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•our estimates regarding enrollment in and the completion dates of our clinical trials and the anticipated results of these trials; •the progress and timing of our research and development programs and the regulatory activities associated with them; •our ability to realize the benefits of orphan drug designation for Korlym and the impact of possible future competition for Korlym or our product candidates; •our estimates for future performance, including revenue and profits; •the timing of •our ability to manufacture, market, commercialize and achieve market acceptance for our product candidates; •uncertainties associated with obtaining and enforcing patents; and •estimates regarding our future revenue, income and capital requirements. Pre-clinical and clinical data also indicate that modulating cortisol activity may improve outcomes in patients suffering from weight gain caused by antipsychotic medications (“AIWG”) and in patients with fatty liver disease and non-alcoholic steatohepatitis (“NASH”), precursors of liver fibrosis and cirrhosis. These novel molecules share Korlym’s affinity for the glucocorticoid receptor GR, but, unlike Korlym, do not bind to the PR and therefore do not cause effects arising from antagonism of progesterone activity, such as termination of pregnancy, endometrial thickening and vaginal bleeding. They are “selective” cortisol modulators. The composition of these compounds and their methods of use in a wide range of indications are covered by U.S. and foreign patents. Korlym to Treat Patients with Cushing’s Syndrome. We sell Korlym in the United States, using experienced sales representatives prevent competitors from marketing other drugs for the treatment of Cushing’s syndrome. prostate cancers. effects of excess cortisol activity, treat these patients’ Cushing’s syndrome and, by reversing cortisol-induced immune suppression, help pembrolizumab achieve its maximum tumor-killing effect. other solid tumors. (“AIWG which are precursors of cirrhosis. We are conducting a Development of ICON plc is helping us conduct our GRACE and GRADIENT trials. IQVIA Inc. is helping us conduct our Phase 2 trial of relacorilant to treat patients with metastatic ovarian cancer and our dose-finding trial of exicorilant to treat patients with CRPC. Medpace, Inc. is helping us conduct our GRATITUDE, GRATITUDE II and RELIANT trials. We may terminate our agreements with ICON and IQVIA on 60 days’ written notice. Our agreement with Medpace may be terminated by us without cause at any time. 2039. 2034. Three patents that were licensed from Stanford University expired in October 2018. See “Business – Intellectual Property.” If the FDA approves We are not seeking regulatory approval to market Korlym outside the United States. The federal Anti-Kickback Statute prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs. The Anti-Kickback Statute is subject to evolving interpretations. In the past, the government has enforced the Anti-Kickback Statute to reach large settlements with healthcare companies based on sham consulting and other financial arrangements with physicians. Further, 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. our Commercial Activities Korlym. •the preference of some physicians for •competition from non-medical treatments, such as surgery and radiation; Failure to generate sufficient Korlym revenue the United States. 2021. and collects payments from insurers representing approximately 99 percent of our revenue. If Optime does not adhere to its agreements with payers, it may not be able to collect some or all of the payments due to us. Our agreement with financial position. We are subject to •the federal Anti-Kickback Statute, which prohibits, among other things, •federal false claims laws, including, without limitation, the False Claims Act, which prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. Pharmaceutical companies have been prosecuted under these laws for a variety of promotional and marketing activities, such as allegedly providing free product to or entering into “sham” consulting arrangements with customers to induce such customers to purchase, order or recommend the company’s products in violation of the Anti-Kickback Statute and federal false claims laws and regulations; reporting to pricing services inflated average wholesale prices that were then used by certain governmental programs to set reimbursement rates; engaging in the promotion of “off-label” uses that caused customers to submit claims to and obtain reimbursement from governmental •the federal Civil Monetary Penalties law, which prohibits, among other things, offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier; •the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created federal criminal laws that prohibit executing a scheme to defraud any health care benefit program or making false statements relating to health care matters; •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 •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 our employees, independent contractors, principal investigators, consultants, vendors, distributors, and Activities succeed. events. •delays obtaining regulatory permission to start a •inability to secure acceptable terms with •failure of patients or investigators to comply with the clinical trial protocol; •negative findings of inspections of Disruptions caused by the COVID-19 pandemic increase the likelihood of delays in initiating or completing our planned and ongoing clinical trials. Please see the risk factor, difficult. Failure to obtain outside the United States. business. •manage our sales and marketing efforts, clinical trials, research and •hire •continue to develop our administrative goals. Risks Related to programs. financial results. commercialize cortisol modulators, including mifepristone, for the treatment of infringement. •actual or anticipated variations in our operating •short selling of our common stock, the publication of speculative opinions about our business or other market manipulation activities by third parties that are intended to lower our stock price or increase its volatility; •actual or anticipated regulatory approvals of our product candidates or of competing products; •changes in laws or regulations applicable to our product candidates or our competitors’ products; •changes in the trading volume of our common stock; •conditions •additions or departures of key personnel; •announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, •additional financing breach. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate the effectiveness of, and provide a management report with respect to, our internal controls over financial reporting. It also requires that the independent registered public accounting firm auditing our consolidated financial statements must attest to and report on the effectiveness of our internal controls over financial reporting. If we are unable to complete the required assessment and report would likely decline. 2017 High Low First Quarter $ 11.58 $ 6.70 Second Quarter $ 12.74 $ 8.90 Third Quarter $ 19.60 $ 11.53 Fourth Quarter $ 20.77 $ 15.30 2016 High Low First Quarter $ 4.92 $ 3.22 Second Quarter $ 6.33 $ 4.55 Third Quarter $ 6.72 $ 5.24 Fourth Quarter $ 10.00 $ 6.11 Stockholders of Record and Dividends Year Ended December 31, 2017 2016 2015 2014 2013 (In thousands, except per share data) Statement of Operations Data: Product revenue, net $ 159,201 $ 81,321 $ 50,286 $ 26,551 $ 10,357 Operating expenses: Cost of sales 3,554 2,058 1,361 882 143 Research and development* 40,376 23,844 15,419 18,372 20,470 Selling, general and administrative* 62,416 45,240 36,949 34,916 31,240 Total operating expenses 106,346 71,142 53,729 54,170 51,853 Income (loss) from operations 52,855 10,179 (3,443 ) (27,619 ) (41,496 ) Non-operating income (expense), net* (49 ) (2,039 ) (2,965 ) (3,764 ) (4,515 ) Income (loss) before income taxes 52,806 8,140 (6,408 ) (31,383 ) (46,011 ) Income tax benefit 76,316 — — — — Net income (loss) $ 129,122 $ 8,140 $ (6,408 ) $ (31,383 ) $ (46,011 ) Net income (loss) per share: Basic $ 1.14 $ 0.07 $ (0.06 ) $ (0.31 ) $ (0.46 ) Diluted $ 1.04 $ 0.07 $ (0.06 ) $ (0.31 ) $ (0.46 ) Weighted average shares – basic 113,527 110,566 106,883 100,978 99,819 Weighted average shares – diluted 124,515 116,139 106,883 100,978 99,819 * Includes certain non-cash expenses, of the following: Stock-based compensation Research and development $ 3,743 $ 1,312 $ 839 $ 723 $ 618 Selling, general and administrative 9,618 5,746 5,174 4,478 4,578 Total stock-based compensation 13,361 7,058 6,013 5,201 5,196 Non-operating expense related to accretion of interest on long-term obligation 456 1,929 2,848 3,678 4,410 Total non-cash expenses $ 13,817 $ 8,987 $ 8,861 $ 8,879 $ 9,606 As of December 31, 2017 2016 2015 2014 2013 (In thousands) Balance Sheet Data: Cash, cash equivalents and investments $ 104,025 $ 51,536 $ 40,435 $ 24,248 $ 54,877 Working capital 94,616 38,315 28,104 16,675 45,573 Total assets 220,537 68,753 51,937 34,630 63,077 Debt obligation - current portion — 14,664 14,965 9,424 5,743 Debt obligation, net of current portion — — 12,528 24,405 �� 29,234 Total stockholders’ equity (deficit) 190,968 41,379 18,498 (3,388 ) 21,017 . four structurally distinct series totaling more than 1,000 compounds, including relacorilant, exicorilant and miricorilant. 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. in Patients with CRPC. clinic. another on January 1, 2020. distribution. Korlym as well as a decrease in its cost of manufacture. processes. Year Ended December 31, 2017 2016 2015 Project (in thousands) Development programs: Oncology $ 7,465 $ 4,592 $ 3,494 Cushing's syndrome 10,869 3,739 811 Psychotic depression — — 190 Pre-clinical selective cortisol modulators 13,605 10,393 7,431 Unallocated activities, including pre-clinical, manufacturing and regulatory activities 4,694 3,808 2,654 Stock-based compensation 3,743 1,312 839 Total research and development expense $ 40,376 $ 23,844 $ 15,419 Research and development expenses increased to $89.0 million for the year ended December 31, 2019 from $75.2 million in relacorilant. 2021 than in 2020 as our clinical programs advance. Research and development spending in future years will depend on the outcome of our pre-clinical and clinical trials and our development plans. fees. exercises of non-qualified stock options. Based on our current plans 2019. Contractual Obligations Total Less than 1 year 1-3 Years 3-5 Years More than 5 Years (in thousands) Manufacturing purchase commitments (1) $ 14,279 $ 14,279 $ — $ — $ — Operating lease (2) $ 1,570 1,256 314 — — Total other contractual obligations $ 15,849 $ 15,535 $ 314 $ — $ — available. Our estimates take into account our understanding of the range of possible outcomes. If results differ from our estimates, we adjust our estimates, which changes our net product revenue and earnings. We report any changes in the period they become known to us, even if they concern transactions occurring in prior period. and Charitable Support our revenue payments these charities make on behalf of patients receiving Korlym. We provide Korlym at no cost to patients without insurance who do not qualify for charitable support. To date, returns have not been material. Cost of sales includes the cost of applicable period. activities. vesting. may also change. 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. (c) Report of Independent Registered Public Accounting Firm assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Audited Consolidated Financial Statements Description of Document 3.1 3.2 4.1 4.2 10.2# 10.3† 10.4 10.5† 10.6† 10.10† 10.11† 24.1 31.1 31.2 32.1 32.2 By: /s/ JOSEPH K. BELANOFF Joseph K. Belanoff, M.D., Chief Executive Officer and President Date: February Signature Chief Executive Officer, President and Director February Joseph K. Belanoff, M.D. (Principal Executive Officer) /s/ Chief Financial Officer and Secretary February (Principal Financial Officer) /s/ JOSEPH DOUGLAS LYON Director and Chairman of the Board of Directors February James N. Wilson /s/ GREGG ALTON Director February G. Leonard Baker, Jr. /s/ Director February /s/ DAVID L. MAHONEY Director February David L. Mahoney /s/ KIMBERLY PARK Director February Audited Financial Statements December 31, 2017 2016 ASSETS Current assets: Cash and cash equivalents $ 31,062 $ 51,536 Short-term marketable securities 57,682 — Trade receivables, net of allowances 15,300 9,860 Other receivable (Note 11) 12,896 — Inventory 4,576 2,329 Prepaid expenses and other current assets 2,669 1,964 Total current assets 124,185 65,689 Strategic inventory 3,800 2,835 Property and equipment, net of accumulated depreciation 518 205 Long-term marketable securities 15,281 — Other assets 50 24 Deferred tax assets, net 76,703 — Total assets $ 220,537 $ 68,753 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 8,579 $ 2,290 Accrued clinical expenses 2,247 1,467 Other accrued liabilities 18,743 8,953 Debt obligation - current portion — 14,664 Total current liabilities 29,569 27,374 Commitments and contingencies (Note 11) Stockholders’ equity: Preferred stock, par value $0.001 per share, 10,000 shares authorized and no shares outstanding at December 31, 2017 and December 31, 2016 — — Common stock, par value $0.001 per share, 280,000 shares authorized and 114,717 and 112,710 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively 115 113 Additional paid-in capital 384,074 363,534 Accumulated other comprehensive loss (75 ) — Accumulated deficit (193,146 ) (322,268 ) Total stockholders’ equity 190,968 41,379 Total liabilities and stockholders’ equity $ 220,537 $ 68,753 Year Ended December 31, 2017 2016 2015 Product revenue, net $ 159,201 $ 81,321 $ 50,286 Operating expenses: Cost of sales 3,554 2,058 1,361 Research and development 40,376 23,844 15,419 Selling, general and administrative 62,416 45,240 36,949 Total operating expenses 106,346 71,142 53,729 Income (loss) from operations 52,855 10,179 (3,443 ) Interest and other expense (49 ) (2,039 ) (2,965 ) Income before income taxes 52,806 8,140 (6,408 ) Income tax benefit 76,316 — — Net income (loss) $ 129,122 $ 8,140 $ (6,408 ) Other comprehensive income (loss): Net unrealized loss on available-for-sale investments (75 ) — — Total comprehensive income (loss) $ 129,047 $ 8,140 $ (6,408 ) Basic net income (loss) per common share $ 1.14 $ 0.07 $ (0.06 ) Diluted net income (loss) per common share $ 1.04 $ 0.07 $ (0.06 ) Weighted average shares outstanding used in computing net income (loss) per share Basic 113,527 110,566 106,883 Diluted 124,515 116,139 106,883 CASH FLOWS Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity (Deficit) Shares Amount Balance at December 31, 2014 101,395 $ 101 $ 320,511 $ — $ (324,000 ) $ (3,388 ) Issuance of common stock upon exercise of options 2,041 3 5,190 — — 5,193 Issuance of common stock upon exercise of warrants 6,206 6 17,082 — — 17,088 Stock-based compensation related to employee and director options — — 5,926 — — 5,926 Stock-based compensation related to non- employee options — — 87 — — 87 Net loss (6,408 ) (6,408 ) Balance at December 31, 2015 109,642 110 348,796 — (330,408 ) 18,498 Issuance of common stock upon exercise of options 3,068 3 7,680 — — 7,683 Stock-based compensation related to employee and director options — — 7,002 — — 7,002 Stock-based compensation related to non- employee options — — 56 — — 56 Net income 8,140 8,140 Balance at December 31, 2016 112,710 113 363,534 — (322,268 ) 41,379 Issuance of common stock upon exercise of options 2,007 2 7,179 — — 7,181 Stock-based compensation related to employee and director options — — 13,330 — — 13,330 Stock-based compensation related to non- employee options — — 31 — — 31 Net unrealized loss on marketable securities (75 ) — (75 ) Net income 129,122 129,122 Balance at December 31, 2017 114,717 $ 115 $ 384,074 $ (75 ) $ (193,146 ) $ 190,968 STOCKHOLDERS' EQUITY Year Ended December 31, 2017 2016 2015 Cash flows from operating activities: Net income (loss) $ 129,122 $ 8,140 $ (6,408 ) Adjustments to reconcile net income (loss) to net cash provided by operations: Stock-based compensation 13,361 7,058 6,013 Accretion of interest expense 456 1,929 2,848 Amortization of debt financing costs 14 21 22 Deferred taxes (76,703 ) — — Excess tax benefits from stock option activity 293 — — Depreciation and amortization of property and equipment 106 87 155 Changes in operating assets and liabilities: Trade receivables (5,440 ) (3,639 ) (2,887 ) Other receivable (Note 11) (12,896 ) — — Inventory (2,262 ) (682 ) 815 Prepaid expenses and other current assets (705 ) (1,322 ) 799 Other assets (26 ) — (7 ) Accounts payable 6,289 965 (561 ) Accrued clinical expenses 780 296 835 Other accrued liabilities 8,546 5,696 1,381 Deferred revenue — (158 ) 125 Net cash provided by operating activities 60,935 18,391 3,130 Cash flows from investing activities: Purchases of property and equipment (419 ) (194 ) (17 ) Purchases of marketable securities (73,037 ) — — Cash used in investing activities (73,456 ) (194 ) (17 ) Cash flows from financing activities: Proceeds from exercise of warrants, net of issuance costs — — 17,088 Proceeds from exercise of stock options, net of issuance costs 7,181 7,683 5,193 Payments related to debt obligation (15,134 ) (14,779 ) (9,207 ) Net cash (used in) provided by financing activities (7,953 ) (7,096 ) 13,074 Net (decrease) increase in cash and cash equivalents (20,474 ) 11,101 16,187 Cash and cash equivalents, at beginning of period 51,536 40,435 24,248 Cash and cash equivalents, at end of period $ 31,062 $ 51,536 $ 40,435 Supplemental disclosure: Income taxes paid $ 377 $ 40 $ 57 serious disorders. 2017. estimates. compensation. income. Korlym. Balance at Beginning of Period Charges Deductions Balance at End of Period (in thousands) Year ended December 31, 2016: Accounts receivable allowances $ 18 $ 2,081 $ (1,749 ) $ 350 Year ended December 31, 2017: Accounts receivable allowances $ 350 $ 2,755 $ (2,178 ) $ 927 revenue, but as a deduction to selling, general and administrative expenses. We provide Korlym at no cost to uninsured patients who do not qualify for charitable support. To date, returns have not been significant. we incur them. activities. the amount of, a valuation allowance may also change. Fair Value Estimated Fair Value Hierarchy December 31, December 31, Level 2017 2016 (in thousands) Corporate bonds Level 2 $ 26,116 $ — Commercial paper Level 2 32,637 — U.S. treasury securities Level 1 14,210 — Money market funds Level 1 14,979 31,605 Total Marketable securities $ 87,942 $ 31,605 Classified as: Cash equivalents $ 14,979 $ 31,605 Short-term marketable securities 57,682 — Long-term marketable securities 15,281 — Total marketable securities $ 87,942 $ 31,605 $1.3 million and $1.0 million as of December 31, 2020 and 2019, respectively, as prepaid and other current assets on our consolidated balance sheet. December 31, 2017 2016 (in thousands) Raw materials $ 4,287 $ 1,848 Work in progress 64 1,414 Finished goods 4,025 1,902 Total inventory 8,376 5,164 Less strategic inventory classified as non-current (3,800 ) (2,835 ) Total inventory classified as current $ 4,576 $ 2,329 asset. December 31, 2017 2016 (in thousands) Furniture and equipment $ 188 $ 300 Software 705 351 Leasehold improvements 14 6 907 657 Less: accumulated depreciation (389 ) (452 ) $ 518 $ 205 December 31, 2017 2016 (in thousands) Government rebates $ 7,961 $ 3,426 Accrued compensation 8,574 4,702 Accrued manufacturing costs 955 — Commercialization costs 208 308 Legal fees 276 164 Professional fees 207 34 Other 562 319 Total other accrued liabilities $ 18,743 $ 8,953 As December 31, 2017 2016 (in thousands) Total repayment obligation $ 45,000 $ 45,000 Less interest in future periods — (456 ) Less unamortized financing costs — (14 ) Less payments made (45,000 ) (29,866 ) Less current portion — (14,664 ) Debt obligation, net of current portion $ — $ — Rent expense for the year ended December 31, 2018 was $1.3 million. Lease Payments 2018 $ 1,256 2019 314 Thereafter — Total $ 1,570 stock options. (in thousands) Exercise of outstanding options Shares available for grant under stock option plans 2020. Incentive Award Plan (the “2012 Plan”). option grantee’s period of service. 2020 Outstanding Options Shares Available For Future Grant Options Shares Subject to Options Outstanding Weighted- Average Exercise Price Weighted- Average Remaining Contractual Life Aggregate Intrinsic Value (in thousands) (in thousands) (in years) (in thousands) Balance at December 31, 2014 7,546 14,704 $ 2.62 Increase in shares authorized for grant 4,056 — Shares granted (4,902 ) 4,902 $ 3.88 Shares exercised — (2,041 ) $ 2.55 Shares cancelled and forfeited 1,370 (1,370 ) $ 3.07 Balance at December 31, 2015 8,070 16,195 $ 2.98 Increase in shares authorized for grant 4,386 Shares granted (5,906 ) 5,906 $ 4.92 Shares exercised — (3,068 ) $ 2.50 Shares cancelled and forfeited 1,370 (1,370 ) $ 3.98 Balance at December 31, 2016 7,920 17,663 $ 3.63 Increase in shares authorized for grant 4,508 Shares granted (5,282 ) 5,282 $ 9.90 Shares exercised — (2,007 ) $ 3.60 Shares cancelled and forfeited 484 (484 ) $ 5.04 Balance at December 31, 2017 7,630 20,454 $ 5.22 6.79 $ 263,129 Options exercisable at December 31, 2017 12,046 $ 3.61 5.46 $ 174,019 Options fully vested and expected to vest at December 31, 2017 19,737 $ 5.08 6.71 $ 256,476 Options Outstanding Options Exercisable Exercise Prices of Options Number of Shares Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price Aggregate Intrinsic Value Number of Shares Weighted- Average Exercise Price Aggregate Intrinsic Value (in thousands) (in years) (in thousands) (in thousands) (in thousands) $ 0.96 - $ 4.00 10,548 5.7 $ 2.82 $ 160,714 8,399 $ 2.62 $ 129,668 $ 4.01 - $ 9.00 8,220 7.7 $ 6.57 94,476 3,503 $ 5.64 43,521 $ 9.01 - $ 17.00 1,296 9.4 $ 11.94 7,939 140 $ 12.13 830 $ 17.01 - $ 19.73 390 9.8 $ 19.23 — 4 $ 19.73 — 20,454 6.8 $ 5.22 $ 263,129 12,046 $ 3.61 $ 174,019 Stock-Based Compensation related to Employee and Director Options Year Ended December 31, 2017 2016 2015 Weighted-average assumptions for stock options granted: Risk-free interest rate 1.99% 1.31% 1.77% Expected term 6.1 years 5.8 years 7.2 years Expected volatility of stock price 68.1% 69.0% 77.0% Dividend rate 0% 0% 0% Weighted-average grant date fair value-based measurement $6.14 $2.98 $2.72 Year ended December 31, 2017 2016 2015 (in thousands) Research and development $ 3,743 $ 1,312 $ 839 Selling, general and administrative 9,618 5,746 5,174 Total stock-based compensation $ 13,361 $ 7,058 $ 6,013 Year ended December 31, 2017 2016 2015 (in thousands) Numerator: Net income (loss) $ 129,122 $ 8,140 $ (6,408 ) Denominator: Weighted-average shares used to compute basic net income (loss) per share 113,527 110,566 106,883 Dilutive effect of employee stock options 10,988 5,573 — Weighted-average shares used to compute diluted net income (loss) per share 124,515 116,139 106,883 Net income (loss) per share attributable to common stockholders Basic $ 1.14 $ 0.07 $ (0.06 ) Diluted $ 1.04 $ 0.07 $ (0.06 ) December 31, 2017 2016 2015 (in thousands) Stock options outstanding 20,454 17,663 16,195 Year ended December 31, 2017 (in thousands) U.S. federal taxes: Current $ — Deferred (71,839 ) Total U.S. federal taxes (71,839 ) State taxes: Current 388 Deferred (4,865 ) Total state taxes (4,477 ) Total $ (76,316 ) December 31, 2017 2016 Deferred tax assets: (in thousands) Federal and state net operating losses $ 41,902 $ 68,605 Capitalized research and patent costs 13,278 23,575 Research credits 22,606 19,058 Biopharma Financing Agreement — 5,556 Stock-based compensation costs 5,596 6,508 Other 5,795 6,067 Total deferred tax assets 89,177 129,369 Valuation allowance (12,474 ) (129,369 ) Net deferred tax assets $ 76,703 $ — Condensed Consolidated Statement of Comprehensive Income in the which such determination is made. year ended December 31, 2018. year 2024 if not utilized. On June 29, 2020, the California governor signed Assembly Bill 85 (“AB 85”) into law. AB 85 limits the use of business incentive tax credits and suspends the use of California net operating losses for 2020, 2021 and 2022 for companies with taxable income of $1 million or more. AB 85 will not have a material impact on our condensed consolidated financial statements. Year ended December 31, 2017 2016 2015 (in thousands) U.S. federal taxes (benefit) at statutory rate $ 17,954 $ 2,840 $ (2,178 ) Changes in valuation allowance (119,765 ) (3,679 ) 2,495 Federal tax rate change impact to change in valuation allowance 33,233 — — Unutilized research credits (1,199 ) (69 ) (445 ) State income taxes (2,955 ) — — Non-deductible Compensation 33 2,435 — Stock-based compensation (3,826 ) (1,660 ) 6 Other 209 133 122 Total $ (76,316 ) $ — $ — Year ended December 31, 2017 2016 Beginning Balance $ 3,527 $ 4,342 Increase in tax positions for prior years 150 222 Decreases in tax positions for prior years — (1,189 ) Increase in tax positions for current year 462 152 Ending Balance $ 4,139 $ 3,527 months. Quarter Ended March 31 June 30 September 30 December 31 2017 Product sales, net $ 27,599 $ 35,559 $ 42,763 $ 53,280 Gross profit on product sales 26,953 34,784 41,787 52,123 Net income 4,388 12,647 13,757 98,330 Basic net income per share 0.04 0.11 0.12 0.86 Diluted net income per share 0.04 0.10 0.11 0.77 2016 Product sales, net $ 16,061 $ 19,724 $ 21,725 $ 23,811 Gross profit on product sales 15,658 19,298 21,057 23,250 Net income (loss) (19 ) 977 2,585 4,597 Basic and diluted net income (loss) per share (0.00 ) 0.01 0.02 0.04 PART•our ability to manufacture, market and sell Korlym® (mifepristone) 300 mg Tablets;the market introductionregulatory submissions seeking approval of future product candidates including new uses for Korlym and the commercialization of any of our proprietary selective cortisol modulators;development and commercializationdevelopment of drugs thatto treat severe metabolic, oncologic and psychiatric disorders by modulating the effects of the hormone cortisol. Elevated levels and abnormal release patterns of cortisol are implicated in a broad range of diseases. Since our founding in 1998, we have developed mifepristone, a compound that modulates the effects of cortisol by acting as a competitive antagonist at the glucocorticoid receptor (“GR”). We have discovered three structurally distinct series of proprietary, selective cortisol modulators, all of which share mifepristone’s affinity for GR but, unlike mifepristone, do not bind to the progesterone receptor (“PR”) and so do not cause effects associated with antagonism of progesterone activity. Pre-clinical and clinical development of compounds from these series are in progress.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 first made Korlym available to patients commercially in April 2012.We are conducting clinical trials of three compounds from our portfolio of proprietary selective cortisol modulators, including: (i) a Phase 2 trial of relacorilant (the recently-approved generic name for CORT125134) to treat patients with Cushing’s syndrome; (ii) a Phase 1/2 trial of relacorilant combined with Celgene Corporation’s drug Abraxane® (nab-paclitaxel) to treat patients with a variety of solid tumors; (iii) a Phase 1/2 trial of CORT125281 combined with Pfizer Inc.’s androgen receptor antagonist Xtandi® (enzalutamide) to treat patients with castration-resistant prostate cancer (“CRPC”); and (iv) a Phase 1 trial in healthy subjects to assess the safety and tolerability of CORT118335, which we plan to develop for the treatment of non-alcoholic steatotic hepatitis (“NASH”) and antipsychotic-induced weight gain.The Role of Cortisol in DiseaseCortisol is a steroid hormone thatcortisol.way the body reactsbody’s response to stressful conditions. Itstress and is essential for survival. Cortisol influences metabolism and the immune system and contributes to emotional stability. In healthy people, cortisolCortisol levels follow a diurnal rhythm that is essential to health, peaking upon awakening and decreasing during the day. Cortisol is essential for survival. Insufficient cortisol activity may lead to dehydration, hypotension, shock, fatigue and hypoglycemia. Excessive cortisol activity, – known as hypercortisolism, – may lead to a suppressed immune response, impaired glucose tolerance, diabetes, obesity, fatty liver disease, depressed mood, psychosis, wasting of the arms and legs, edema, fatigue, hypertension and other problems. Pre-clinicalmay reducereduces a patient’s immune response to oncogenesis, shieldshields certain cancer cells from the apoptotic effects of chemotherapy and facilitatefacilitates the growth of others. hypercortisolisma patient with Cushing’s syndrome is thatmodulating cortisol’s effects without suppressing them below normal levels or disrupting cortisol’s normal diurnal rhythm. Simply reducing or destroying the ability of the body to make cortisol can cause serious harm. An effective medication must modulate cortisol’s effects without suppressing them below normal levels or disrupting the body’s normal cortisol rhythm. The action of cortisolCortisol activity can effectively be modulated effectively by the use of compoundsa drug that competecompetes with cortisol as it attempts to bind to GR. Mifepristone, the glucocorticoid receptor (“GR”). We do not sell Korlym internationally.in Korlym, is a competitive GR antagonist, as are Corcept’s proprietary compounds.Because mifepristone, works by reducingreduces the binding of excess cortisol to GR, it can modulate the effects of abnormal levels and release patterns of cortisol without compromising cortisol’s necessary, normalhealthy functions and rhythms. However, mifepristone also binds to PRthe progesterone receptor (“PR”), thereby terminating pregnancy and causing other sideadverse effects, including irregularendometrial thickening and vaginal bleeding, (a manageable buta debilitating side-effectcondition suffered by a significant portion of women who take Korlym). Our selectiveKorlym.blockthat bind to GR as potently as mifepristone does, but have no affinity for PR and so do not cause Korlym’s PR-related side effects. It most often affects adults aged 20 to 50. An estimated 10 to 15 of every one million people are newly diagnosed with thisCushing’s syndrome each year, resulting in approximately 3,000 new patients and about 20,000 patients with Cushing’s syndromea patient population in the United States of about 20,000, approximately half of whom are cured by surgery. Symptoms vary, butsurgery. Cushing’s syndrome most often affects adults between the ages of 20 and 50. for Cushing’s syndrome patients is surgery, which, if successful, can cure the disease. Depending on the type of tumor, surgery can result in a range of complications and has varying rates of success. In approximately half of the patients, surgery is not successful because the tumor cannot be located or removed completely. Depending on the type of tumor, surgery can also result in a range of complications.We have received orphan drug designation and marketing exclusivity from the FDA for Korlym for the treatment of patients with endogenous Cushing’s syndrome. Orphan drugs receive seven years of marketing exclusivity for the approved indication from the date of drug approval, as well as tax credits for clinical trial costs, marketing application filing fee waivers and assistance from the FDA in the drug development process.who target the endocrinologists and other specialiststo call on physicians caring for patients with endogenous Cushing’s syndrome. We also reach patients directly through web-based initiatives and interactions with patient groups.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 diagnosis of this syndromescreening for hypercortisolism and the role cortisol modulatorsKorlym can play in treating the disease. In addition, wedisorder. We also have a field-based force of medical science liaisons.support.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 cover the costpay for all aspects of their Cushing’s syndrome care, whether or not they arethat care includes taking Korlym. (CORT125134) to Treat Patients with Cushing’s Syndrome. We are conducting atwo Phase 2 trial3 trials of our proprietary, selective cortisol modulator, relacorilant, to treat patients with Cushing’s syndrome. The trial is open labelas a potential treatment for hypercortisolism. Relacorilant was well-tolerated in its Phase 1 and will enroll approximately 30 patients at sitesPhase 2 trials. Patients in the United StatesPhase 2 trial exhibited meaningful improvements in glucose control and Europe. Relacorilanthypertension, as well as weight loss, improved liver function, coagulopathy, cognition, mood, insulin resistance and quality of life. Importantly, relacorilant shares Korlym’s affinity for GR. Data from its Phase 1 trial showed that relacorilant prevents the effects of the steroid prednisone, a commonly-used synthetic GR, agonist, on serum osteocalcin, white blood cell counts, glucose metabolism and expression of the FKBP5 gene – a marker of GR activation. Modulating the effect of prednisone is a strong surrogate for modulation of cortisol – the essential quality of an effective treatment for patients with Cushing’s syndrome. Unlikebut unlike Korlym, relacorilant has no affinity for PR and so does not cause the effects associated with PR affinity, including termination of pregnancy, endometrial thickening and irregular vaginal bleeding.Interim results from Relacorilant also does not appear to cause hypokalemia (low potassium), a potentially serious adverse event that is the first 17leading cause of patients to completestopping treatment with Korlym. Forty-four percent of patients in Korlym’s pivotal trial experienced hypokalemia.trial showed statistically significant, dose-dependentUnited States, Canada, Europe and Israel. Each patient in GRACE will receive relacorilant for 22 weeks. Those who exhibit pre-specified improvements in hypertension or glucose tolerance and serum osteocalcin (a marker of bone growth that is suppressedmetabolism will enter a 12-week, double-blind, “randomized withdrawal” phase, in Cushing’s syndrome, which causes osteoporosis). Forty-two percenthalf of the patients will continue receiving relacorilant and the rest will receive placebo. GRACE’s primary endpoints are the rate and degree of relapse in patients receiving placebo compared to those continuing treatment with uncontrolledrelacorilant. If successful, we expect GRACE to provide the basis for a new drug application (“NDA”) for relacorilant to treat patients with all etiologies of Cushing’s syndrome.exhibited a five millimeterand glucose metabolism. Many of the clinical sites in GRACE are participating in GRADIENT. Pandemic-related restrictions and disruptions have slowed enrollment in these trials.greater reduction in systolic or diastolic blood pressure. As expected, patients experienced no progesterone-related side effects. There were no discontinuations due to drug-related adverse events and no serious adverse events.a CLIA-validatedan assay to measure expression of the gene FKBP5, gene expressionwhich is stimulated by cortisol activity, and have completed analytical validation pursuant to the Clinical Laboratory Improvement Amendments (“CLIA”). Clinical data indicate that weFKBP5 levels are high in patients suffering from hypercortisolism (i.e., excess cortisol activity), but subside when they are successfully treated. We are testing this hypothesis in the GRACE trial. We believe successful development of this assay will enable physicians to more easily identify new patients with hypercortisolism more easily and to better treat patientsthose already in their care.solid-tumor cancerssolid tumors to resist treatment. In some cancers, cortisol activity promotes tumor growth. In other cancers, cortisol stimulates genes that retard cellular apoptosis. Cortisol also suppresses the body'sbody’s immune response, which is often useful, as it lessens the frequency of autoimmune diseases.response. However, activating, not suppressing, the immune system is beneficial in fighting certain cancers.cancers. Adding a cortisol modulator to a treatment regimen may help the patient’s immune system combat the disease.disease. Many tumor types of solid tumors express GR and are potential targets for cortisol modulation therapy, among them triple-negative breast,pancreatic, ovarian, castration-resistant prostate and adrenocortical cancer. We own, or have exclusively licensed, several patents covering the use of cortisol modulators to treat pancreatic, cervical, breast and pancreatic cancers, as well as sarcoma and melanoma.to Treatin Patients with Solid-TumorsSolid Tumors. We are conducting aIn July 2020, we completed enrollment in our 178-patient, controlled, Phase 1/2 open label trial of Abraxane in combination with relacorilant to treat solid tumors. As we identify indications of clinical activity in a particular tumor-type, we will further test the combination’s efficacy and safety in expansion cohorts of approximately 20 patients. We began enrolling the first expansion cohort in December 2017, treating patients with metastatic pancreatic cancer. We continue to explore opening cohorts in patients with other solid-tumors, including metastatic triple-negative breast and ovarian cancer. We may also initiate new trials evaluating relacorilant in combination with other cancer therapies, including immunotherapy, to treat solid tumors.Korlym to Treat Patients with Triple-Negative Breast Cancer (“TNBC”). In December 2016, we announced the results of our Phase 1/2 trial of Korlymnab-paclitaxel in combination with eribulin (Eisai Inc.’s drug, Halaven®) to treat patients with metastatic TNBC.advanced, high-grade serous ovarian tumors. We randomized two-thirds of the patients to receive relacorilant plus nab-paclitaxel, while the rest receive nab-paclitaxel alone. The trial studied 21 patients with GR-positive tumors, one with GR-negative tumors and one with tumors whose GR status was not known. As determinedtrial’s primary endpoint is progression-free survival, as measured using the Response Evaluation Criteria in Solid Tumors (“RECIST”), efficacy results were as follows: four patients exhibited a partialTumors.defined as a 30 percent or greater reduction in tumor size; eight had stable disease;rate, duration of response, best overall response and 11 had progressive disease. Six patients achieved progression-free survival (“PFS”) longer than the upper bound of the 95% confidence interval for PFS (15 weeks) in patients receiving Halaven® monotherapy in a comparable population (Aogi et al., Annals of Oncology 23: 1441-1448, 2012). Median PFSoverall survival.We expect data from this trial to be available in the first half of 2021.was 11.1 weeks – compared to 7.2 weeks in the Halaven monotherapy study reported by Aogi.We believe the addition(“RELIANT”) of Korlym to chemotherapy warrants further study. University of Chicago investigators are leading a 64-patient double-blind, placebo-controlled, multi-center, Phase 2 trial of Korlym combined with Abraxanerelacorilant plus nab-paclitaxel to treat patients with TNBC. Celgenemetastatic pancreatic cancer. RELIANT is fundingexpected to enroll 80 patients, all of whom will receive relacorilant plus nab-paclitaxel. We plan to perform an interim analysis of data from the trial. Universityfirst 43 patients (the last of Chicago investigators are also conducting a 74-patient, open labelwhich enrolled in January 2021) in the first half of 2021.Korlym combined with Merck’s drug Keytruda® (pembrolizumab)relacorilant plus the PD-1 checkpoint inhibitor pembrolizumab in 20 patients with advanced HER2-negativeadrenocortical cancer with cortisol excess. Because adrenocortical tumors produce cortisol, these patients suffer from both cancer and triple-negative breast cancer. Merck is fundingCushing’s syndrome. Our trial will evaluate whether relacorilant can, by reducing the trial. We are providing Korlym to both trials.is theand cortisol’s stimulation of mutated androgen receptors are primary growth factor.factors. Combining a cortisol modulator with an androgen modulator such as Xtandi (enzalutamide) may block this escape route.have begun dosing patients in an open label Phase 1/2are conducting a dose-finding trial of our proprietary, selective cortisol modulator CORT125281 combinedexicorilant in combination with Xtandi in patients with metastatic CRPCCRPC. Independently, investigators at sitesthe University of Chicago are conducting a dose-finding trial of relacorilant combined with Xtandi in the same patient population. We are providing relacorilant.Europe. Universitythe EU for the treatment of Chicago investigators are leading an 84-patient, controlled, multicenter Phase 2 trialpancreatic cancer. In addition, we hold U.S. and international patents covering relacorilant’s composition of Korlym combined with Xtandimatter and U.S. patents covering its use to treat patients with metastatic CRPC. The Department of Defensepancreatic and the Prostate Cancer Foundation are funding the trial. Pfizer is providing Xtandi. We are providing Korlym. Weovarian cancer.from the Universitycovering relacorilant’s composition of Chicago covering thematter and its use of cortisol modulators combined with anticancer agents to treat TNBCa variety of disorders, including pancreatic cancer, castration-resistance prostate cancer (“CRPC”) and with androgen deprivation agents to treat CRPC.and NASHCORT118335 potentlymiricorilant prevents and reverses the weight gain caused by Eli Lilly and Company’sthe antipsychotic medication Zyprexa® (olanzapine).olanzapine. These findings replicate dataare similar to the results generated with mifepristone in the same animal models and from placebo-controlledplacebo-controlled clinical trials we conducted, in which the mifepristone (the active ingredient in Korlym) significantly reduced the weight gain and other adverse metabolic effects inexperienced by healthy subjects administered Zyprexa®olanzapine or Johnson & Johnson’sthe antipsychotic medication Risperdal® (risperidone). We published therisperidone. The results of these trials were published in the journals Advances in Therapy, Gross et al (2009) and Obesity, Gross et al (2010).CORT118335 also preventsreverses non-alcoholicclinical data suggest that our propriety, selective cortisol modulator miricorilant can prevent weight gain and other metabolic side-effects caused by antipsychotic medications such as olanzapine. In a double-blind, placebo-controlled Phase 1b trial, 96 healthy subjects received daily doses of olanzapine (10 mg) and either miricorilant (600 mg or 900 mg) or placebo for 14 days. Study participants who received miricorilant gained less weight than subjects receiving placebo. In addition, markers of liver damage that rise temporarily at the start of olanzapine therapy increased less sharply in subjects receiving miricorilant, suggesting that miricorilant may have protective effects in the liver. disease and liver fibrosis, in animal models. We conducted these pre-clinical studies in response to reports suggesting that cortisol modulation with Korlym may have played a role in reversing fatty liver disease in patients with Cushing’s syndrome. Fatty liver disease is a precursor to NASH.Phase 1 trial of the safety, tolerability and pharmacokinetics of CORT118335. We plan to advance it todouble-blind, placebo-controlled, Phase 2 trial that is expected to enroll 150 patients with NASH, as determined by MRI, at 15 sites in the United States. Patients will receive a potential treatmentdaily dose of miricorilant (600 mg or 900 mg) or placebo for antipsychotic-induced weight gain and NASH.Ourour Other Selective Cortisol Modulatorswhich includes relacorilant, CORT125281 and CORT118335, consists of four structurally distinct series totaling more than 5001,000 compounds, in three structurally distinct families. All of theseincluding relacorilant, exicorilant and miricorilant. These compounds potently blockbind to GR but not the progesterone, estrogen or androgen receptors. We hold U.S. and foreign patents covering these compounds and their methods of use in a wide range of indications. We have applied, and will continue to apply, for patents covering the composition and method of use of our products and product candidates. See “Business – Intellectual Property.”theseour proprietary compounds have demonstrated positive results in animal or in vitro models of cortisol modulation. One such molecule, CORT113176, has shown promise in animal models of amyotrophic lateral sclerosis (“ALS”). It has completed Phase 1 and we plan to advance it to Phase 2 as a potential treatment for that disease. We plan to continue identifying new compoundsselective cortisol modulators and advancing the most promising of them towards the clinicclinic.Patent & Trademark Office (“USPTO”) has issued us nineand Europe to market levoketoconazole, a chiral form of the commonly-prescribed cortisol synthesis inhibitor ketoconazole, as a treatment for patients with Cushing’s syndrome.22 method of use55 U.S. patents covering the use of cortisol modulators to treat a wide rangevariety of serious disorders. We have exclusively licensed three U.S. method of use patents from Stanford Universitydisorders, including Cushing’s syndrome and five method of use patents from the University of Chicago. We also own an extensive portfolio of patents in countries around the world. We have applied, and will continue to apply, for U.S. and foreign patents covering the composition and method of use of our product candidates. See “Business – Intellectual Property.”Studies by Independent InvestigatorsFor many years we have advanced our understanding of cortisol modulation by supporting the work of independent academic investigators. These researchers have studied the utility of mifepristone or our proprietary selective cortisol modulators in a wide range of disorders, including central serous retinopathy, post-traumatic stress disorder, anxiety, alcoholism, cocaine addiction, Alzheimer’s disease, ALS, muscular dystrophy, Cushing’s syndrome, metabolic syndrome, atherosclerosis, fatty liver disease,products and a wide range of solid tumors, including triple-negative breast, prostate, ovarian and non-small cell lung cancers, as well as sarcoma and melanoma.Clinical Trial Agreements Some of our clinical trials are conducted through the use of clinical research organizations (“CROs”). Our Phase 2 trial of relacorilant for the treatment of patients with Cushing’s syndrome is being conducted under an agreement with Chiltern International Limited (“Chiltern”). Novella Clinical LLC (“Novella”) is helping us conduct our Phase 1/2 trial of CORT125281 to treat patients with CRPC. Our agreements with Chiltern and Novella may be terminated by us on 60 days’ written notice or sooner if the parties mutually agree.Research and Development SpendingWe incurred $40.4 million, $23.8 million and $15.4 million of research and development expenses in the years ended December 31, 2017, 2016 and 2015, respectively, which accounted for 38%, 34% and 29%, respectively, of our total operating expenses in those years. Manufacturing KorlymWe do not have manufacturing capabilities and intend to continue to rely on experienced contract manufacturers to produce Korlym and our product candidates. In March 2014, we entered into a long-term agreement with one contract manufacturer – Produits Chimiques Auxiliaires et de Synthese SA (“PCAS”), to produce mifepristone, the active pharmaceutical ingredient (“API”) for pursuant to which we have agreed to purchase from PCAS a minimum percentage of our mifepristone requirements. The initial term of the agreement is five years, with an automatic extension of one year, unless either party gives 12-months prior written notice of termination. We have the right to terminate the agreement if PCAS is unable to manufacture mifepristone for nine consecutive months.We have one tablet manufacturer for Korlym – Alcami Corporation (“Alcami,” formerly known as AAI Pharma Services Corp., or AAI) In April 2014, we entered into an agreement with Alcami for the manufacture and packaging of Korlym tablets. The initial term of this agreement is three years, with consecutive automatic extensions of two years, unless either party gives written termination notice (in the case of Alcami, 18 months prior to the end of the applicable term; in our case, 12 months prior to the end of the applicable term). We have the right to terminate the agreement if (i) Alcami is unable to manufacture our product for four consecutive months or (ii) our product is withdrawn from the market. We have no minimum purchase obligations under this agreement.We have received Orphan Drug designation for Korlym for the treatment of endogenous Cushing syndrome in the United States. Orphan designation qualifies the sponsor of the product for the tax credit and marketing incentives of the Orphan Drug Act, including seven years of exclusive marketing rights for the specific drug for the orphan indication, if it receives the first regulatory approval for that indication, with limited exceptions. A marketing application for a prescription drug product that has been designated as a drug for a rare disease or condition is not subject to a prescription drug user fee unless the application includes an indication for other than a rare disease or condition. Orphan Drug designation for one medication does not prevent competitors from developing or marketing different drugs for the same Orphan indication. It also does not convey an advantage in, or shorten the duration of, the review and approval process for a drug.Our marketing exclusivity period for Korlym to treat patients with Cushing’s syndrome ends on February 17, 2019, after which time a competitor that has received FDA approval for a generic equivalent of Korlym may market its drug to patients with Cushing’s syndrome, provided doing so would not infringe any of our applicable patents. We have two patents listed in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book, that we believe would be infringed by a generic competitor for Korlym. We have additional applications for patents we believe would qualify for the Orange Book under examination by the USPTO.Hatch-Waxman Amendments to the Federal Food, Drug and Cosmetic Act (“FDCA”)The FDCA establishes an approval process for generic versions of approved drugs (“Innovator Drugs”) through the submission of an Abbreviated New Drug Application, or ANDA. An ANDA provides for marketing of a generic drug with the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use, among other things, to the Innovator Drug. ANDAs are termed “abbreviated” because they are generally not required to include preclinical and clinical data establishing safety and efficacy. Instead, generic applicants must demonstrate that their product is bioequivalent to, or performs in the same manner as, the Innovator Drug.In seeking approval, ANDA applicants must certify to the FDA that any Orange Book patents relating to the Innovator Drug are invalid or will not be infringed by the manufacture, use or sale of the generic product. This is known as a “Paragraph IV certification.” If the owner of the Innovator Drug responds to receipt of a paragraph IV certification by suing the ANDA applicant for patent infringement, the FDA may not approve the ANDA application until the earlier of 30 months or when the infringement case concerning each such patent was favorably decided in the ANDA applicant's favor or settled, or such shorter or longer period as may be ordered by a court. This prohibition is generally referred to as the 30-month stay. Owners of Innovator Drugs regularly challenge paragraph IV certifications and trigger the 30-month stay, recognizing that the related patent litigation may take many months or years to resolve.In February 2018, we received notice that Teva Pharmaceuticals USA, Inc. (“Teva”) had submitted an ANDA seeking FDA approval for a generic version of Korlym. Teva’s Paragraph IV certification stated that our listed Orange Book patents will not be infringed by Teva’s proposed product, are invalid and/or are unenforceable. We plan to vigorously defend our extensive intellectual property rights in Korlym.Competition for KorlymKorlym competes with established treatments, including surgery, radiation and other medications, including “off-label” uses of drugs such as ketoconazole, an anti-fungal medication. Korlym also competes with Novartis’ drug, Signifor® (pasireotide) Injection, which the FDA approved in December 2012 for the treatment of adult patients with Cushing’s disease who are not candidates for pituitary surgery or for whom surgery did not work. (Cushing’s disease is a subset of Cushing’s syndrome that afflicts approximately 70 percent of patients with Cushing’s syndrome.)In the future, Korlym may experience competition from generic versions and from new compounds. For example, Strongbridge Biopharma plc is developing levoketoconazole, a chiral form of ketoconazole. Novartis isdeveloping osilodrostat, a cortisol synthesis inhibitor. Both compounds are in Phase 3 testing in the United States and European Union.Intellectual PropertyPatents and other proprietary rights are important to our business. It is our policy to seek patent protection for our inventions and to rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position.Mifepristone. The composition of matter patent covering Korlym’s active ingredient, mifepristone, has expired. The only other FDA-approved use of mifepristone is to terminate pregnancy. TheWe hold 16 U.S. method of use patents listed in the FDA has imposed significant restrictions on this useOrange Book covering various uses of mifepristone. Korlym in the treatment of patients with Cushing’s syndrome, with additional patent applications that may be suitable for listing in the Orange Book under examination at the USPTO. Our current Orange Book patents have expiration dates ranging from 2028 to 2038.the exclusive marketing rights conferred as a benefitour method of orphan drug designation and marketing exclusivity in the United States,use patents, (2) the significant restrictions imposed by the FDA on the use of mifepristone to terminate pregnancy and (3) the different patient populations, administering physicians and treatment settings between the use of mifepristone to terminate pregnancy and to treat Cushing’s syndrome and (4) oursyndrome.described below.Oncology. We have exclusive license agreements withfrom the University of Chicago to patents covering the use of all cortisol modulators,glucocorticoid receptor antagonists, including mifepristone, in the treatment of triple-negative breast cancer (in combination with anti-cancer agents) and castration-resistant prostate cancer (inin combination with androgen deprivation agents).agents and triple-negative breast cancer in combination with anti-cancer agents. This license also covers related applications in countries around the world. See “Business –- License Agreements.”Patents. WePatents. In addition to our patents relating to Cushing’s syndrome, we own U.S. and foreign patents for the use of cortisol modulators in the treatment of pancreatic cancer, weight gain caused by antipsychotic medications, mild cognitive impairment, the prevention and treatment of stress disorders, improving the therapeutic response to electroconvulsivedelirium, catatonia, psychosis induced by interferon-alpha therapy, the treatment of delirium, the treatment of catatonia, the treatment of psychosis with Interferon-Alpha therapy, inhibiting cognitive deterioration in adults with Down’s Syndrome, the treatment of weight gain following treatment with antipsychotic medication, the treatment ofmigraine headaches, gastroesophageal reflux disease, the treatment of migraine headaches, the treatment of neurological damage in premature infants and in the treatment of diseases using combination steroid and GR antagonist therapy. We own a methodpatents covering the optimization of use patent for optimizing mifepristone plasma levels in plasma serum inthe treatment of patients suffering from any disorder,disorders, including Cushing’s syndrome, amenable to treatment with mifepristone. We also own a methodpatents covering prevention and treatment of use patent covering the usestress disorders, improvement of mifepristonetherapeutic response to diagnoseelectroconvulsive therapy and treat ACTH-dependent Cushing’s syndrome.inhibition of cognitive deterioration in adults with Down’s Syndrome. The expiration dates of these patents and their foreign counterparts range from 2020 to 2036.In addition, we have 22 U.S. method-of-use applications covering our selective cortisol modulators.We estimate that the expiration dates of the patents that could issue from these applications and their foreign counterparts range from 2029 to 2037.nineten U.S. composition of matter patents containing claims relating to three structurally distinct series ofour next-generation cortisol modulators. FourForeign counterparts of five of these patents have issued in Europe, with an additional U.S. application pending.Europe. The expiration dates of these patents and their foreign counterparts range from 20262025 to 2033.also filed, where we deemedin appropriate jurisdictions, foreign patent applications corresponding to our U.S. patents and applications. We cannot assure you that any of our patent applications will result in the issuance of patents, that any issued patent will include claims of the breadth sought in these applications,we are seeking, or that competitors or other third-parties will not successfully challenge or circumvent our patents if they are issued. that our patents are valid and that we do not infringe any third-party’sthe patents or other proprietary rights andof others. Accordingly, we believe we are not obligated to pay royalties relating to the use of intellectual property to any third-parties other than Stanford University andthird parties except the University of Chicago.Chicago, from which we have licensed certain patents. exclusively licensed three issued U.S. patents from Stanford University for the use of cortisol modulators, including mifepristone, in the treatment of psychotic depression, cocaine-induced psychosis and early dementia, including early Alzheimer’s disease. We are required to make milestone payments and pay royalties to Stanford University on sales of products commercialized under these patents. Milestone payments are creditable against future royalties. Our license will end upon expiration of the related patents in 2018 and 2019 or upon notification by us to Stanford. We have also exclusively licensed from the University of Chicago three issuedeight U.S. patents for (a) the use of cortisol modulators in the treatment of triple-negative breast cancer, and a second patent family consisting of an issued U.S. patent and applications in Europe having claims directed to(b) the use of cortisol modulators to treat castration-resistant prostate cancer. We are required to pay the University of Chicago customary milestone fees and royalties on revenue from products commercialized under the issued patents or patents that may issue pursuant to the pending applications. Our license will end upon expiration of the relatedlicensed patents in 2031 and 2033 or upon notification by us to the University of Chicago. including regulations that governgoverning the testing, manufacturing, safety, efficacy, labeling, storage, record keeping, advertising and promotion of the products under the Federal Food, Drug and Cosmetic Act. All of our product candidates require regulatory approval by government agencies prior to commercialization. The process required by the FDA beforecommercialization and are subject to continued regulatory oversight thereafter. Before a new drug may be marketed in the United States the FDA generally involves the following:requires completion of preclinical laboratory and animal testing; submission of an Investigational New Drug (“IND”), which must become effective before clinical trials may begin;testing, performance of adequate anduse;use and approval by the FDA. The process of complyingComplying with these and other federal and state statutes and regulations involves significant time and expense.Preclinical studies are generally conducted in laboratory animals to evaluate the potential safety and the efficacy of a product. Drug developers submit the results of preclinical studies to the FDA as a part of an IND, which must be approved before beginning clinical trials in humans. If it is anticipated that the clinical trial will be conducted in Europe, a Clinical Trial Authorization (CTA) must be submitted and approved by the appropriate European regulatory agency prior to the commencement of the study. Typically, human clinical trials are conducted in three sequential phases that may overlap.Phase 1. The product candidate is administered to a small number of healthy subjects to provide preliminary information as to its safety, tolerability and pharmacokinetics and sometimes to provide preliminary information as to its activity and/or efficacy.Phase 2. The product candidate is administered to patients afflicted with the target disease to determine its preliminary efficacy, optimal dosages and to provide more evidence of safety.Phase 3. The product candidate is administered to a larger group of patients afflicted with the target disease to establish its risk/benefit ratio and to demonstrate with substantial evidence its efficacy and safety.The FDA and the institutional review boards associated with clinical trial sites closely monitor the progress of clinical trials conducted in the United States and may reevaluate, alter, suspend or terminate a trial at any time for various reasons, including a belief that the subjects are being exposed to unacceptable risks. The FDA may also require that additional trials be conducted.After Phase 3 trials are completed, drug developers submit the results of preclinical studies, clinical trials, formulation studies and data supporting manufacturing to the FDA in the form of a New Drug Applications (“NDA”). The FDA reviews an NDA upon submission and may request additional information rather than accept an NDA for filing. If the FDA accepts an NDA for filing, it may grant marketing approval (i.e., permit commercial sales), request additional information or deny the application. Once an NDA has been accepted for filing, by law the FDA has 180 days to examine the application and respond to the applicant. However, the review process is often significantly extended by FDA requests for additional information or clarification. Under the Prescription Drug UserFee Act, the FDA has a goal of responding to NDAs within ten months of the filing date for standard review, and six months for priority review if a sponsor shows that its drug candidate provides a significant benefit compared to marketed drugs. FDA approvals may not be granted on a timely basis or at all.an NDA,the marketing of a new drug, physicians may prescribe the subject drugit to patients in the United States. The FDA may withdraw a product’s marketingits approval at any time if compliance with regulatory standards is not maintained. The drug developer must submit periodic reports to the FDA. AdverseFDA, including reports of adverse patient experiences, with the product must be reported towhich could cause the FDA which could result in the imposition ofto impose marketing restrictions through labeling changes or removal ofremove the productdrug from the market. In addition, theThe FDA may also require post-marketingpost-approval studies, referred to as Phase“Phase 4 studies,” to monitor or further explore the effect of approved products, and may limit further marketing of the productdrug based on the results of such studies.authorities where applicable and must comply with FDA-mandated current Good Manufacturing Practices regulations (“cGMP”).regulatory authorities. Failure to comply with statutory and regulatory requirements subjects the manufacturer to possible legal or regulatory action, including suspension of manufacturing or a product recall.The FDA imposes complex regulations on entities, such as Corcept, that advertise and promote pharmaceuticals. These include standards and regulations for direct-to-consumer advertising, off-label promotion, and industry-sponsored scientific and educational activities. The FDA has broad enforcement authority under the Federal Food, Drug and Cosmetic Act. Failure to abide by its regulations can result in penalties including the issuance of a warning letter directing a company to correct deviations from FDA standards, a requirement that future advertising and promotional materials be pre-cleared by the FDA, and state and federal civil and criminal penalties.In addition to studies requested by the FDA after approval, a drug developer may conduct other preclinical and clinical trials investigating use of the approved compound to treat additional indications. Data supporting the use of a drug for new indications must be approved by the FDA before the drug can be marketed for these indications.We are not seeking regulatory approvalmarket Korlymdistribute our product candidates outside the United States. If we do so,States, we (or our potential future partners) will have to complete an approval process similar to the U.S. approval process before we can distribute our product candidates in those countries.one imposed by the FDA. The approval procedure and the time required for approval vary from country to country and canmay involve additional preclinical and clinical trials. Foreign approvals may not be granted on a timely basis, or at all. Regulatory approval of pricing is required in most countries other than the United States. The prices approvedStates, which pricing may be too low to generate an acceptable return.AlthoughThird-party payers are increasingly limiting coverage and reducing reimbursements for medical products and services, although this trend has not to-date had a material impact on the amount or timing of our revenues, these third-party payors are increasingly limiting coverage and reducing reimbursements for medical products and services.revenues. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures and adoption of more restrictive policies in jurisdictions with existing controls and measures could limit our net revenue and results.revenue. Decreases in third-party reimbursement for our products or a decision by a third-party payorpayer to not cover our products could reduce physician utilization of our productssales and have a material adverse effect on our sales, results of operations and financial condition.and foreign governments in whichwhere we conduct our business. These laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy and security and physicians’ sunshine laws and regulations. Foreign governments have comparable regulations.the recently enacted Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the PPACA, among other things, amends the intent requirement of the federal Anti-Kickback Statute and the criminal statute governing healthcare fraud statutes. Aa person or entity no longer needsdoes not need to have actual knowledge of these statutes or specific intent to violate them. In addition, the PPACA provides that the government may assert thatthem to have committed a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act or federal civil money penalties statute.violation. The majority of states also have anti-kickback laws which establish similar prohibitions and in some cases may apply to items or services reimbursed by any third-party payor, including commercial insurers.PPACA,Patent Protection and Affordable Care Act (“ACA”), among other things, imposes new reporting requirements on drug manufacturers for payments made by them to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain health care professionals beginning in 2022 and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to submit required information may result in significant civil monetary penalties of up to an aggregate of $150,000 per year (or up to an aggregate of $1 million per year for “knowing failures”), for allany payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an annual submission. Drug manufacturers must report such payments to the government by the 90th day of each calendar year. Certain states also mandate implementation of commercial compliance programs, impose restrictions on drug manufacturer marketing practices and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians.executives. Weexecutives and also enlist the expertise of associates andindependent advisors with extensive pharmaceutical development experience. As of December 31, 2017,2020, we had 136 employees, six of whom have MDs.236 employees. We consider our employee relations to be good. Our employees are not covered by a collective bargaining agreement.
We seek to hire, retain and motivate smart, ethical, hard-working employees, officers and directors. To achieve this goal, we offer a collegial work environment where creativity, collaboration and initiative are encouraged. We offer competitive salaries and industry-leading health benefits. To align our people’s goals with Corcept’s goals, we offer annual performance-based cash bonuses and stock-based compensation., Korlym® and CORLUXKorlym®. Corluxin® is a registered trademark in the EU. Other service marks, trademarks and trade names referred to in this document are the property of their respective owners.These may be inspected and copied at the SEC’s Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549, on official business days during the hours of 10:00 A.M. to 3:00 P.M. (Eastern Time). You may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site, www.sec.gov, that contains reports, proxy statements and other information regarding issuers such as Corcept.RISKRISK FACTORSAn investmentYou shouldBefore investing, carefully consider the risks described below and the other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes, before investing in our common stock. If any of the following risks or uncertainties actually occurs, our business, results of operations or financial condition could be materially harmed, the price of our common stock could decline and you could lose part or all of your investment.notes. The risks and uncertainties described below are those thatthe ones we currently believe may materially affect us; however, theyus. Many of them have been or may notbecome exacerbated by the COVID-19 pandemic. There may be the only risks and uncertainties that we face. Othersothers of which we are unaware or currently deem immaterial maythat could materially harm our business.the Commercialization of Korlym®Forforeseeable future,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.will be solelyis dependent on the sale of Korlym.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 in the care ofdiagnosing or caring for patients with the illness and it maycan be difficulthard to persuade them to prescribe Korlym, evenidentify appropriate patients and treat them with clinical trial results showing it is a compelling treatment.hamperlimit our efforts to generate Korlym revenue, including: long-standing off-label treatments for Cushing’s syndrome, such as ketoconazole;
•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;•negative publicity and political concerns about Korlym, RU-486, Mifeprex® or mifepristone;the•lack of availability of government or private insurance, which may be exacerbated if (i) the U.S. Supreme Court strikes down the Affordable Care Act, which greatly increased the number of Americans with health insurance or (ii) significant increases in unemployment cause patients to lose employer-provided private health insurance and government insurance coverage;either shift to Medicaid, which reimburses Korlym at a significantly lower price, or become uninsured, which would decrease our revenue andrapid technological change that makes Korlym obsolete.wouldcould prevent us from fully funding our planned commercial and clinical activities and would likely cause our stock price to decline.Orphan Drugorphan drug designation does not barexpired in February 2019, which means other companies may now seek to introduce generic equivalents of Korlym for the treatment of Cushing’s syndrome, provided they receive FDA approval and can show that they would not infringe our applicable patents or that those patents are invalid or unenforceable. If our patents are successfully challenged and a generic version of Korlym becomes available, our sales of Korlym tablets and their price could decline rapidly and significantly, which would reduce our revenue and materially harm our results of operations and financial position. Competition from developinga 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.sale of Korlym forItalian pharmaceutical company Recordati-S.p.A., the treatment of Cushing’s syndrome or other indications. Although we have received orphan drug designation in the United States, the regulatory authorities may still approve other drugs for the treatment of patients with Cushing’s syndrome.In 2012, Novartis received approvalsomatostatin analogue SigniforEuropean Union (“EU”) to market its somatostatin analogue Signifor® (pasireotide) InjectionEU for adult patients with Cushing’s disease (a subset of Cushing’s syndrome that accounts for approximately 70 percent of all patients with Cushing’s syndrome) for whom pituitary surgery is not an option or has not been curative. In addition, Novartis is conducting Phase 3 trials of. On March 6, 2020, the experimentalFDA granted Recordati approval to market another cortisol synthesis inhibitor, osilodrostatIsturisa® (osilodrostat) tablets, to treat patients with Cushing’s syndrome and has received Orphan Designationdisease. Osilodrostat is approved in the United States and the EU for that use. Novartisthe treatment of patients with Cushing’s syndrome. Osilodrostat has substantially more resourcesbeen designated an orphan drug in both the EU and experience than we do and may provide significant competition.syndrome andsyndrome. Levoketoconazole is conducting Phase 3 trials in Europe andan enantiomer of the United States for this indication.If generic productsanti-fungal medication, ketoconazole, that compete with Korlym or any future Corcept product are approved and launched, our business would be adversely affected.Although Korlym is covered by patents covering its method of use, including its useprescribed off-label to treat patients with Cushing’s syndrome, we cannot assure you that third parties will not attemptsyndrome. Strongbridge has completed two Phase 3 trials, which met their primary endpoints of reducing cortisol synthesis, and expects to invalidate or design aroundsubmit a new drug application (“NDA”) to the patents, or assert that they are invalid or otherwise unenforceable, and introduce generic equivalents of Korlym or any future products. Once orphan drug exclusivity for KorlymFDA in the United States for the treatmentfirst quarter of Cushing’s syndrome expires in February 2019, other companies could attempt to introduce generic equivalents of these products if they do not infringe our patents or can demonstrate that our patents are invalid or unenforceable. After the introduction of a generic competitor, a significant percentage of the prescriptions written for a product may be filled with the generic version, resulting in a loss in sales of the branded product and reducing its price. Generic competition for Korlym or our future products could have a material adverse effect on our sales, results of operations and financial condition.In February 2018, we received notice that Teva had filed an ANDA requesting approval to market a generic version of Korlym. The notice included a Paragraph IV certification stating that our patents in the Orange Book for Korlym are invalid, unenforceable or will not be infringed by Teva’s proposed generic product. Corcept intends to file suit against Teva, triggering the automatic 30-month stay of FDA approval. Litigation to enforce or defend intellectual property rights is complex, costly and involves significant commitments of management time. If any of our Orange Book listed patents are successfully challenged by Teva or any other party, and a generic version of Korlym is approved, Korlym’ sales and price could decline materially.payors,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 payorspayers cease to provide adequate and timely coverage and reimbursement for Korlym, physicians may not prescribe the medication orand patients may not purchase it, even if it is prescribed. In addition, delays in coverage for individual patients may reduce our revenues.somemany 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.(“PPACA”),or ACA, which was passed in 2010, substantially changed the way health care is financed by both governmental and private insurers and significantly impacts the U.S. pharmaceutical industry.insurers. The PPACA,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 PPACAACA also appropriated additional funding to comparative clinical effectiveness research, although it remains unclear how the research will impact currentaffect Medicare coverage and reimbursement or how new information will influence other third-party payorpayer policies.PPACA,ACA, and we expect there will be additional challenges and amendments to the PPACAACA in the future, particularly in light of the new presidential administration and U.S. Congress.future. For example, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the PPACA towaive, defer, grant exemptions from, or delay the implementation of any provision of the PPACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On October 12, 2017, President Trump signed another Executive Order directing federal agencies to expand access to alternative health plans and health reimbursement arrangements, and the U.S. Department of Health and Human Services announced that it would immediately cease making Cost-Sharing Reduction (“CSR”) payments to issuers of qualified health plans. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified health plans under the PPACA. In addition, CMS has proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the PPACA for plans sold through such marketplaces. Further, each chamber of Congress has put forth multiple bills designed to repeal or repeal and replace portions of the PPACA. Most recently, the Tax Cuts and Jobs Acts (the “Tax Act”) was enacted, which, among other things, removesremoved penalties for not complying with the individual mandate to carry health insurance. At this time,On December 14, 2018, a U.S. District Court Judge in the full effectNorthern District of Texas, ruled that the PPACA,individual mandate is a critical and inseverable feature of the Executive Orders,ACA, and therefore, because it was repealed as part of the haltingTax Act, the remaining provisions of CSR paymentsthe ACA are invalid as well. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court’s decision that the individual mandate was unconstitutional but remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are invalid as well. On March 2, 2020, the U.S. Supreme Court granted the petitions for writs of certiorari to review the case, although it is unclear when the decision will be made or how these decisions, subsequent appeals, if any, and any subsequent legislation would have onthe Supreme Court will rule. In addition, there may be other efforts to challenge, replace or repeal the ACA that may affect the law or our business remains unclear.business. Any new limitations on, changes to, or uncertainty with respect to the ability of individuals to enroll in governmental reimbursement programs or other third-party payorpayer insurance plans could impact demand forreduce Korlym sales, which in turn could affect our ability to successfully develop and commercialize ournew products.PPACAACA was enacted. These changes included an aggregate reduction in Medicare payments to providers of up to 2 percent per fiscal year, which went into effect on April 1, 2013 and will remain in effect through 20252030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2021, unless additional Congressional action is taken. On January 2, 2013, President Obama signed into lawIn addition, the American Taxpayer Relief Act of 2012, which further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. On February 1, 2016,Moreover, the Centers for Medicare & Medicaid Services, or CMS, published a final rule that revised certain requirements involved in our calculation of prices we report in connection with our participation infederal government reimbursement programs so that Korlym will be eligible for purchase by, or qualify for partial or full reimbursement from, Medicaid and other government programs. The extent to which this rule may alter our reported prices and estimated rebates and chargebacks under government programs remains unclear. Moreover,the individual states in the United States have also become increasingly aggressiveactive in developing proposals, passing legislation and implementing regulations designed to control productdrug pricing, including price or patient reimbursement constraints, discounts, formulary flexibility, marketing cost disclosure and transparency measures.healthcare reformhealthcare-related measures that may be adopted in the future, could materially reduce our ability to successfully develop and commercialize Korlym and our product candidates.has been and continues to beis the subject of considerable ethical and political debate in the United States and elsewhere. Public perception of mifepristone may limit our ability to engage alternative manufacturers and may limit the commercial acceptance of Korlym by patients and physicians. Even though we have taken measures to minimize the likelihood of the prescribing ofchance that Korlym will accidentally be prescribed to a pregnant woman, physicians may choose not to prescribe Korlym to a woman simply to avoid the risk of unintentionally terminating a pregnancy. have no manufacturing or pharmacy capabilities and depend on third-party vendors to manufacture Korlym’s active ingredient, form it into tablets, package it and dispense it to patients. We also depend on third-party suppliersvendors to manufacture the API and capsules or tablets for relacorilant, CORT118335, CORT125281 and our other product candidates. If theseour suppliers become unable or unwilling to perform these functions and we cannot transfer our businessthese activities to qualified replacement vendors in a timely manner, our business will be harmed.AnotherTwo other third-party manufacturer, Alcami, producesmanufacturers produce and bottles ourbottle Korlym tablets. Our agreementsagreement with these vendorsPCAS automatically renew. Onerenews for two one-year terms, unless either party provides 12-months’ written notice of its intent not to renew. A single specialty pharmacy, Optime Care, Inc., (“Optime”) dispenses the Korlym we sell directly to patients which representsthis vendorOptime has a five-year term and renews upon the written consent of both parties. We rely on other third-partiesparties, subject to manufacturecustomary termination provisions, including the API and capsulesright of our selective cortisol modulators, including relacorilant, CORT118335 and CORT125281. IfOptime to terminate in the event of a material breach by us that we do not cure in a reasonable period of time after receiving written notice. In addition, we may terminate the agreement for convenience. In the event any of these vendors is unable or unwillingfails to meet our requirements, we may not be able to manufacture or dispense our product in a timely manner. Our arrangements with these manufacturers are terminable by them, subject to notice provisions. Any third-party manufacturer or specialty pharmacy we engage will be subject to regulation by the FDA and other governmental authorities, including, in some cases, the EMA. We do not control these vendors’ processes or operations and cannot assure that they will meet applicable regulatory requirements or theirperform its contractual obligations to us. Identifying replacementsus or is materially impaired in its performance by the COVID-19 pandemic or for these vendorsany other reason, we may experience disruptions and transitioningdelays in our supply chain and our ability to deliver Korlym to patients, which would adversely affect our business, to them would be time-consuming, complexresults of operations and expensive. Failure to do so efficiently and in a timely manner would harm our business.FDA.FDA and, in some cases, the European Medicines Agency (“EMA”). We do not control the manufacturing activities of these vendors, including whether they maintain adequate quality control and hire qualified personnel. We are completely dependent on our contract manufacturing partnersthem for compliance with the regulatory requirements known as current good manufacturing practices (“cGMPs”). If our contract manufacturersvendors cannot successfully manufacture material that conforms to our specifications and the strict requirements of the FDA or others, they will not be able to maintain regulatory approvalauthorizations for their manufacturing facilities. Wefacilities and we could be prohibited from using the API or drug product they have no control over whether our contract manufacturers maintain adequate quality control and hire qualified personnel.provided. If the FDA, EMA or a comparable foreignother regulatory authority does not approveauthorities withdraw regulatory authorizations of these facilities, for the manufacture of our products or if it withdraws its approval, we may need to find alternative manufacturingvendors or facilities, which would be time-consuming, complex and expensive and could significantly hamper our ability to develop, obtain regulatory approval for orand market our products. In addition, sanctionsSanctions could be imposed on us, including fines, injunctions, civil penalties, failurerefusal of regulators to approve our product candidates, delays, suspensionsuspensions or withdrawalwithdrawals of approvals, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could harm our business.In addition to meeting stringent regulatory requirements, our suppliers must manufacture Korlym and our product candidates on a timely basis in the quantities that we require. If they fail to do so, we may exhaust our Korlym or product candidate inventory and not be able to generate revenue or our advance our clinical development programs in a timely manner.caused adverse effects.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 the medicineKorlym in our clinical trials and physicians prescribing the medicine to women must take strict precautions to ensure that the medicineit is not administered to pregnant women. Failure to observe these precautions could result in significant product liability claims.We have product liability with coverage limits we believe to be appropriate for a company marketing a single pharmaceutical product and developing others. However, this insurance may become prohibitively expensive or may not fully cover our potential product liabilities. Our inabilityInability to obtain adequate insurance coverage at an acceptable cost could prevent or inhibit the commercializationdevelopment of Korlym or our product candidates or result in meaningful underinsured orsignificant uninsured liability. Defending a lawsuit could be costly and significantly divert management’s attentionmanagement from conducting our business.We are subject to ongoing and continued regulatory review. productive activities.regulatoryother requirements, we will be unable to generate revenue orand may be subject to penalties and our business would be harmed.The FDA’s approval of Korlym was limited to the indication stated in Korlym’s label. If we violate any of the FDA’s restrictions, the FDA could withdraw its approval. ongoing obligations and continued regulatory reviewoversight by the FDA and other regulatory authorities in the United States and other countrieselsewhere with respect to theour research, testing, manufacturing, labeling, distribution, adverse event reporting, storage, selling, advertising, promotion, recordkeeping and sales and marketing of products.activities. These requirements include submissions of safety information, annual updates on manufacturing activities and continued compliance with FDA regulations, known asincluding cGMPs, current good laboratory practices (“cGLPs”) and current good clinical practices (“cGCPs”GCP”). The FDA enforces these regulations through periodic inspections of us and the laboratories, manufacturers and clinical sites we use. (ForeignForeign regulatory authorities have comparable requirements and enforcement mechanisms.) Discovery of previously unknown problems with a product includingor product candidate, such as adverse events of unanticipated severity or frequency or with our third-party manufacturers ordeficiencies in manufacturing processes or management, as well as failure to comply with FDA and applicableor other U.S. or foreign and U.S. regulatory requirements, may subject us to substantial civil and criminal penalties, injunctions, holds on clinical trials, product seizure, or detention, refusal to permit the import or export of products, restrictions on product marketing, withdrawal of the product from the market, voluntary or mandatory product recalls, total or partial suspension of production, refusal to approve pending NDAs or supplemental NDAs, and suspension or revocation of product approvals.The FDA’s policies may change or new governmental regulations may be enacted that prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of future government regulations.Recent U.S. tax legislation may materially adversely affect our results of operations, financial condition and cash flows.Recently enacted U.S. tax legislation has significantly changed the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate, limiting interest deductions, permitting immediate expensing of certain capital expenditures, adopting elements of a territorial tax system, imposing a one-time transition tax (or “repatriation tax”) on all undistributed earnings and profits of certain U.S.-owned foreign corporations, revising the rules governing net operating losses and the rules governing foreign tax credits, and introducing new anti-base erosion provisions. Many of these changes are effective immediately, without any transition periods or grandfathering for existing transactions. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and Internal Revenue Service (“IRS”), any of which could lessen or increase certain adverse impacts of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often use federal taxable income as a starting point for computing state and local tax liabilities.we marketour marketing of Korlym in a manner that violates FDA regulations or health care fraud and abuse laws.In the United States, weindications other than those approved by the FDA,any indication they choose, manufacturers are prohibited from promotingmay only promote products for such “off-label” uses.their FDA-approved use. All other uses are referred to as “off-label.” In the United States, we market Korlym for treatment ofto treat hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing’s syndrome who have type 2 diabetes mellitus or glucose intolerance and havefor whom surgery has failed surgery or areis not candidates for surgery andan option. We provide promotional materials and training programs to physicians regardingcovering the use of Korlym for this indication. Although we believe our marketing materials and training programs for physicians do not constitute “off-label” promotion of Korlym, theThe FDA may disagree. change its policies or enact new regulations at any time that restrict our ability to promote our products.determineswere to determine that our promotional materials, training or other activities by our employees or agents constitute “off-label”we engaged in off-label promotion, of Korlym, itthe FDA could askrequire us to change our training or promotional materials or other activities. The FDA could alsopractices and subject us to regulatory enforcement actions, including issuance of a public “warning letter,” injunction, seizure, civil fine or criminal penalties. Other federal or state enforcement authorities might act if they believe that the alleged improper promotion led to the submission and payment of claims for an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. Even if it is determined that we are not in violation of these laws, we may be faced withreceive negative publicity, incur significant expenses and be forced to devote management time to defending our position.WeIn addition to laws restricting off-label promotion, we are also subject to federal and state healthcare fraud and abuse laws and regulations including: persons from 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 the Medicare and Medicaid programs;payorspayers for non-covered “off-label” uses; and submitting inflated best price information to the Medicaid Drug Rebate Program;• by the PPACA on drug manufacturers regarding any “transfer of value” made or distributed to prescribers and other health care providers, and ownership or investment interests held by physicians and their immediate family members. Manufacturers are required to submit reports detailing these financial arrangements by the 90th day of each calendar year;HIPAA, as amended by the Health Information Technology for EconomicACA on drug manufacturers regarding any “transfer of value” made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and Clinical Health Act of 2009chiropractors), certain health care professionals beginning in 2022, teaching hospitals, and ownership or investment interests held by physicians and their respective implementing regulations,immediate family members. Manufacturers are required to submit reports detailing these financial arrangements by the 90th day of each calendar year;impose obligations on covered healthcare providers, health plans,broadly regulate marketplace activities and healthcare clearinghouses, as well as their business associatesactivities that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, securitypotentially harm consumers; and transmission of individually identifiable health information; andpayor,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;expenditures and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. our being found in violation of these laws and regulations is increased by the fact that many of them have not been fullydefinitively interpreted by the 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(some of whom recommend, purchase and/or prescribe our products,products) and the manner in which we promote our products, could be subject to challenge. We are also exposed to the risk thatCROscontract 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.our operations are found to be in violation ofwe violate any of the laws described above or any other government regulations, we may be subject to civil and criminal penalties, damages, fines, exclusion from governmental health care programs, a corporate integrity agreement or other agreement to resolve allegations of non-compliance, individual imprisonment, and the curtailment or restructuring of our operations, any of which could adversely affect our financial results and ability to operate.A break-down or breach of our information technology systems could subject us to liability or interrupt the operation of our business. We store sensitive data on our computer networks and on the networks of third-party vendors, including intellectual property and confidential information relating to our business, patients and employees. Despite the implementation of security measures, our internal computer systems and those of our vendors are subject to the risk of cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. In addition, system failures could cause the loss of valuable clinical trial data or otherwise disrupt our clinical and commercial activities and be expensive and time-consuming to remedy. If a disruption or security breach resulted in the disclosure of confidential or proprietary information, we could incur liability and our research, development and commercialization efforts could be delayed or otherwise harmed.A catastrophic disaster could damage our own or our manufacturers’ facilities and equipment, which could require us to cease or curtail operations.Our business is vulnerable to damage from various types of natural disasters or other disruptive events, including earthquakes, fires, floods, power losses and communications failures. For example, our headquarters are located in the San Francisco Bay Area, which is earthquake-prone, and our specialty pharmacy is located in an area that is subject to severe weather conditions. In addition, political considerations relating to mifepristone put us and our manufacturers at increased risk for terrorist attacks, protests or other disruptive events. If a disaster or similar event were to occur, we might not be able to operate our business or our manufacturers might not be able to produce or dispense Korlym or our product candidates. Our insurance may not cover or be adequate to cover losses resulting from disasters or other business interruptions.theour Research and Development of our Product Candidatesis often not successful.unsuccessful. Results of earlierearly studies and trials are often not predictive of later trial results. Failure can occur at any stage of drug development. Our efforts to discover, develop and commercialize our product candidates may not be predictive of future trial results.takes a long time.often unsuccessful. Data obtained from clinical trials are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The results from early clinical trials mayare often not be predictive of results in later clinical trials. Product candidates may ultimately 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 advancedlate-stage clinical trials due to lack of efficacy or theunanticipated or unexpectedly severe adverse safety profile of their product candidate. are too smallmay prove inadequate to support marketing approvals for the compounds being studied.approvals. Even if these trials that generate positive results those results wouldmay have to be confirmed in one or more substantiallymuch larger, more expensive and lengthier trials before we could realistically seek regulatory approvals.The commencement and completionapproval of clinicala product candidate.trial;CROs, other required vendors and an appropriate number of clinical trial sites;
•delays or inability to obtain institutional review board (“IRB”) approval at prospective trial sites;•delays or inability to obtain institutional review board (“IRB”) approval at prospective trial sites;slow patient enrollment;negative or inconclusive trial results;lack of effectiveness or safety of the product candidate; andour clinical sites or manufacturing operations by us, the FDA or other authorities.We could encounter delays if a clinicalismay also be suspended or terminated by us, the trial’s data safety monitoring board, or the IRBs atgoverning the sites where the trial is being conducted. Theconducted or the FDA or other regulatory authorities may suspend or terminate a trial for many reasons, including failure to conduct the trial in accordancecomply with regulatory requirements or our by the FDA or other authorities of our clinical trial operations or clinical trial sites by the FDA or other authorities, unforeseen safety issues, failure to demonstrate a benefit from using a product candidate or changes in government regulations. clinical 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 in additionor to those we had planned,change the size or design of a trial already underway, which could delay or prevent the completion of its development program orand increase its cost. Even if we conduct all of the clinical trials and supportive studies that we consider appropriate and the results are positive, we may not receive regulatory approvalapproval.product candidate.We depend on third-partiesCOVID-19 vaccine or effective treatment is widely available. In addition, physicians, patients and medical institutions have changed their behavior in an attempt to conductreduce the risk of infection that makes clinical trials more expensive, time-consuming and manage manyrisky to initiate and conduct.third-partiesvendors to successfully perform their contractual duties or meet expected timelines may prevent or delay approval of our product candidates, which could harm our business.We rely oncandidates.to enroll patients and third-parties such as CROs to manage many of our trials and to perform required data collection and analysis. Although we control only certain aspects of these third-parties’ activities, we are still responsible for ensuring that every study adheres to its protocol and meets all applicable regulatory and scientific standards. If we or any of the third-parties working with us fail to comply with applicable cGCPs, the clinical data generated in our trials may be unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving a product candidate. We cannot be certain that regulatory authorities will determine that our clinical trials comply with cGCP requirements. In addition, failure of our manufacturers to comply with cGMP may require us to repeat clinical trials, which would delay regulatory approval. We may not be able to select and qualify appropriate sites for our trials. If our clinical sites fail to enroll a sufficient number of patients in a timely way, we may be unable to complete our trials as planned, which could delay or prevent the approval of our product candidates.Although we have agreements with the CROs and consultants helping to conduct our clinical trials, we may fail to maintain satisfactory relationships with them or with our clinical investigators. If our agreements with any of these third-parties terminates, we may not be able to enter into alternative arrangements in a timely manner or on commercially reasonable terms, or at all. If the third-parties on which we rely dovendors does not perform their contractualits duties or fail to meet expected deadlines or fails to adhere to applicable GCP, or if the quality or accuracy of the data they obtainit produces is compromised, ouraffected clinical trials may be extended, delayed or terminated and we may be unable to obtain approval for our product candidates.We Failure of our manufacturing vendors to perform their duties or comply with cGMPs may be unablerequire us to obtain and maintainrecall drug product or repeat clinical trials, which would delay regulatory approvals forapproval. If our product candidates.We are not permitted to market or promoteagreements with any products before we receive regulatory approval from the FDA or comparable foreign regulatory authorities. Although we have received FDA approval to market Korlym to treat patients with Cushing’s syndrome,of these vendors terminate, we may not be unableable to maintain such approval. We may not receive regulatory approval for any ofenter into alternative arrangements in a timely manner or on reasonable terms.product candidates. vendors and clinical sites has been limited by the COVID-19 pandemic and associated public health restrictions, which increases the risk that failures to meet applicable requirements will go undetected.a new drug is uncertain, lengthy and expensive. Failure can occur at any stage. In order to receive approval from the FDA for a product candidate, we must demonstrate that the new drug product is safe and effective for its intended use and that our manufacturing processes for the product candidate comply with cGMPs, which govern production processes, quality control andrecordkeeping. Our inability or the inability of our suppliers to comply with applicable FDA and other regulatory requirements can result in, among other things, delays in or denials of new product approvals, warning letters, fines, consent decrees restricting or suspending manufacturing operations, injunctions, civil penalties, recall or seizure of products, total or partial suspension of product sales and criminal prosecution. Any of these or other regulatory actions could materially harm our business and our financial condition.Future governmental action or changes in FDA policy or personnel may also result in delays or rejection of an NDA in the United States. In addition, because the only other currently FDA-approved use of mifepristone is the termination of pregnancy, we expect that the label for mifepristone for any indication will include, as Korlym’s does, some limitations, including a so-called “black-box” warning that it should not be used by pregnant women or women seeking to become pregnant.If we receive regulatory approval for our future product candidates we willin foreign jurisdictions would be subject to ongoing FDA obligationscostly and continued regulatory oversight and review, such as continued safety reporting requirements; and we may also be subject to additional FDA post-marketing restrictions and obligations. If we are not able to maintain regulatory compliance, we may not be permitted to market our product candidates and may be subject to product recalls or seizures. Any regulatory approvals that we receive for our future product candidates may limit the indicated uses for which the medicine may be marketed or require costly post-marketing studies. regulatory approval in foreign jurisdictionssuch approvals would prevent us from commercializing our product candidates abroad.on our own or with the help of partners. Outside the United States, we may commercialize a product only if wewhich would require us to receive a marketing authorization and, in many cases, pricing approval, from the appropriate regulatory authorities, whoseauthorities. These approval processes include all of the risks associated with the FDA’s approval process and, in some cases, additional risks. The approval procedure varies amongmore. Approval procedures vary between countries and can involverequire additional testing. The time required to obtainpre-clinical or clinical studies. Obtaining approval may differ from that required to obtain FDA approval.take longer than it does in the United States. Although approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA,others, failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. Webe ablepossible to file for regulatory approvals and maydetermine whether or not receive necessary approvals to commercializethese conditions were caused by the drug candidate being studied or something else. As we test our product candidates in any foreign market. Although we have received orphan drug designation in the EU of Korlym to treat patients with Cushing’s syndrome, we are not currently seeking any foreign approvals. We face competition from companies with financial, technicallarger, longer and marketing resources substantially greater than our own.The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. Our present and potential competitors include major pharmaceutical companies, specialized pharmaceutical firms, universities and public and private research institutions. These competitors may develop and commercialize medications that are superior to and less expensive than ours. We expect competition to intensifymore extensive clinical trials, or as technical advances are made. Many of our competitors and potential competitors have greater experience, more financial and marketing resources and larger research and development staffs than we do. In addition, manyuse of them either alonebecomes more widespread if we receive regulatory approval, patients may report serious adverse events that did not occur or together with their collaborative partners, have significantly greater experience thanwent undetected in previous trials. Many times, serious side effects are only detected in large-scale, Phase 3 clinical trials or following commercial approval.do in drug development, obtaining regulatory approvals, manufacturingelect, or are required by authorities, to delay, suspend or terminate any clinical trial or commercialization efforts, the commercial prospects of such product candidates or products may be harmed, and commercializing products. Theyour ability to generate product revenues from them may develop drugs that are superior tobe delayed or eliminated.which could render our product candidates obsolete or non-competitive.Our efforts to discover, develop and commercialize product candidates beyond Korlym for the treatment of patients with Cushing’s syndrome are at an early stagereceives marketing approval, and we may fail to successfully commercialize any of them. To develop additional sources of revenue, we must develop new product candidates or new therapeutic uses for Korlym. Cortisol modulators may not be effective to treat any other disorders. We could discover that cortisol modulators have unacceptableothers later identify undesirable side effects or are otherwiseadverse events, potentially significant negative consequences could result, including but not safe. Due to the potential for lack of efficacy and side effects inherent in novel compounds and in new uses for existing medications, we are developing multiple compounds, which will increase our rate of spending, with no assurance that we will be successful in developing drugs that are safe and effective.We only have significant clinical and commercial experience with mifepristone, the active ingredient in Korlym, and we may determine that mifepristone is not desirable for uses other than for the treatment of patients with Cushing’s syndrome. The compounds developed pursuant to our early discovery, preclinical and clinical research programs may fail to become approved medications, no matter how much management time and money we spend on their development. After a product candidate is identified, we may abandon further development efforts after expending significant expense and time due to financial constraints, concerns over safety or efficacy, marketing considerations, manufacturing difficulties or other reasons. Moreover, governmentallimited to:enact new legislation or regulations thatsuspend, limit or restrict our development efforts. If we are unable to successfully discoverwithdraw approvals of such product;commercialize new uses for cortisol modulators, other safety information about the product;unablerequired to generate sufficient revenuechange the way the product is administered or conduct additional studies or clinical trials;supportcreate a Risk Evaluation and Mitigation Strategy (REMS), which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers and/or other elements to assure safe use;operations. will need to increase the size of our organization and we may experience difficulties in managing growth.The development of ourwill beare constrained by our limited administrative, operational and management resources. To date, we have relied on a small management team. Growth will impose significant added responsibilities on members of management, including the need to recruit and retain additional employees. To date, we have relied on a small management team. Our future financial performance and our ability to compete effectively will depend on our ability to manage growth effectively. To that end, we must:developmentmanufacturing activities and supply chain effectively;additionalmore management, clinical development, administrative and sales and marketing personnel; andaccounting and management information systems and controls.Our failure our key personnel or are unable to attract and retain additionalmore skilled personnel, we may be unable to pursue our product development and commercialization efforts.our potential future growth depends significantly upon hiring and retaining keyskilled managerial, scientific, sales, marketing, and financial personnel, and attracting and retaining additional highlypersonnel. The job market for qualified personnel in these areas.is intensely competitive. We face intense competition for qualified personnel. We depend substantially on the principal members of our management and scientific staff. We do not have agreements with any of our executive officers that provide for their continued employment with us or employment insurance covering any of our key personnel. Any officer or employee canmay terminate his or her relationship with us at any time and work for onea competitor. We do not have employment insurance covering any of our competitors.personnel. The loss of key individuals could delay our research, development and commercialization efforts.Ourour Capital Needs and Financial Resultsoperating plans, including our clinical development programs,operations or for strategic reasons. Such capital may not be available on favorableacceptable terms or at all.our Korlym revenues decline or fail to grow,revenue declines significantly, we may need to curtail our operations or raise funds to support our operating plans, including our research and development activities.plans. We may also choose to raise additional capitalfunds for strategic reasons, even if we believe our revenue can fully fund our current and future operating plans.reasons. We cannot be certain that additional funding will be available on acceptable terms or at all. The COVID-19 pandemic has increased volatility and may reduce liquidity in the equity markets, which would make raising additional capital more difficult and expensive. Equity financing couldwould cause dilution. Debtdilution, debt financing if available, may involve restrictive covenants. Neither type of financing may be available to us on attractive terms or at all. If we obtain funds through collaborations with other companies, those arrangementswe may be on unfavorable terms or may require ushave to relinquish certain rights to Korlymone or more of our product candidates. If our revenue declines and our cash reserves are depleted, and if adequate funds are not available from other sources, we may be requiredhave to delay, reduce the scope of, or eliminate one or more of our research or development programs or we may be required to discontinue operations. we were to require additional capital and there was turbulence in the financial markets, institutional investors or lenders may be unwilling to provide capital to businesses such as ours or may greatly increase its cost. If our commercial activities do not generate enough cash to fully fund the operation of our business and we are unable to raise capitalobtain or borrow funds,maintain orphan designation for our product candidates our financial results may be negatively affected.needbe unable to find alternative waysmaintain these designations or to increaseobtain designations for our liquidity. Such alternatives may include, without limitation, curtailing clinical or drug development activity or limiting our commercial efforts, which would have an adverse effect on our business and financial condition.If we acquire other potential products, we will incur a variety of costs and may never realize the anticipated benefits of the acquisition.We currently have no commitments, agreements or plans for any acquisitions. However, if appropriate opportunities arise, we may attempt to acquire products or product candidates, that complementwhich may negatively affect our operating plan. Acquiring rights to another potential product or technology may result in unforeseen difficulties and expenditures and may absorb significant management attention that would be spent developing our existing business. We may fail to realize the anticipated benefits of any acquisition, which could dilute our stockholders’ ownership interest or cause us to incur debt, expose us to future liabilities and result in amortization or other expenses related to goodwill and other intangible assets.Korlymwe do not protect our intellectual property, competitors may erode our competitive advantage. Please see “Part I, Item 3, Legal Proceedings.”other product candidates conflict withintellectual property to the patentsextent the laws of others or ifthe United States do. If we become involvedfail to obtain adequate patent protection in other intellectual property disputes, wecountries, others may have to engageproduce products in those countries based on our technology.orand may require us to obtain a license or may be barredbar us from commercializing our product candidates or Korlym for a new indication.success depends ondevelopment and commercialization of Korlym or our ability to obtain and maintain adequate patent protection for the composition of our proprietary, selective cortisol modulators and their methods of use and the use of Korlym to treat Cushing’s syndrome, TNBC and CRPC. If we do not adequately protect our intellectual property, competitors may erode our competitive advantage.Patents in the pharmaceutical industry are highly uncertain, involve complex legal and factual questions and are the subject of very costly litigation. Our product candidates may give rise to claims that our patents or the patents we have licensed are invalid or that we infringe on the rights of others, which may causerequire us to engage in costly, time-consuming and possibly unsuccessful litigation. If it is determined that one of our products or product candidates infringe others’ patent rights, we may be requiredhave to obtain licenses to those rights. If we fail to obtain licenses when necessary, we may have torights or delay commercializing our product candidatesor suspend commercial activity while we attempt to design around the infringed patent. We couldIf our efforts fail, andwe may be unable to commercialize ourthe infringing product candidates. If we become involved in intellectual property litigation, we are likely to incur considerable costs. or product candidate. We do not have liability insurance for patent infringement.Stanford University and the University of Chicago. To maintain our licenses from the exclusive license to these patents,University of Chicago, we must make milestone and royalty payments to both universities.payments. If we do not comply with our obligations under ourthese licenses, we may lose the right topsychotic depression, cocaine-induced psychosis, early dementia, TNBC and CRPC.patent applications and patents licensed or issued to us may be challenged by third-parties and our patent applications may not result in issued patents. Our presently pending and future patent applications may not issue as patents, and any patent issued to us may be challenged, invalidated, held unenforceable or circumvented. Our patent claims may not prevent third-parties from producing competing products. The foreign countries in which we may someday operate may not protect our intellectual property to the extent of the laws of the United States. If we fail to obtain adequate patent protection in other countries, our competitors may produce competing products in those countries based on our technology, which would impair our ability to succeed.If a third-party successfully asserted an infringement claim against us, we could be forced to obtain an expensive license or pay damages and be prevented from developing, manufacturing or marketing our potential products. We do not have liability insurance for patent infringement. Patent litigation could consume a substantial portion of our resources and management time. Regardless of a claim’s merit, defending a lawsuit is expensive and diverts management’s attention from productive business.Our ability to compete could be diminished if we are unable to protect our trade secrets and proprietary information.In addition to patents, we rely on a combination of confidentiality, nondisclosure and other contractual provisions, laws protecting trade secrets and security measures to protect our proprietary information. These measures may not provide adequate protection, in which case third-parties couldconcerning mifepristone cover its use, our proprietary information to diminish our ability to compete. In addition, employees, consultants and others may breach their agreements with us regarding our proprietary information and we may not have adequate remedies for the breach.The mifepristone patents that we own or license cover the use of mifepristone, not its composition, which may make it more difficultharder to prevent patent infringement if physicians prescribe another manufacturer’s mifepristone or if patients acquire mifepristone from other sources, such as the internet or underground market. disorders, including TNBC and CRPC.disorders. A method of use patent covers only a particular use of a compound, not its composition. Because our patents do not cover the composition of mifepristone, we cannot prevent others from commercializing mifepristone to treat disorders not covered by our method of use patents. The availability of mifepristone for these disorders may enable patients to obtain mifepristone from other companies for indications covered by our patents. Although any such “off-label” use would violate our patents, effectively monitoring compliance and enforcing our rights may be difficult and costly. Patients may be able to purchase mifepristone through the internet or underground market. Mifepristone is sold in the United States by Danco Laboratories for the termination of pregnancy. Although distribution is limited to a single dose provided in the physician’s office and covered by other restrictions, weWe cannot be certain that patients with Cushing’s syndrome will not be able to obtain mifepristone from thisDanco or other sources,another company, should anotherthat company receive approval to market mifepristone for anotherany indication. market price of our common stock has beenfluctuates widely and is likely to continue to be subject to wide fluctuations in price that are beyond our control.do so. Opportunities for the sale of shares at any givenparticular time may be limited.an activea liquid trading market for our common stock will exist at any particular time. HoldersAs a result, holders of our common stock may not be able to sell shares quickly or at the current market price if trading in our common stock is not active.price. During the 52-week period ended February 23, 2018,17, 2021, our average daily trading volume was approximately 1,464,2941,466,131 shares and the intra-day sales prices per share of our common stock on The NASDAQ CapitalNasdaq Stock Market ranged from $8.50$9.70 to $25.96.$31.18. As of February 23, 2018,17, 2021, our officers, directors and principal stockholders controlled 15beneficially owned approximately 16 percent of our common stock.Stock prices, especially those of biotechnology companies, sometimesOur stock price can experience extreme price and volume fluctuations that are unrelated or disproportionate to these companies’our operating performance or prospects. This volatility may significantly reduce the market price of our common stock, regardless of our operating performance. Securities class-action litigation isclass action lawsuits are often instituted against companies following periods of stock market volatility. If instituted against us, suchSuch litigation could result in substantial costsis costly and divertdiverts management’s attention from more productive efforts.Thecanto fluctuate rapidly and widely include:response to a varietythe expected or actual timing of factors, including:our competitors’ potential development programs, including developments in ANDA litigation and proceedings before the PTAB and the announcement of ANDA filings seeking approval for generic versions of Korlym;results;actual or anticipated timing and results of our clinical trials;purchases or sales of our common stock by our officers, directors or our stockholders;changes in the expected•purchases or actual timingsales of our competitors’ potential development programs, including the announcement of ANDA filings seeking approval to market generic versions of Korlym;announcements of •technological innovations by us, our collaborators or our competitors;our cash and short-term investment position; or trends in the biotechnology and pharmaceutical industries,industry, including the market valuations of companies similar to Corcept;general market and economic conditions;disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;collaboratorscollaborations or capital commitments; andactivities.that we have provided to the public, estimates published by research analysts or other investor expectations.20182021 revenue is only an estimate of what we believe is realizable at the time we give such guidance. OurIt is difficult to predict our revenue and our actual results may vary materially. There are inherent difficulties in predictingmaterially from our guidance. The effect on our business of the amount of Korlym that will be sold. For example,COVID-19 pandemic is difficult to estimate. In addition, the rate of physician adoption of Korlym and the actions of government and private payers is uncertain. We may experience competition from generic versions of Korlym, which our public revenue guidance does not anticipate. We may not meet our financial guidance or other investor expectations for other reasons, including those arising from the risks and uncertainties described in this report and in our other public filings and public statements. Research analysts have publishedpublish estimates of our future revenue estimatesand earnings based on their own analyses.analysis. The revenue guidance we provide may be one factor they consider when determining their estimates. Readersreport should conducttype of loss may not be sufficient to cover actual losses, or may not apply to the circumstances relating to any particular loss.research, form their own conclusions and may develop and commercialize medications that are superior to and less expensive than ours, which could negatively affect our financial results.guidance andproprietary information. These measures may not be adequate, in which case competitors could exploit our proprietary information to our disadvantage. If employees, consultants or anyone else breaches their agreements with us regarding our proprietary information, we may not have adequate remedies for the estimates of research analysts at their own discretion. oneany of the analysts covering us downgrades or discontinues coverage of our stock, itsthe price of our common stock could decline rapidly and significantly. Securities analystscovering our common stock may discontinue coverage. A lackPaucity of research coverage may also adversely affect our stock’s marketstock price.theits price of our common stock to decline.resale in the public market,resale, whether by the exercise of stock options by employees or directors or because of an equity financing by us, the supply of our stock will increase, which could cause its price to fall. Substantially all of the shares of our stock are eligible for sale, subject to applicable volume and other resale restrictions.Our officers, directors and principal stockholders, acting as a group, could significantly influence corporate actions.As of February 23, 2018, our officers and directors controlled 15 percent of our common stock. Acting together, these stockholders could significantly influence any matter requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combinations. The interests of this group may not always coincide with our interests or the interests of other stockholders and may prevent or delay a change in control. This significant concentration of share ownership may adversely affect the trading price of our common stock because many investors perceive disadvantages to owning stock in companies with controlling stockholders.PPACAACA requiring the reporting of aggregate spending related to health care professionals, the provisions of the Sarbanes-Oxley Act of 2002 and rules adopted by the SEC and by The NASDAQ CapitalNasdaq Stock Market have and will likely continue to increase our cost of doing business. Complying with these regulations may increase our selling, general and administrative expensesbusiness and divert management’s time and attention from revenue-generating activities.We are a small company with limited resources. have increased and will continue to increase our legal compliance costs.as to the adequacy of our internal control over financial reporting in or if our independent registered public accounting firm is unable to provide us withissue an unqualified reportopinion as to the effectiveness of our internal control over financial reporting, investors could lose confidence in our financial reporting.Changes in or interpretations of accounting rulesreporting and regulations could result in unfavorable accounting charges or require us to change our accounting policies or operating practices.Accounting methods and policies for business and marketing practices of pharmaceutical companies are subject to continual review, interpretation and guidance from accounting authorities, including the SEC. Although we believe that our accounting practices are consistent with current requirements, changes to accounting methods or policies may require us to reclassify, restate or otherwise change or revise our financial statements. Such changescould result in changes to the amounts or characterization of our assets, liabilities, revenues, expenses and income, which could harm our financial position and results of operations and could cause thestock price of our common stock to decline.and resultbecause many investors perceive disadvantages to owning stock in the market price being lower than it would otherwise be.companies with controlling stockholders.23,47336,062 square feet of office space in Menlo Park, California for our corporate facilities. Our current lease extended our occupancy throughexpires in March 2019.2022.See NoteCommitmentsCivil Action No. 1:19-cv-01830. The complaint named our board of directors, including our Chief Executive Officer and contingenciesChief Financial Officer as defendants and us as nominal defendant. The complaint alleges breach of fiduciary duty, violation of Section 14(a) of the Exchange Act, insider selling, misappropriation of insider information and waste of corporate assets and seeks damages in an amount to be proved at trial. On October 23, 2019, this action was stayed pending a resolution of our auditedmotions to dismiss the Melucci litigation. We will respond to this complaint vigorously but cannot predict the outcome of this matter.statements.position.NASDAQNasdaq Capital Market under the symbol “CORT.” The following table sets forth the high and low intra-day sale prices per share of our common stock on The NASDAQ Capital Market for the periods indicated. These prices represent quotations among dealers without adjustments for retail mark-ups, markdowns or commissions and may not represent prices of actual transactions.23, 2018,17, 2021, we had 114,830,345117,312,341 shares of common stock outstanding held by 29 stockholders of record. Because almost all of our shares of common stock areis held by brokers, nominees and other institutions on behalf of stockholders, we are unable to estimate the totalactual number of stockholders represented by these record holders.our stockholders. We have never declared or paid cash dividends. We currently intend to retain any future earnings to finance the growth and development of our business and therefore do not anticipate paying cash dividends in the foreseeable future.None.Fiscal Period Total Number of Shares Purchased Average Price Paid Per Share October 1, 2020 to October 31, 2020 — $ — $ — November 1, 2020 to November 30, 2020 450 21.05 190,526 December 1, 2020 to December 31, 2020 9 22.64 190,331 Total 459 $ 21.08 $ 190,331 Fiscal Period Average Price Paid Per Share Approximate Dollar Amount of Shares October 1, 2020 to October 31, 2020 — $ — $ — November 1, 2020 to November 30, 2020 31 22.88 714 December 1, 2020 to December 31, 2020 58 24.74 1,443 Total 89 $ 24.09 $ 2,157 The rules of the SEC require that we include a graph comparing cumulative stockholder returns on our common stock with the NASDAQ US Benchmark Total Return Index and either a published industry or line-of-business standard index or an index of peer companies selected by us. NASDAQNasdaq US Benchmark TR Index and Nasdaq Biotechnology Index (consisting of a group of 120 companies in the biotechnology sector, including us) for purposes of the performance comparison that appears below.below,Corcept hasWe have never paid dividends on itsour common stock.COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN AMONGCORCEPT THERAPEUTICS,THE NASDAQBENCHMARK TOTAL RETURN (“TR”) INDEXAND THE NASDAQ BIOTECHNOLOGY INDEX
the Nasdaq Biotechnology Index (NBI)
2017, 20162020, 2019 and 20152018 and the balance sheet data as of December 31, 20172020 and 20162019 are derived from our audited consolidated financial statements included in this Annual Report. The statement of operations data for the years ended December 31, 20142017 and 20132016 and the balance sheet data as of December 31, 2015, 20142018, 2017 and 20132016 have been derived from our audited financial statements, which are not included in this Annual Report. Our historical results are not necessarily indicative of our results expected for 2018 or for any other future period. The selected financial data set forth below should be read in conjunction with our financial statements, the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report. Year Ended December 31, 2020 2019 2018 2017 2016 (In thousands, except per share data) Statement of Operations Data: Product revenue, net $ 353,874 $ 306,486 $ 251,247 $ 159,201 $ 81,321 Operating expenses: Cost of sales 5,582 5,504 5,215 3,554 2,058 Research and development Research and development 114,764 89,017 75,247 40,376 23,844 Selling, general and administrative Selling, general and administrative 105,326 100,359 81,289 62,416 45,240 Total operating expenses 225,672 194,880 161,751 106,346 71,142 Income from operations Income from operations 128,202 111,606 89,496 52,855 10,179 Interest and other income (expense), net Interest and other income (expense), net 3,400 5,070 2,657 (49) (2,039) Income before income taxes Income before income taxes 131,602 116,676 92,153 52,806 8,140 Income tax expense (benefit) Income tax expense (benefit) 25,591 22,495 16,743 (76,316) — Net income Net income $ 106,011 $ 94,181 $ 75,410 $ 129,122 $ 8,140 Net income per share: Net income per share: Basic $ 0.92 $ 0.82 $ 0.65 $ 1.14 $ 0.07 Diluted $ 0.85 $ 0.77 $ 0.60 $ 1.04 $ 0.07 Weighted average shares – basic 115,412 114,349 115,343 113,527 110,566 Weighted average shares – diluted 124,194 122,566 126,688 124,515 116,139 Includes certain non-cash expenses, of the following: Includes certain non-cash expenses, of the following: Stock-based compensation Cost of sales Cost of sales $ 66 $ 144 $ 259 $ — $ — Research and development 11,222 9,541 7,012 3,743 1,312 Selling, general and administrative 22,251 19,628 16,476 9,618 5,746 Total stock-based compensation 33,539 29,313 23,747 13,361 7,058 Non-operating expense related to accretion of interest on long-term obligation — — — 456 1,929 Total non-cash expenses $ 33,539 $ 29,313 $ 23,747 $ 13,817 $ 8,987 December 31, 2020 2019 2018 2017 2016 (In thousands) Balance Sheet Data: Cash, cash equivalents and investments $ 476,892 $ 315,314 $ 206,760 $ 104,025 $ 51,536 Working capital 431,007 268,517 201,247 94,616 38,315 Total assets 571,731 412,312 311,694 220,537 68,753 Debt obligation - current portion — — — — 14,664 Total stockholders’ equity 523,338 371,182 275,882 190,968 41,379 OFOF FINANCIAL CONDITION AND RESULTS OF OPERATIONSManagement'sManagement’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. This MD&Acondition and is provided as a supplement to, and should be read in conjunction with, our audited Financial Statementsconsolidated financial statements and the accompanying Notesnotes to Financial Statements, Risk Factorsfinancial statements, risk factors and other disclosures included in this Form 10-K. Our Financial Statementsconsolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and are presented in U.S. dollars.development and commercializationdevelopment of drugs that treat severe metabolic, oncologic and psychiatric disorders by modulating the effects of the hormone cortisol. Since 2012, we have marketed Korlym, a first-generation cortisol modulator,Korlym® (mifepristone) for the treatment of patients with endogenouswho suffer from Cushing’s syndrome. We are developing compounds from ourOur portfolio of proprietary selective cortisol modulators for the treatment consists of a wide range of serious disorders. to Treat Patients with Cushing’s Syndrome. We sell Korlym in the United States, using experienced sales representatives who target the endocrinologists and other specialiststo call on physicians caring for patients with endogenous Cushing’s syndrome.syndrome (hypercortisolism). Because many people who suffer from Cushing’s syndrome are undiagnosed or inadequately treated, we have developed and continue to refine and expand programs to educate physicians and patients about screening for hypercortisolism and the role Korlym can play in treating the disorder. We also reach patients directly through web-based initiatives and interactions with patient groups. have a field-based force of medical science liaisons.support. To help ensuresupport to physicians and patients. Our policy is that no patient iswith Cushing’s syndrome will be denied access to Korlym for financial reasons,reasons. To help us achieve that goal, we fund our own patient support programs and donate money to independent charitable foundations that help patients withpay for all aspects of their Cushing’s syndrome cover the cost of their care, including the cost ofwhether or not that care includes taking Korlym. (CORT125134) to Treat Patients with Cushing’s Syndrome. We are conducting atwo Phase 2 trial3 trials of our proprietary, selective cortisol modulator, relacorilant, to treatas a treatment for patients with Cushing’s syndrome. This open labelSyndrome.willis expected to enroll approximately 30130 patients at sites in the United States, Canada, Europe and Europe.OncologyThereIsrael. Each patient in GRACE will receive relacorilant for 22 weeks. Patients who exhibit pre-specified improvements in hypertension or glucose metabolism enter a 12-week, double-blind, “randomized withdrawal” phase in which half of the patients continue receiving relacorilant and the rest receive placebo. If successful, we expect GRACE to provide the basis for a new drug application to treat patients with all etiologies of Cushing’s syndrome.substantialexpected to enroll 130 patients whose Cushing’s syndrome is caused by an adrenal tumor. Half of patients will receive relacorilant for 26 weeks and half will receive placebo. Many of the clinical sites in vitro,GRACE are participating in vivoGRADIENT.clinical evidence that cortisol’s activity allows certain solid-tumor cancersDrug Association (“FDA”) and the European Commission (“EC”) have designated relacorilant as an orphan drug for the treatment of Cushing’s syndrome. In the United States, relacorilant’s orphan designation confers tax credits, reduced regulatory fees and, provided we obtain approval, seven years of exclusive marketing rights for the treatment of patients with Cushing’s syndrome. Benefits of orphan drug designation by the EC are similar, but also, include protocol assistance from the European Medicines Agency (“EMA”), access to resist treatment. In some cancers, cortisol activity promotes tumor growth.to Treatin Patients with Solid Tumors. We are conductingIn July 2020, we completed enrollment in a 178-patient, controlled Phase 1/2 open label trial of Abraxanerelacorilant in combination with relacorilant to treat solid-tumors. As we identify indications of clinical activity in a particular tumor type, we will further test the combination’s efficacy and safety in expansion cohorts of approximately 20 patients. We began enrolling the first expansion cohort in December 2017, treating patients with metastatic pancreatic cancer. We continue to explore opening cohortsnab-paclitaxel in patients with other solid tumors.Cortisol Modulators to Treat Patients with CRPC. We advanced, high-grade serous ovarian tumors, which we an open label Phase 1/2 trial of our proprietary, selective cortisol modulator CORT125281 combined with Xtandi in patients with metastatic CRPC at sites in the United States and Europe. DevelopmentWe expect top-line data from this trial to be available in the first half of Our Other Selective 2021.a Phase 1an open label, dose-finding trial of the safety, tolerability and pharmacokinetics of our proprietary, selective cortisol modulator CORT118335.exicorilant in combination with Xtandi in patients with metastatic CRPC. Investigators at the University of Chicago are conducting a dose-finding trial of relacorilant combined with Xtandi in the same patient population. We are providing relacorilant.this compoundit to Phase 2 as a potential treatment for antipsychotic-induced weight gain and NASH.Our portfolio of proprietarythat disease. In addition, we continue to identify selective cortisol modulators contains more than 500 compounds. Weand plan to continue identifying new compounds and to advance the most promising of them towards the clinic. .For the year ended December 31, 2017, we recorded $159.2 million in net and chargebacks.as compared to $81.3was $353.9 million for the year ended December 31, 20162020, compared to $306.5 million and $50.3$251.2 million for the yearyears ended December 31, 2015. The increases in net product revenue year over year were primarily driven by increases in our2019 and 2018, respectively. For the years ended December 31, 2020, 2019 and 2018, higher sales volume and price increases. These price increases represented approximately 16.6volumes accounted for 31.9 percent, 58.4 percent and 32.185.7 percent of the increases in net revenue, respectively, as we shipped Korlym to more patients. Increases in the average price of Korlym tablets accounted for the yearsremainder of the increases. The increase in Korlym’s price for the year ended December 31, 20172020 was due to a relative decrease in the number of patients covered by Medicaid (which reimburses Korlym at a lower rate), a statutorily-mandated increase in the price paid by other government programs, one price increase that took effect on August 1, 2019 and 2016, respectively.distribution.$3.6$5.6 million for the year ended December 31, 2017, as2020, compared to $2.1$5.5 million and $5.2 million for the years ended December 31, 2019 and 2018, respectively. The dollar value of our cost of sales increased in the corresponding period in 2016 and $1.4 million in the corresponding period in 2015. These increases wereboth years due to greater sales volumes, partially offset by reductions in our manufacturing costs. For the year ended December 31, 2017, costunit volumes. Cost of sales was 2.21.6 percent, 1.8 percent and 2.1 percent of our net product revenue, as compared to 2.5 percent in the corresponding period in 2016 and 2.7 percent in the corresponding period in 2015.Cost of sales declined as a percentage of net product revenue for the years ended December 31, 20172020, 2019 and 20162018, respectively. Cost of sales as a percentage of revenue declined due to reduced manufacturing costs and increasesan increase in the average price of Korlym.retainingrecruiting and compensating development personnel, (2) clinical trials, (3) discovery research and pre-clinical studies, (4) drug product for useand preclinical studies in support of clinical trials and to support regulatory submissions, (4) discovery research and (5) the development of drug formulations and manufacturing processes and (6) regulatory activities.$40.4$114.8 million for the year ended December 31, 20172020 from $23.8 million in 2016, an increase of 69.3 percent, primarily due to the clinical advancement of relacorilant and the pre-clinical and clinical development of CORT118335 and CORT125281, including the associated hiring of additional clinical development employees.Research and development expenses increased to $23.8$89.0 million for the year ended December 31, 2016 from $15.4 millioncomparable period in 2015, an2019. The increase of 54.6 percent, primarilywas due to increased spending on the advancement of relacorilant, which entered clinical trials in patients inour oncology and endocrinology development programs and on the second quarterrecruitment and compensation of 2016, and the hiring of additional clinical development employees. Below is a summary of our research and development expenses by major project:2018 and thereafter will depend2018. The increase was primarily due to increased spending on the outcomesrecruitment and compensation of our pre-clinicaldevelopment personnel and clinical trialson the discovery and our development plans. We expect research and development spending in 2018advancement of new selective cortisol modulators, partially offset by the completion of drug-drug interaction studies related to be higher than it was in the corresponding period of 2017 as our programs advance and we begin new ones. Year Ended December 31, 2020 2019 2018 (in thousands) Development programs: Oncology $ 34,163 $ 21,098 $ 11,965 Endocrinology $ 48,435 $ 35,988 $ 18,392 Pre-clinical and clinical selective cortisol modulators $ 11,580 $ 11,120 $ 29,380 Unallocated activities, including pre-clinical, manufacturing and regulatory activities $ 9,364 $ 11,270 $ 8,498 Stock-based compensation $ 11,222 $ 9,541 $ 7,012 Total research and development expense $ 114,764 $ 89,017 $ 75,247 risksuncertainties and uncertainties,risks, including inconclusive or negative results, slow patient enrollment, adverse side effects and unforeseen difficulties in the formulation or manufacture of study drugs and their real or perceivedthe lack of efficacy or safety. Clinicaldrug-candidate efficacy. In addition, clinical development is also subject to extensiveintensive government oversight and to regulations that may change unpredictably and without notice. We expect our research and development expense to be higher in ways we cannot anticipate.– - Selling, general and administrative expenses include (1) compensation of employees, consultants and contractors engaged in commercial and administrative activities, (2) the cost of vendors that supportsupporting commercial activities and (3) legal and accounting fees.for the year ended December 31, 2017 increased 38.0 percent to $62.4 million, from $45.2 million for the comparable period in 2016. This increase was primarily due to the growth of our sales organization, higher performance bonus expense and increased professional services fees.Selling, general and administrative expenses for the year ended December 31, 2016 increased 22.4 percent to $45.2 million, from $36.9 million for the comparable period in 2015. The increases were driven primarily by increased compensation expense due to additional hiring, performance bonus expense, and commissions related to increased sales.We expect that selling, general and administrative expenses will be higher in 2018 than in 2017 due to the increased scope of our commercial and clinical activities. Selling, general and administrative activities in 2018 and future years will depend on the cost and scope of our commercial and clinical development efforts. See also, “Liquidity and Capital Resources.”Interest and other expense – Interest and other expense for the year ended December 31, 2017 was $49,000, as compared to $2.0$105.3 million for the year ended December 31, 20162020 from $100.4 million for the comparable period in 2019. The increase in selling, general and $3.0administrative expenses was primarily due to increases in employee recruiting and compensation expenses, increased legal and marketing costs, volume-related pharmacy and other distribution costs and professional service fees.2015. These amounts2019 from $81.3 million for the comparable period in 2018. The increase in selling, general and administrative expenses was primarily due to increased spending on the recruitment and compensation of additional employees, increased legal and marketing costs, and added distribution expenses arising from increased Korlym sales volumes. interest expense related to the Biopharma Financing Agreement, largely offset in 2017 by interest income from marketable securities. Because we extinguished our obligations under the Financing Agreement in July 2017, there will be no interest expense under this obligation in 2018.Income tax benefit – Income tax benefitInterest and other income decreased for the year ended December 31, 2017 was $76.3 million2020 from the comparable period in 2019 primarily due to market-wide reductions in interest rates. The increase from the releaseyear ended December 31, 2019 from the comparable period in 2018 was due to growth in our holdings of a portion of our valuation allowance on our deferredcash and marketable securities.assets.expense - Income tax expense for the years ended December 31, 2020, 2019 and 2018 was $25.6 million, $22.5 million, and $16.7 million, respectively. The amount of the release was affected by the reduction of theincreases in income tax rate applicableexpense during the years ended December 31, 2020, 2019 and 2018 were primarily due to our futureincreases in net income and decreased discrete benefits from 35% to 21%. See Note 10, Income Taxes in our audited financial statements for additional information. We had no income tax benefit for the corresponding periods in 2016 and 2015.Until we incurred operating losses every year. At December 31, 2017, we had an accumulated deficit of $193.1 million. Since 2012, we have relied on revenues from the sale of Korlym and proceeds from the sale of common stock and the now concluded Financing Agreement with Biopharma to fund our operations.which include fully funding our Cushing’s syndrome commercial operations, conducting Phase 2 and Phase 3 trials of relacorilant in both Cushing’s syndrome and solid tumors, the development of CORT125281 to treat patients with CRPC and CORT118335 to treat patients with antipsychotic-induced weight gain and NASH,expectations, we expect to fund our operations and planned research and development activities without needing to raise additional funds, although we may choose to raise additional funds to finance our strategic priorities.for other reasons. If we were to raise funds, equity financing couldwould be dilutive to stockholders.dilutive. Debt financing if available, could involve restrictive covenants. Funds raised through collaborations with other companies may require us to relinquish certain rights in our product candidates.Atcandidates.2017,2020, we had cash, cash equivalents and marketable securities of $104.0$476.9 million, consisting of cash and cash equivalents of $31.1$76.2 million and marketable securities of $72.9$400.7 million, compared to cash and cash equivalents of $51.5$31.3 million atand marketable securities of $284.0 million as of December 31, 2016. Net cash provided by operating activities for the years ended December 31, 2017, 2016 and 2015 was $60.9 million, $18.4 million and $3.1 million, respectively. These increases were primarily due to greater sales volumes. Net cash used in investing activities for the year ended December 31, 2017 was $73.5 million, primarily due to purchases of marketable securities, while net cash used in investing activities for the years ended December 31, 2016 and 2015 was $0.2 million and $17,000, respectively, which consisted of purchases of property and equipment. Net cash provided by stock option exercises was $7.2 million, $7.7 million and $5.2 million during the years ended December 31, 2017, 2016 and 2015, respectively. In addition, we made payments under the Biopharma Financing Agreement of $15.1 million, $14.8 million and $9.2 million during the years ended December 31, 2017, 2016 and 2015, respectively. We extinguished our obligations under the Financing Agreement in July 2017. No further payments are due.institution holdinginstitutions holdings them were to fail or be subject toseverely adverse conditions were to rise in the financial markets.markets for public or private debt securities. We have never experienced a loss or lack of access to cash.Commercial Commitments2017.
2020.(1)As of December 31, 2017, we had commitments to purchase $14.3 million worth of API from PCAS to manufacture relacorilant, CORT118335 and CORT125281.(2)In March 2016, we early terminated our lease and replaced it with a new one effective May 1, 2016 through March 31, 2019. On June 1, 2017, we amended that lease to add more space. At December 31, 2017, the remaining minimum rental payments under this operating lease were $1.6 million.Contractual Obligations Total Less than
1 year1-3
Years3-5
YearsMore than
5 Years (in thousands) $ 159 $ 159 $ — $ — $ — $ 2,639 $ 2,109 $ 530 $ — $ — $ 116 $ 116 $ — $ — $ — Total other contractual obligations $ 2,914 $ 2,384 $ 530 $ — $ — that we had received as of the effective date of the termination and any applicable cancellation fees.We have other contractual payment obligations and purchase commitments, the timing of which are contingent on future events, including the initiation and completion of manufacturing projects. In March 2014, we entered into an agreement with PCAS for the manufacture of mifepristone, the API in Korlym, for an initial term of five years, with an automatic extension of one year unless either party gives 12 months’ prior written notice of termination. In April 2014, we entered into a manufacturing agreement with Alcami Corporation (formerly known as AAI Pharma Services Corp.) for the manufacture and packaging of Korlym tablets. This agreement has an initial term of three years, with consecutive automatic extensions of two years each, unless either party gives written notice of termination. (In the case of Alcami, notice is due 18 months before the end of the applicable term. For Corcept, notice is due 12 months before the end of the applicable term.) Neither agreement requires us to make minimum purchases. Purchase commitments will depend on Corcept’s requirements.109, Income Taxes in our audited consolidated financial statements.Net Product RevenueWe primarily sell Korlym directly Our significant accounting policies are described in Note 1, patients, using a single specialty pharmacy. We recognize revenue upon the delivery of Korlym if (i) there is persuasive evidence that an arrangement exists with the customer, (ii) collectability is reasonably assured and (iii) the sales price is fixed or determinable. In order to conclude that the price is fixed or determinable, we must be able to (i) calculate gross product revenue from a sale and (ii) reasonablyestimate the associated net revenue. Confirmation of coverage by the patient’s private or government insurance plan or by our own patient assistance program or a third-party charity is a prerequisite for selling Korlym to a patient. We provide Korlym at no cost to patients without insurance who do not qualify for charitable support. (See discussion set forthConsolidated Financial Statements included in Part IV – Item 15(1) – Financial Statements, Notesof this Annual Report on Form 10-K. We believe the following accounting estimates and policies to Financial Statements, Note 2, Significant Agreements – Commercial Agreements.). It is our policy that no patient is denied Korlym for financial reasons.Through August 9, 2017 our exclusive specialty pharmacy was Dohmen Life Science Services (“Dohmen”). On August 10, 2017, Optime Care, Inc. (“Optime”) became our exclusive specialty pharmacy.We donate cash to charities that help patients pay for the treatment of Cushing’s syndrome, including the cost of medical and non-medical therapy unrelated to Korlym. We do not include payments we receive from these organizations in revenue.We calculate gross product revenues based on the price we charge our customers. We estimatebe critical:revenues by deductingrevenue, we deduct from gross product revenues (a) estimated government rebates and chargebacks, (b) estimated costssales the cost of our patient co-pay assistance program (c)and our estimates of (i) government chargebacks and rebates, (ii) discounts provided to our SD for prompt payment and (d)(iii) reserves for expected product returns. We record estimates for these deductionsestimates at the time we recognize the gross revenue and reviseupdate them as new information becomes available.partial or full reimbursement from, Medicaid and other government programs. We estimate any government rebate amounts by applyingprograms that are eligible for rebates on the discount rates applicableprice they pay for Korlym. To determine the appropriate amount to each government-funded programreserve against our salesthese rebates, we identify Korlym sold to patients covered by government-funded programs, apply the applicable government discount to these sales and then estimate the portion of total rebates we expect will be claimed. We then (i) deduct this reserve from revenue in the period to which the rebates relate and (ii) include in accrued expenses on our consolidated balance sheet a current liability of equal amount.programsdiscounts by reducing its payment to us (this reduction is called a “chargeback”).Allowances Chargebacks sometimes relate to Korlym sold to SD in prior periods. We deduct from our revenue in each period chargebacks claimed by the SD for Korlym we sold to the SD that period. We also create a reserve for chargebacks we estimate the SD will claim in future periods against Korlym it purchased in the current period but has not yet resold. We determine the amount of this reserve based on our experience with SD chargebacks and our understanding of the SD’s customer base and business practices. We deduct this reserve from revenue and include in accrued expenses on our consolidated balance sheet a current liability of equal amount.require them to payhave high deductibles andor co-payments and deduct the amount of such assistance from these sales from gross revenue. We determine the amount of such assistance we provide each patient by applying our program guidelines to all eligible salesthat patient’s financial position and their insurance policy’s co-payment and deductible requirements. We also donate cash to charities that help patients with financial need pay for the treatment of Cushing’s syndrome (which treatment may not include Korlym). We do not include in the period. from each period’s gross revenue the amount of Korlym we estimate the SD will be returned. When estimating returns, we analyzereturn from each period’s gross revenue. We base our estimates on quantitative and qualitative information including, but not limited to, historical return rates, the amount of product inKorlym held by the distribution channel, the expiration date of the product, currentSD and projected product demand, the introduction of competing products that may erode demand, and broad economic and industry-wide indicators.demand. If we cannot reasonably estimate product returns with respect to a particular sale, we defer recognition of revenue from that sale until we can make a reasonable estimate.Regulatory approval of product candidates is uncertain. Because product manufactured prior to regulatory approval may not be sold unless regulatory approval is obtained, we treat manufacturing costs for product candidates as research and development expenses at the time such costs are incurred. We capitalize into inventory manufacturing any costs related to an approved product that are incurred after regulatory approval.value. Wevalue and determine the cost of inventory we sell using the specific identification method, which approximates a first-in, first-out basis. We assess our inventory levels at each reporting period and write down inventory that has become obsoleteis either expected to be at risk of expiration prior to sale, or has a cost basis in excess of its expected net realizable value. Anyvalue, or for which there are inventory quantities in excess of expected requirements. We destroy expired inventory is disposed of and recognize the related costs are recognized as cost of sales in thethat period’s statement of comprehensive income (loss) in that period.income.product (i.e., the cost of manufacturing Korlym, including material,materials, third-party manufacturing costs and indirect personnel and other overhead costs)costs, based on unitsthe number of Korlym tablets for which we recognize revenue, is recognized in the current period, as well as costs of stability testing, logistics and distribution.Inventory amounts that are not expected to be consumed within 12 months followingdistribution incurred during the balance sheet date are classified as strategic inventory, a noncurrent asset.Research and development expenses consist of direct expenses, such as the cost ofpre-clinicalpreclinical studies and clinical trials relating toon our portfolio of proprietary, selective cortisol modulators, manufacturing development, preparations for submissions to the FDA or other regulatory agencies and related overhead expenses. We expense nonrefundable payments and the cost of technologies and materials used in research and development as they are incurred.We base our cost accruals for research, preclinical activities, and clinical trials on estimates of work completed, under service agreements, milestones achieved, patient enrollment and past experience with similar contracts.activities. Our estimates of work completed and associated cost accruals include our assessments of information from third-party vendorscontract research organizations and the overall status of clinical trial and otherour own research, development and administrative activities. related to option grants under the fair value method, based on the value of the award at the grant date. To date, our stock-based compensation has consisted entirely of option grants, which we value using the Black-Scholes option valuation model. We recognize thisstock-based compensation expense over the requisiteapplicable vesting period, net of estimated forfeitures.forfeitures. If actual forfeitures differ from our estimates, we adjust stock-based compensation expense accordingly.thetheir fair value-based measurement of the option grantsvalue at the time of vesting.Debt obligationThe accounting for the Financing Agreement with Biopharma required us to make certain estimates and assumptions, including the timing of royalty payments due to Biopharma, the expected rate of return to Biopharma, the split between current and long-term portions of the obligation, and the accretion of interest expense. Actual payment amounts were based on Korlym receipts during the applicable quarter. We made our final payment under the Financing Agreement in July 2017.(“(“ASC 740”), which requires recognition of deferred tax assets and liabilities for the expected tax consequences of our future financial and operating activities. Under ASC 740, we determine deferred tax assets and liabilities based on the temporary difference between the financial statement and tax bases of assets and liabilities using the tax rates in effect for the year in which we expect such differences to reverse. If we determine that it is more likely than not that we will not generate sufficient taxable income to realize the value of some or all of our deferred tax assets (net of our deferred tax liabilities), we establish a valuation allowance offsetting the amount we do not expect to realize. We perform this analysis each reporting period and reduce or increase the size of our measurement ofvaluation allowance accordingly.taxes, iftax assets that we record each period depend primarily on our ability to generate future taxable income in the likelihoodUnited States. Each period, we will realize them becomes uncertain.In deciding whetherevaluate the need for a valuation allowance against our deferred tax assets and, if necessary, adjust the valuation allowance so that net deferred tax assets are recorded on our balance sheet only to the extent we conclude it is necessary, GAAP requires us to give significant weight to objective evidence. It is difficult to concludemore likely than not that sufficient taxable incomethese deferred tax assets will be generated when there is significant evidence – such as Corcept’s substantial cumulative losses – thatrealized. If our outlook for future taxable income is not assured. Because forecastschanges significantly, our assessment of taxable income are inherently uncertain and not objectively verifiable, our cumulative losses must weigh heavily in our analysis.We are also required to evaluate and quantify other sources of taxable income, such as the possible reversal of future deferred tax liabilities, should any arise,need for, and the implementationamount of, tax planning strategies. Evaluating and quantifying these amounts is difficult and involves significant judgment, based on all of the available evidence and assumptions about our future activities.Until the fourth quarter of 2017, we maintained a valuation allowance on the entire value of our deferred taxes and did not report these amounts in our balance sheet.may recognize ain the consolidated financial statements the largest expected tax benefit only if it is more likelythat has a greater than not the tax position will be50 percent likelihood of being sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Our policy is toauthorities. We report interest and penalties related to unrecognized tax benefits as income tax expenses.On December 22, 2017 President Donald Trump signed into U.S. law the Tax Cuts and Jobs Act of 2017 (“Tax Act”). The Tax Act introduced a broad range of tax reform measures that significantly change the federal income tax regime. Among other things, the Tax Act reduces the corporate income tax rate from 35% to 21% effective for tax years including or commencing on January 1, 2018, repeals corporate alternative minimum tax, limits various business deductions, modifies the maximum deduction of net operating loss with no carryback but indefinite carryforward provision, expands the deduction limit applicable to compensation paid to top executives of publicly traded companies, and includes various international tax related provisions. In accordance with ASC 740, the companies are required to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions of Tax Act is for tax years beginning after December 31, 2017, or in the case of certain other provisions of the law, January 1, 2018.Given the significance of the legislation, the U.S. Securities and Exchange Commission staff issued Staff Accounting Bulletin ("SAB") No. 118 (SAB 118), which allows registrants to record provisional amounts during a one year “measurement period”. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared, and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared, or analyzed. Refer to Note 10, Income Taxes in our audited financial statements for further details. 2017,2020, the fair value of our cash and cash equivalents and marketable securities was $104.0$476.9 million. Our marketable securities consisted primarily of commercial paper, corporate bonds, notes, asset-backed securities, repurchase agreements, U.S. Treasury securities and a money market fund invested in short-term U.S. Treasury securities maintained at a major U.S. financial institution. To minimize our exposure to interest rate and other market risks, we have limited the maturities of our investments to less than three years, with the duration of our portfolio not to exceed two years. Due to the short-term nature and high liquidity of these instruments, an increase or decrease in market interest rates by 25 basis points would not have a material impact on the total value of our portfolio as of December 31, 2017.2020.2017,2020, our Chief Executive Officer and Chief Financial Officer evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on their evaluation, they concluded that they are effective.20172020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.ITEMItem 9A(a) above, internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance that their objectives have been met.Ourincludingconducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluatedof the effectiveness of the design and operation of our internal control over financial reporting, based on criteria establisheddisclosure controls and procedures, as defined in Internal Control – Integrated Framework issued byRules 13a-15(e) and 15d-15(e) under the CommitteeSecurities Exchange Act of Sponsoring Organizations of the Treadway Commission (COSO) in 2013.1934 (the “Exchange Act”). Based on thisupon that evaluation, managementour Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2017,2020, our internal control overdisclosure 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 reporting was effective.Inc.’sIncorporated’s internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Corcept Therapeutics Inc.Incorporated (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2020, based on the COSO criteria.(“PCAOB”)(PCAOB), the consolidated balance sheets as of December 31, 20172020 and December 31, 2016,2019, the related consolidated statements of operations, comprehensive income, (loss), stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2017,2020, and the related notes of the Company and our report dated February 28, 201823, 2021 expressed an unqualified opinion thereon.28, 201823, 202120182021 Annual Meeting of Stockholders, and certain information included therein is incorporated herein by reference.PagePage F-2F-3F-4F-5F-6F-7Exhibit Number 4.3 4.3 4.4Exhibit NumberDescription of Document4.6 10.1Description of Document 10.1 10.710.8 10.8†10.9†10.12#10.13# 10.13†10.14†Exhibit NumberDescription of Document10.15 10.1610.17#10.18#10.1910.20Description of Document 10.19 10.2110.22#10.2310.24#10.2510.2610.27#10.28†10.29†Exhibit NumberDescription of Document10.29# 10.31#23.110.32† 10.33† 10.34 10.35 10.36 10.37 Exhibit Number Description of Document 10.38 10.39† 10.40† 10.41† 10.42 10.43 23.1 101XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document The following materials from101.SCH XBRL Schema Document 101.CAL XBRL Calculation Linkbase Document 101.DEF XBRL Definition Linkbase Document 101.LAB XBRL Labels Linkbase Document 101.PRE XBRL Presentation Linkbase Document 104 Cover Page Interactive Data File - the registrant’s Annual Report on Form 10-K forcover page interactive data file does not appear in the year ended December 31, 2017, formatted in Extensible Business Reporting Language (XBRL): (i) Balance Sheets at December 31, 2017 and 2016, (ii) Statements of Comprehensive Income (Loss) forInteractive Data File because its XBRL tags are embedded within the Years Ended December 31, 2017, 2016 and 2015, (iii) Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2017, 2016 and 2015, (iv) Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015, and (v) Notes to Financial Statements.#Confidential treatment granted†# Confidential treatment granted † Management contract or compensatory plan or arrangement CORCEPT THERAPEUTICS INCORPORATED 28, 2018 G. Charles Robb, and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, each with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.SignatureTitleDateTitle Date /s/ JOSEPH K. BELANOFF 28, 2018G. CHARLES ROBB28, 2018G. Charles RobbChief Accounting Officer February 23, 2021 Joseph Douglas Lyon (Principal Accounting Officer) /s/ JAMES N. WILSON 28, 2018Director February 23, 2021 Gregg Alton /s/ G. LEONARD BAKER, JR. 28, 2018DANIEL M. BRADBURY28, 2018Daniel M. Bradbury/s/ RENEE D. GALADirectorFebruary 28, 2018Renee D. Gala28, 2018Director February 23, 2021 Kimberly Park /s/ DANIEL N. SWISHER, JR 28, 2018`Daniel N. Swisher, Jr.PagePage F-2F-3F-4F-5F-6F-7REGISTEREDREGISTERED PUBLIC ACCOUNTING FIRMInc.Incorporated (the Company) as of December 31, 20172020 and December 31, 2016,2019, the related consolidated statements of operations, comprehensive income, (loss), stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2017,2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as ofat December 31, 20172020 and December 31, 2016,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2020, in conformity with U.S. generally accepted accounting principles. also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 201823, 2021 expressed an unqualified opinion thereon.includeincluded examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Inventory Excess and Obsolescence Reserve Description of the Matter How We Addressed the Matter in Our Audit 28, 2018 23, 2021inIn thousands, except per share amounts)data) December 31, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 76,190 $ 31,269 Short-term marketable securities 364,506 244,693 Trade receivables, net of allowances 26,198 19,928 Inventory 4,910 5,424 Prepaid expenses and other current assets 6,697 6,044 Total current assets 478,501 307,358 Strategic inventory 16,247 11,981 Operating lease right-of-use asset Operating lease right-of-use asset 2,509 3,446 Property and equipment, net of accumulated depreciation 1,675 1,050 Long-term marketable securities 36,196 39,352 Other assets 5,000 3,448 Deferred tax assets, net 31,603 45,677 Total assets $ 571,731 $ 412,312 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 10,554 $ 7,537 Accrued clinical expenses 13,704 6,477 Accrued and other liabilities Accrued and other liabilities 21,186 23,269 Short-term operating lease liability Short-term operating lease liability 2,050 1,558 Total current liabilities 47,494 38,841 Long-term operating lease liability Long-term operating lease liability 501 1,903 Long-term accrued income taxes Long-term accrued income taxes 398 386 Total liabilities Total liabilities 48,393 41,130 Commitments and contingencies (Note 10) Commitments and contingencies (Note 10) 0 0 Stockholders’ equity: Preferred stock, par value $0.001 per share, 10,000 shares authorized and 0 shares outstanding at December 31, 2020 and December 31, 2019 Preferred stock, par value $0.001 per share, 10,000 shares authorized and 0 shares outstanding at December 31, 2020 and December 31, 2019 0 0 Common stock, par value $0.001 per share, 280,000 shares authorized and 122,586 issued and 116,735 outstanding at December 31, 2020 and 119,767 shares issued and 114,549 outstanding at December 31, 2019 Common stock, par value $0.001 per share, 280,000 shares authorized and 122,586 issued and 116,735 outstanding at December 31, 2020 and 119,767 shares issued and 114,549 outstanding at December 31, 2019 122 120 Treasury stock; at cost; 5,851 shares of common stock at December 31, 2020 and 5,218 shares of common stock at December 31, 2019 Treasury stock; at cost; 5,851 shares of common stock at December 31, 2020 and 5,218 shares of common stock at December 31, 2019 (75,795) (62,704) Additional paid-in capital 516,140 457,060 Accumulated other comprehensive gain Accumulated other comprehensive gain 415 261 Retained earnings (accumulated deficit) Retained earnings (accumulated deficit) 82,456 (23,555) Total stockholders’ equity 523,338 371,182 Total liabilities and stockholders’ equity $ 571,731 $ 412,312 (LOSS)inIn thousands, except per share amounts)data)Year Ended December 31, 2020 2019 2018 Product revenue, net $ 353,874 $ 306,486 $ 251,247 Operating expenses: Cost of sales 5,582 5,504 5,215 Research and development 114,764 89,017 75,247 Selling, general and administrative 105,326 100,359 81,289 Total operating expenses 225,672 194,880 161,751 Income from operations 128,202 111,606 89,496 Interest and other income 3,400 5,070 2,657 Income before income taxes 131,602 116,676 92,153 Income tax expense 25,591 22,495 16,743 Net income $ 106,011 $ 94,181 $ 75,410 Other comprehensive income: Net unrealized (loss) gain on available-for-sale investments, net of tax impact of $15, $(104) and $22 (50) 327 5 Foreign currency translation gain, net of tax 204 4 0 Total comprehensive income $ 106,165 $ 94,512 $ 75,415 Basic net income per share $ 0.92 $ 0.82 $ 0.65 Diluted net income per share $ 0.85 $ 0.77 $ 0.60 Weighted average shares outstanding used in computing net income per share Basic 115,412 114,349 115,343 Diluted 124,194 122,566 126,688 STOCKHOLDERS EQUITY (DEFICIT)inIn thousands) Year Ended December 31, 2020 2019 2018 Cash flows from operating activities: Net income $ 106,011 $ 94,181 $ 75,410 Adjustments to reconcile net income to net cash provided by operations: Stock-based compensation 33,539 29,313 23,747 Amortization (accretion) of interest income 1,303 (1,738) (1,721) Depreciation and amortization of property and equipment 525 703 236 Deferred income taxes 14,089 16,877 14,067 Non-cash amortization of right-of-use asset 1,712 1,468 0 Others 148 0 0 Changes in operating assets and liabilities: Trade receivables (6,270) (2,340) (2,288) Other receivable 0 0 12,896 Inventory (3,514) (1,044) (7,779) Prepaid expenses and other current assets (653) 1,696 (5,071) Other assets (1,552) (3,398) 0 Accounts payable 3,161 (735) (389) Accrued clinical expenses 7,227 2,956 1,274 Accrued and other liabilities (2,083) (517) 5,044 Long-term accrued income taxes 12 147 239 Operating lease liability (1,685) (1,452) 0 Net cash provided by operating activities 151,970 136,117 115,665 Cash flows from investing activities: Purchases of property and equipment (1,238) (1,088) (298) Proceeds from maturities of marketable securities 302,089 182,295 142,655 Purchases of marketable securities (420,114) (299,035) (233,124) Net cash used in investing activities (119,263) (117,828) (90,767) Cash flows from financing activities: Proceeds from exercise of stock options, net of issuance costs 23,226 8,419 9,322 Repurchase of common stock (9,945) (30,975) (23,657) Cash paid to satisfy statutory withholding requirement for the net settlement of cashless option exercise (1,067) (6,089) 0 Net cash provided by (used in) financing activities 12,214 (28,645) (14,335) Net increase (decrease) in cash and cash equivalents 44,921 (10,356) 10,563 Cash and cash equivalents, at beginning of period 31,269 41,625 31,062 Cash and cash equivalents, at end of period $ 76,190 $ 31,269 $ 41,625 Supplemental disclosure: Income taxes paid $ 10,856 $ 6,744 $ 1,351 Cost of shares repurchased for net settlement of cashless option exercise $ 2,079 $ 1,983 $ 0 Recognition of right-of-use asset and lease liability $ 775 $ 4,913 $ 0 CASH FLOWSCommon Stock Additional
Paid-in
CapitalTreasury Stock Accumulated
Other
Comprehensive
Income (Loss)Retained Earnings (Accumulated
Deficit)Total
Stockholders'
EquityShares Amount Balance at December 31, 2017 114,717 $ 115 $ 384,074 $ 0 $ (75) $ (193,146) $ 190,968 Issuance of common stock upon exercise of options 2,121 2 9,320 — — — 9,322 Stock-based compensation related to employee and director options — — 23,834 — — — 23,834 Other comprehensive loss, net of tax — — — — 5 — 5 Purchase of treasury stock (1,807) — — (23,657) — — (23,657) Net income — — — — — 75,410 75,410 Balance at December 31, 2018 115,031 117 417,228 (23,657) (70) (117,736) 275,882 Issuance of common stock upon exercise of options 2,929 3 10,399 — — — 10,402 Shares tendered to satisfy cost and statutory withholding requirements for net settlement of cashless option exercises (631) — — (8,072) — — (8,072) Stock-based compensation related to employee and director options — — 29,201 — — — 29,201 Stock-based compensation related to non-employee options — — 232 — — — 232 Other comprehensive income, net of tax — — — — 331 — 331 Purchase of treasury stock (2,780) — — (30,975) — — (30,975) Net income — — — — — 94,181 94,181 Balance at December 31, 2019 114,549 120 457,060 (62,704) 261 (23,555) 371,182 Issuance of common stock upon exercise of options 2,819 2 25,303 — — — 25,305 Shares tendered to satisfy cost and statutory withholding requirements for net settlement of cashless option exercises (154) — (3,146) — — (3,146) Stock-based compensation related to employee and director options — — 33,777 — — — 33,777 Other comprehensive income, net of tax — — — — 154 — 154 Purchases of treasury stock (479) — — (9,945) — — (9,945) Net income — — — — — 106,011 106,011 Balance at December 31, 2020 116,735 $ 122 $ 516,140 $ (75,795) $ 415 $ 82,456 $ 523,338 was incorporated in the State of Delaware in May 1998, and our headquarters are located in Menlo Park, California. We areis a commercial-stage pharmaceutical company engaged in the discovery development and commercializationdevelopment of medications that treat severe metabolic, oncologic and psychiatric disorders by modulating the effect of the stress hormone cortisol. In 2012, the United StatesU.S. Food and Drug Administration (“FDA”) approved Korlym®(“mifepristone”) 300 mg tablets, as a once-daily oral medication for the treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing’s syndrome who have type 2 diabetes mellitus or glucose intolerance and have failed surgery or are not candidates for surgery. We have discovered and patented three4 structurally distinct series of selective cortisol modulators, consisting of more than 5001,000 compounds. We are developing compounds from these series to treatas potential treatments for a broad range of disorders.subsidiary. Corcept Therapeutics UK Limited wassubsidiary, which we incorporated in the United Kingdom in March 2017, and to date, there have been no material financial transactions or balances related to this entity.estimates. sales returns, recognition and measurement of income tax assets and liabilities, inventory, allowances for doubtful accounts and other accrued liabilities, including our bonus accrual, clinical trial accruals and stock-based compensation. the assumptions we believe third-party market participants would adoptuse. When choosing which assumptions to make when valuing such instruments. Our methodology usesdetermining the value of a “fair value hierarchy” that gives the highest priority tofinancial instrument, we look first for quoted prices in active markets for identical instruments (called “Level(“Level 1 inputs”). If no Level 1 inputs are available, we consider (i) quoted prices in non-active markets for identical instruments; (ii) active markets for similar instruments; (iii) inputs other than quoted prices for the instrument; and (iv) inputs that are not directly observable, but that arecan be corroborated by observable data (“Level 2 inputs”). In the absence of Level 2 inputs, we rely on unobservable inputs, such as our own data aboutestimates of the assumptions market participants would use in pricing the instrument (“Level 3 inputs”). all highly liquid investments purchased with original maturities ofthat will mature in three months or less from the date oftime we purchase them to be cash equivalents. Cash equivalents are carried at fair value as measuredvalued using Level 1 inputs, which approximatesapproximate our cost. As of December 31, 2016, all of our funds were held in checking and money market fund accounts maintained at major U.S. financial institutions.F-7CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, Continuedcorporate notes.repurchase agreements. We classify our marketable securities as available-for-sale securities and report them at fair value as “cash equivalents” or “marketable securities” on our consolidated balance sheet, with related unrealized gains and losses included in stockholders' equity. Realized gains and losses and permanent declines in value are included in “interest and other income”income (expense)” on our consolidated statement of comprehensive income (loss).exposedsubject to credit risk from our cash equivalents and concentration risks in the event of default by the financial institution holdingmarketable securities. We limit our funds and investments or by the entity or entities that issued the securities held by the funds to the extent of the amount recorded on our balance sheet. We mitigate these risks by investing in liquid U.S. Treasury obligations and high-grade corporate debt, asset-backed securities highly-rated commercial paper and corporate notes,repurchase agreements with less than a 36-month maturity at the time of purchase.money market funds that invest primarily in short-term U.S. Treasury notes and bills.do not expose us to concentrations of credit risk. We have never experienced a loss in, or lack of access to, our operating or investment accounts.Among other services,a specialty pharmacy, dispenses Korlym to patients for us,us. Optime is an independent third party. Its unwillingness or inability to dispense Korlym to patients in a timely manner would harm our business.Accordingly, ourOur receivables risk is spread among various third-party payors –payers - pharmacy benefit managers, insurance companies, private charities, government programs – and individual patients.private charities. We extend credit to third-party payorspayers based on their creditworthiness. We monitor our exposure and record an allowance against uncollectible trade receivables as necessary. To date, we have not incurred any credit losses. Through August 9, 2017 our exclusive specialty pharmacy was Dohmen Life Science Services (“Dohmen”). On August 10, 2017, Optime Care, Inc. (“Optime”) became our exclusive specialty pharmacy.We have a concentrationrisk in regardSalesthe manufacture and distribution of our product. As of December 31, 2017, we had one tablet manufacturer for Korlym – Alcami Corporation (formerly known as AAI Pharma Services Corp.). In addition, we have a single-source manufacturer of mifepristone, the active pharmaceutical ingredient (API), in Korlym – Produits Chimiques Auxiliaires et de Synthèse SA (PCAS). If either of these companies is unable to manufacture API or Korlym tablets in the quantities and time frame required, weregulatory approval may not be able to manufacturesold unless regulatory approval is obtained, we record the cost of manufacturing our product in a timely manner. In ordercandidates as research and development expenses at the time such costs are incurred. We capitalize to mitigate these risksinventory manufacturing costs related to the manufacture of our product, we purchased and hold in inventory additional quantities of mifepristone API and Korlym tablets. Optime is our sole specialty pharmacy. Its unwillingness or inability to dispense Korlym to patients in a timely manner would harm our business.Inventoryvalue. Wevalue and determine the cost of inventory we sell using the specific identification method, which approximates a first-in, first-out basis. We assess our inventory levels at each reporting period and write down inventory that has become obsoleteis either expected to be at risk of expiration prior to sale, or has a cost basis in excess of its expected net realizable value. Anyvalue, or for which there are inventory quantities in excess of expected requirements. We destroy expired inventory is disposed of and recognize the related costs are recognized as cost of sales in thethat period’s statement of comprehensive income (loss)income.that period.Inventory amounts that are not expected to be consumedclinical studies within 12 months followingof the balance sheet date are classified as strategic inventory, a noncurrentnon-current asset.We expense the manufacturing costs for product candidates incurred prior to regulatory approval as research and development expense as we incur them. We begin capitalizing costs related to the manufacture of a product candidate when we obtain regulatory approval to begin marketing that product.F-8CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, ContinuedIn August 2012, we entered into a Purchase and Sale Agreement (“Financing Agreement”) with Biopharma Secured Debt Fund II Sub, S.à r.l (“Biopharma”), a private limited liability company organized under the laws of Luxembourg. Under the terms of the Financing Agreement, we received $30.0 million from Biopharma, which we recorded as a long-term obligation. In return, we were obligated to make payments to Biopharma totaling $45.0 million. These payments equaled a percentage of (i) our net product sales, including sales from any product containing mifepristone or any of our proprietary selective cortisol modulators (“Covered Products”) and (ii) cash or cash equivalents received from any licensing transaction or co-promotion arrangement involving Covered Products (together, “Korlym Receipts”). Once we had paid Biopharma a total of $45.0 million, no more payments were due and the obligation was extinguished.We recognized a portion of each quarterly payment under the Financing Agreement as interest expense, which we determined by calculating the interest rate to Biopharma implied by the stream of quarterly payments we expected to make. In each period, the amount shown on our balance sheet as the current portion was our estimate of the amount we expected to pay Biopharma in the following 12 months. We recorded the rest of the outstanding portion of the obligation, if any, as a long-term liability.We made our final payment to Biopharma, completely satisfying our obligations under the Financing Agreement, in July 2017.See Note 5, Debt Obligation, for additional information regarding this agreement. primarily sell Korlym directly to patients through a single specialty pharmacy. We also sell Korlym to a specialty distributor (“SD”), for which we recognize revenue uponat the deliverytime the SD receives Korlym. SD sales were less than 1 percent of our net revenue in the years ended December 31, 2020, 2019 and 2018.ifwe (i) there is persuasive evidence that an arrangement existsidentify our contract with each customer; (ii) identify the obligations of Corcept and the customer (ii) collectability is reasonably assuredunder the contract; (iii) determine the contracted transaction price; (iv) allocate the transaction price to the contract’s performance obligations, which in our case consists of delivering Korlym to the customer; and (iii)(v) recognize revenue once Korlym has been delivered, provided we deem it probable that we will collect the sales price is fixed or determinable. In orderpayment due to conclude that the price is fixed or determinable, we must be able to (i) calculate gross product revenue from a sale and (ii) reasonably estimate the associated net revenue. us.the patient’s private or government insurance plan or by a third-party charity is a prerequisite for selling Korlym to a patient. We provide Korlym at no cost to patients without insurance who do not qualify for charitable support.Through August 9, 2017 our exclusive specialty pharmacy was Dohmen. On August 10, 2017, Optime became our exclusive specialty pharmacy.We also sell Korlym to a specialty distributor (“SD”), which we recognize at the time the SD receives the Korlym. SD sales were less than one percent of our net revenue in the year ended December 31, 2017. We donate cash to charities that help patients with financial need pay for the treatment of Cushing’s syndrome. We do not include payments we receive from these organizations in revenue.We calculate gross product revenues based on the price we charge our customers. We estimaterevenues by deductingrevenue, we deduct from gross product revenues (a) estimated government rebates and chargebacks, (b) estimated costssales the cost of our patient co-pay assistance program (c)and our estimates of (a) government chargebacks and rebates, (b) discounts provided to our SD for prompt payment and (d)(c) reserves for expected productKorlym returns. We record estimates for these deductionsestimates at the time we recognize the gross revenue and update them as new information becomes available.Rebatesavailable. Our estimates take into account our understanding of the range of possible outcomes. If results differ from our estimates, we adjust our estimates, causing a change to our net product revenue and Chargebacks: earnings. We report any changes in the period they become known, even if they concern transactions occurring in prior periods.partial or full reimbursement from, Medicaid and other government programs. We estimate any government rebate amounts by applyingprograms that are eligible for rebates on the discount rates applicableprice they pay for Korlym. To determine the appropriate amount to each government-funded programour salesthese rebates, we identify Korlym sold to patients covered by government-funded programs, apply the applicable government discount to these sales, then estimate the portion of total rebates we expect will be claimed.programs.F-9CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, ContinuedOur allowance activity included in Trade Receivables includes our allowance for doubtful accounts, prompt pay cashsales, SD recovers the full amount of any related discounts and chargebacksby reducing its payment to us (this reduction is summarized as follows: There were no material changescalled a “chargeback”). Chargebacks sometimes relate to Korlym purchased by the SD in reserve estimates relating to prior periods.Allowances We deduct from our revenue in each period chargebacks claimed by the SD for Korlym it purchased in that period. We also create each period a reserve for chargebacks we estimate the SD will claim in future periods against Korlym it has not yet resold. We determine the amount of this reserve based on our experience with SD chargebacks and our understanding of the SD’s customer base and business practices. We then deduct this reserve from revenue and include in accrued expenses on our consolidated balance sheet a current liability of equal amount.Program: Program and Charitable Support: It is our policy that no patient be denied Korlym due to inability to pay. We provide financial assistance to eligible patients whose insurance policies require them to payhave high deductibles andor co-payments and deduct the amount of such assistance from these sales from gross revenue. We determine the amount of such assistance we provide each patient by applying our program guidelines to all eligible salesthat patient’s financial position and their insurance policy’s co-payment and deductible requirements for the purchase of Korlym. We donate cash to charities that help patients with financial need pay for the treatment of Cushing’s syndrome. We do not include payments from these charities in the period. from each period’s gross revenue the amount of Korlym we estimate the SD will be returned. When estimating returns, we analyzereturn from each period’s gross revenue. We base our estimates on quantitative and qualitative information including, but not limited to, historical return rates, the amount of product inKorlym held by the distribution channel, the expiration date of the product, currentSD and projected product demand, the introduction of competing products that may erode demand, and broad economic and industry-wide indicators.demand. If we cannot reasonably estimate product returns with respect to a particular sale, we defer recognition of revenue from that sale until we can make a reasonable estimate.Chargebacks Government Rebates Total (in thousands) Balance at December 31, 2017: $ 927 $ 7,961 $ 8,888 Provision recorded during the period 2,687 28,628 31,315 Provision related to prior period sales 0 532 532 Credit or payments made during the period (3,268) (25,988) (29,256) Balance at December 31, 2018: 346 11,133 11,479 Provision related to current period sales 783 24,374 25,157 Provision related to prior period sales 0 (95) (95) Credit or payments made during the period (852) (27,203) (28,055) Balance at December 31, 2019: 277 8,209 8,486 Provision related to current period sales 519 27,698 28,217 Provision related to prior period sales (3) (631) (634) Credit or payments made during the period (630) (25,864) (26,494) Balance at December 31, 2020: $ 163 $ 9,412 $ 9,575 consist ofinclude the direct expenses, such as the cost of discovery research,discovering and screening new compounds, pre-clinical studies, and clinical trials, relating to our portfolio of proprietary, selective cortisol modulators, manufacturing development, preparations for submissions to the FDA or other regulatory agencies and related overhead expenses.costs. We expense nonrefundable payments and the cost of technologies and materials used in research and development as they are incurred.cost accruals for discovery research, preclinical activities,studies and clinical trials on our estimates of work completed, under service agreements, milestones achieved, patient enrollment and past experience with similar contracts.activities. Our estimates of work completed and associated cost accruals include our assessments of information from third-party contract research organizations and the overall status of clinical trial and otherour own research, development and administrative activities. one1 operating segment, which is the discovery, development and commercialization of pharmaceutical products. related to option grants under the fair value method, based on the value of the award at the grant date. To date, our stock-based compensation has consisted entirely of option grants, which we value using the Black-Scholes option valuation model. We recognize thisstock-based compensation expense over the requisiteapplicable vesting period, net of estimated forfeitures.forfeitures. If actual forfeitures differ from our estimates, we adjust stock-based compensation expense accordingly.We recognize the expense of options granted to non-employees based on the fair value-based measurement of the option grants at the time of vesting.F-10CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, Continuednecessary, GAAP requires us to give significant weight to objective evidence. It is difficult to concludemore likely thansufficient taxable incomethese deferred tax assets will be generated when there is significant evidence – such as Corcept’s substantial cumulative losses – thatrealized. If our outlook for future taxable income is not assured. Because forecastschanges significantly, our assessment of taxable income are inherently uncertainthe need for, and not objectively verifiable, our cumulative losses must weigh heavily in our analysis.Until the fourth quarter of 2017, we maintained a valuation allowance on the entire value of our deferred taxes and did not report these amounts in our balance sheet. also account for uncertain tax positions in accordance with ASC 740, which requires us to adjust our consolidated financial statements to reflect only those tax positions that are more-likely-than-not to be sustained upon review by federal or state examiners. We may recognize ain the consolidated financial statements the largest expected tax benefit only if it is more likelythat has a greater than not the tax position will be50 percent likelihood of being sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Our policy is toauthorities. We report interest and penalties related to unrecognized tax benefits as income tax expenses.In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-15 (Subtopic 205-40), “Presentation of Financial Statements—Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. We adopted this standard on January 1, 2017. Because we generated cash in 2016 and 2017 and expect to generate cash in 2018, adoption had no impact on our financial statements.In July 2015, FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which requires certain inventory to be measured at the lower of cost or net realizable value. We adopted this standard on January 1, 2017 and it did not have a material impact on our financial statements.In November 2015, FASB issued ASU No. 2015-17 "Balance Sheet Classification of Deferred Taxes," which requires that deferred tax liabilities and assets be classified as noncurrent. Before adoption, companies were required to separate deferred liabilities and assets into current and noncurrent amounts in their balance sheets. We adopted this standard prospectively on January 1, 2017. Prior period balance sheets were not impacted, as we had a full valuation allowance against our deferred taxes, resulting in no deferred taxes being recorded in our financial statements. As of December 31, 2017, we have released a portion of our valuation allowance of our deferred tax assets. Accordingly, we presented the associated net deferred tax assets as noncurrent on our balance sheet.F-11CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, ContinuedIn March 2016, FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718) “Improvements to Employee Share-Based Payment Accounting,” which simplifies accounting for transactions involving shares awarded to employees. It requires companies to record excess tax benefits and deficiencies as income tax expenses or benefits instead of including them in additional paid-in capital. At the start of the year in which they implement the guidance, companies must adjust retained earnings by an amount equal to any previously unrecognized excess tax expenses or benefits. We adopted this guidance prospectively on January 1, 2017, at which time we recognized a $0.7 million deferred tax asset, which was offset by a corresponding increase to our deferred tax valuation allowance, resulting in no change to our balance sheet. Prior periods have not been adjusted. We elected to report on a prospective basis cash flows related to excess tax benefits as an operating activity and to continue to recognize stock compensation expense net of estimated forfeitures. Adoption of this standard did not have a material impact on our financial statements.Recently Issued Accounting Pronouncements Not Yet AdoptedIn May 2014, FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which changes the way companies recognize revenue. We plan to adopt this update using the modified retrospective approach, with the cumulative effect of adoption being recorded to our retained earnings on January 1, 2018. We have completed our evaluation of the contracts governing our sales process and have reviewed our related disclosures, policies and controls, which we will change as required when we adopt the standard. Because our arrangements with customers contain variable consideration, we have focused our analysis on how the new standard will affect our estimate of transaction prices, which will not change materially. The adoption will not have a material impact on our financial statements.In February 2016, FASB issued ASU No. 2016-02, “Leases”, which requires the recognition of lease transactions with terms longer than 12 months on the balance sheet as “lease liabilities” and “right-of-use assets.” We plan to adopt this new standard prospectively on January 1, 2019. Although we are in the process of evaluating the impact of this standard, we expect that adoption will increase our “lease liabilities” and “right-of-use assets” equally.Instruments—CreditInstruments-Credit Losses (Topic 326),Measurement of Credit Losses on Financial Instruments,.” The standardwhich changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. EarlyWe adopted this standard on January 1, 2020 using the modified retrospective approach with the cumulative effect of the adoption is permittedrecorded as an adjustment to retained earnings. It had no impact on our consolidated financial statements.2018.2020. We plan towill adopt thisthe new standard in the first quarter of 2020 and are currently evaluating the impact2021. The adoption of this new standard is not expected to have a significant impact on our consolidated financial statements.In August 2016, FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230) (ASU 2016-18), which requires the inclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-15 and ASU 2016-18 are both effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, provided that all of the amendments are adopted in the same period. We plan to adopt this standard on January 1, 2018. While we are in the process of evaluating the impact of this standard, we do not expect it to have a material impact on our financial statements.In May 2017 FASB issued ASU No. 2017-09, Stock Compensation (Topic 718): “Scope of Modification Accounting,” which changes the accounting for modifications to the terms and conditions of share-based payment awards. We plan to adopt this standard on January 1, 2018 and do not expect it to have a material impact on our financial statements.F-12CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, ContinuedMay 2013, we entered into a services agreement with Dohmen to provide exclusive specialty pharmacy and patient services programs for Korlym beginning July 1, 2013, which was terminated on August 9, 2017.On August 4, 2017, we entered into a distribution services agreement with an independent third party, Optime, to provide exclusive specialty pharmacy and patient services programs for Korlym beginning August 10, 2017. Under the terms of this agreement, Optime acts as the exclusive specialty pharmacy distributor of Korlym in the United States, subject to certain exceptions. Among other services, Optime provides services related to pharmacy operations; patient intake, access and reimbursement; patient support; claims management and accounts receivable; and data and reporting. We provide Korlym to Optime, which it dispenses to patients. Optime does not purchase Korlym from us and it does not take title to the product. Title passes directly from us to the patient at the time the patient receives the medicine.theour agreement with Optime is a period of five years, unless terminated earlier terminated pursuant to its terms.by us upon 90 days’ notice. The agreement contains additional customary termination provisions, representations, warranties and covenants. Subject to certain limitations, we have agreed to indemnify Optime for certain third-party claims related to the product, and we have each agreed to indemnify the other for certain breaches of representations, warranties, covenants and other specified matters.Active Pharmaceutical IngredientIn March 2014,entered into a new long-term manufacturing and supplyamended our agreement with PCAS for the manufacture of mifepristone, the active pharmaceutical ingredient (API) in Korlym. We have agreed to purchaseadd a minimum percentage of our mifepristone requirements from PCAS; the amount of the commitment will depend on our future needs. The initialsecond manufacturing site and extend its term of the agreement is five years,to December 31, 2021, with an2 one-year automatic extension of one yearrenewals, unless either party givesprovides 12 months’ priormonths advance written notice that it doesof its intent not want an extension. We haveto renew. The amendment provides exclusivity between PCAS and Corcept. In the right to terminate the agreement ifevent PCAS is unable to manufacture the product for a consecutive nine-month period. Tablet ManufactureIn April 2014,cannot meet our requirements, we entered into a new manufacturing agreement with Alcami Corporation for the manufacture and packagemay purchase API from another supplier. As of Korlym tablets. The initial term of this agreement is a period of three years, with consecutive automatic extensions of two years unless either party gives written notice – in the case of Alcami Corporation, 18 months prior to the end of the applicable term, and in our case 12 months prior to the end of the applicable term – that it does not want such an extension. We have the right to terminate the agreement if Alcami Corporation is unable to manufacture the product for a consecutive four-month period or if the product is withdrawn from the market. There are noDecember 31, 2020, there were 0 minimum future purchase obligations under this agreement.ResearchDevelopment Agreements In 1999, we entered into an agreement with The Board of Trustees of Leland Stanford Junior University (Stanford)bottle Korlym tablets.which Stanford granted us an exclusive license to patents covering the use of glucocorticoid receptor antagonists for the treatment of psychotic depression, early dementia, and cocaine-induced psychosis, as specified in the license agreement. This license agreement expires upon the expiration of the related patents or upon notification by us to Stanford. In exchange for the license, we paid Stanford an initial non-refundable fee, immediately issued 30,000 shares ofNote 5, Leases, regarding our common stock to Stanford and are obligated to pay Stanford $50,000 per year as a nonrefundable royalty payment. In addition, we are obligated to pay additional milestone payments in the future, which are not material and a portion of which are creditable against future royalties and will pay a royalty based on net revenue generated by any product arising from the patent until its expiration.F-13We have also exclusively licensed from the University of Chicago five issued U.S. patentsthe use of cortisol modulators in the treatment of triple-negative breast cancerSale Securities and a second patent family with applications in the United States and Europe having claims directed to the use of cortisol modulators to treat castration-resistant prostate cancer. In exchange for these licenses, we paid initial non-refundable fees to the University of Chicago and are committed to additional annual and milestone payments in the future, which are not material and which are creditable against future royalties. We will also pay royalties based on net revenue generated by any product arising from these patents until their expiration.3. Fair Value of Financial InstrumentsAs of December 31, 2017 and 2016, we had invested our financial assets in marketable securities and a money market fund that can be converted to cash at par on demand. We measured these funds, which totaled $87.9 million and $31.6 million as of December 31, 2017 and 2016, respectively, at fair value, which approximates cost and classified them as Level 1 and Level 2 assets in the fair value hierarchy.OurMeasurementsincluded:in our Consolidated Balance Sheets are as follows:Year Ended December 31, 2020 2019 (in thousands) Cash equivalents $ 50,524 $ 18,461 Short-term marketable securities 364,506 244,693 Long-term marketable securities 36,196 39,352 Total marketable securities $ 451,226 $ 302,506 estimatedfollowing table presents our available-for-sale securities grouped by asset type: Fair Value
Hierarchy
LevelDecember 31, 2020 December 31, 2019 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 $ 96,999 $ 74 $ (9) $ 97,064 $ 109,780 $ 136 $ (6) $ 109,910 Commercial paper Level 2 139,791 0 0 139,791 41,237 0 0 41,237 Asset-backed securities Level 2 39,243 15 (1) 39,257 57,195 63 (5) 57,253 Repurchase agreements Level 2 0 0 0 0 18,000 0 0 18,000 U.S. treasury securities Level 1 124,461 131 (2) 124,590 75,574 71 0 75,645 Money market funds Level 1 50,524 0 0 50,524 461 0 0 461 Total Marketable securities $ 451,018 $ 220 $ (12) $ 451,226 $ 302,247 $ 270 $ (11) $ 302,506 is based onclassified as Level 1 using quoted market prices for these or similar investments obtained from a commercial pricing service. TheWe estimate the fair value of marketable securities classified withinas Level 2 is based uponusing inputs that may include benchmark yields, reported trades, broker/dealer quotes and issuer spreads. Our accumulatedcomprehensive lossissues. If the fair value of our investment in any debt security is less than our amortized cost basis, we determine whether an allowance for credit losses is appropriate by assessing quantitative and subjective factors including, but not limited to, the nature of security, changes in credit ratings, analyst reports concerning the security’s issuer and industry, interest rate fluctuations and general market conditions.balance sheets consistedavailable-for-sale debt securities as of net unrealized losses on available-for-sale investments of $75,000 and zero at December 31, 20172020 were not significant and 2016, respectively. were primarily due to changes in interest rates, and not increased credit risk. Accordingly, we have not recorded an allowance for credit losses associated with these investments.diddo not recognize any realized gains or lossesintend to sell the investments that are currently in an unrealized loss position, and it is highly unlikely that we will be required to sell the investments before recovery of their amortized cost basis, which may be maturity.salesour marketable securities of investments for any period presented.2017,2020, all our marketable securities had original maturities of less than two years. The weighted-average maturity of our holdings was sevenfive months. As of December 31, 2020, our long-term marketable securities had remaining maturities ranging from 13 to 17 months. None of our marketable securities changed from one fair value hierarchy to another during the year ended December 31, 2017.F-14The composition of inventory was as follows:Year Ended December 31, 2020 2019 (in thousands) Raw materials $ 1,685 $ 1,389 Work in progress 12,916 10,086 Finished goods 6,556 5,930 Total inventory 21,157 17,405 Less strategic inventory classified as non-current (16,247) (11,981) Total inventory classified as current $ 4,910 $ 5,424 In order to be prepared for potential demand for Korlym and becausesingle-source manufacturers of botha single manufacturer for the active pharmaceutical ingredient (“API”)API for Korlym, and Korlym tablets, we have purchased and hold significant inventoryquantities of these materials.API. We classify inventory we do not expect to usesell within 12 months of the balance sheet date as “Strategic Inventory,” a long-term asset.PropertyYear Ended December 31, 2020 2019 (in thousands) Furniture and equipment $ 810 $ 304 Software 1,485 1,541 Leasehold improvements 1,233 533 3,528 2,378 Less accumulated depreciation (1,853) (1,328) Property and equipment, net of accumulated depreciation $ 1,675 $ 1,050 equipment consisted of the following:other liabilitiesYear Ended December 31, 2020 2019 (in thousands) Accrued compensation $ 10,144 $ 12,331 Government rebates 9,412 8,209 Accrued selling and marketing costs 665 491 Legal fees 612 1,087 Professional fees 151 367 Other 202 784 Total accrued and other liabilities $ 21,186 $ 23,269 Accrued LiabilitiesOther accrued liabilities consisted of the following:F-15CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, Continued discussed in Note 1, Basis of Presentation and Summary of Significant Accounting Policies, Debt Obligation, under the Financing Agreement with Biopharma we made payments to Biopharma calculated as a percentage of our Korlym revenue. Biopharma’s right to receive payments expired once it received $45.0 million. To secure our obligation, we granted Biopharma a security interest in our patents, trademarks, trade names, domain names, copyrights, know-how, books, records and regulatory approvals related to the Covered Products and any proceeds from them. We extinguished our obligations under the Financing Agreement in July 2017 and have fully paid Biopharma $45.0 million.We recorded interest expense of $0.5 million and $1.9 million for the years ended December 31, 2017 and 2016, respectively, and total accreted interest of $15.0 million for the period from August 2012 through July 2017. The following table provides a summary of the payment obligations under the Financing Agreement as of December 31, 20172020 and 2016.We capitalized $0.12019, other assets includes $4.8 million and $3.3 million of issuance costs relateddeposits for clinical trials, respectively.Financing Agreement, whichinterest rate we amortizedwould pay on a loan with monthly 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 obligation, based on the assumptions discussed above. At December 31, 2017 and 2016, the unamortized issuance costs were approximately zero and $14,000, respectively, and are included in “debt obligation,” netted against the obligation on our balance sheets.6. Lease ObligationsIn February 2016, we extended thelease. for our office space through 2019 and added more space. Effective May 1, 2016, we terminated our lease early and replaced it with a new one effective through March 31, 2019. On June 1, 2017, we amended that lease to add more space. Rent expense for the years ended December 31, 2017, 20162020 and 20152019 was $1.1 million, $0.9approximately $1.9 million and $0.7$1.5 million, respectively.Year Ended December 31, 2020 2019 (in thousands) Cash paid for operating lease liabilities $ 1,840 $ 1,551 Right-of-use assets obtained in connection with operating lease obligations $ 775 $ 4,913 Weighted-average remaining lease term (years) 15 months 27 months Weighted-average discount rate 4.8 % 5.0 % 2017,2020, future minimum lease payments under non-cancelable operating leases were as follows:follows (in thousands):2021 $ 2,109 2022 530 2,639 Less imputed interest (88) Total operating lease liabilities $ 2,551 7.See discussion belowNote 8, order to provide him with liquidity to satisfy the tax liability arising from his net (cashless) exercise in 2019 of stock options that were about to expire., under the caption Common Stock, regarding the sale of securities to various investors, including members of our board of directors and related entities.F-16CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, Continued8. and Stockholders’ EquityPreferred Stock20172020 and 2016,2019, we had no0 outstanding shares of preferred stock.We issued approximately 6.2 shares of our common stock (the “Stock Repurchase Program”). Unless it is terminated or suspended prior to its expiration, the Stock Repurchase Program will remain in March 2015,effect until September 30, 2021. The timing and amount of any repurchases pursuant to it will be determined based on market conditions, stock price and other factors. The Stock Repurchase Program does not require us to acquire any specific number of shares and it may be modified, suspended or discontinued at any time without notice. Repurchases pursuant to the Stock Repurchase Program may be made through a variety of methods, including open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions or any combination of such methods.warrants that had been issued in two private placement transactions, one in 2008 and the other in 2012, to qualified investors, including members of our board of directors and their affiliates. The transactions generated aggregate net proceeds of approximately $17.1 million, after the deduction of issuance costs. Approximately 3.1 million shares of the securities, which generated aggregate gross proceeds of $5.9 million, were issued in these transactions to venture capital funds, trusts and other entities affiliated with members of our Board of Directors.20172020 are as follows:Common stock: 24,946 20,4549,041 7,63033,987 28,0847, 2018,4, 2021, our Board of Directors authorized an additional increase of 4.64.7 million shares in the number of shares available under the 2012 Equity Incentive Plan (the 2012 Plan)“2012 Plan”), which was equivalent to 4% of the shares of our common stock outstanding at December 31, 2017.two active2 stock option plans at December 31, 2016 – the 2004 Equity Incentive Plan (the 2004 Plan)“2004 Plan”) and the 2012 Plan. boardBoard of directorsDirectors and stockholders approved the 2004 Plan, which became effective upon the completion of our initial public offering (IPO). Under the 2004 Plan, options, stock purchase and stock appreciation rights and restricted stock awards can be issued to our employees, officers, directors and consultants. The 2004 Plan provided that the exercise price for incentive stock options will be no less than 100% of the fair value of the Company’s common stock, as of the date of grant. Options granted under the 2004 Plan vest over periods ranging from one year to five years. The vesting period of the options is generally equivalent to the requisite service period.boardBoard of directorsDirectors and stockholders approved the 2012 Plan. As of the effective date of the 2012 Plan, 5.3 million shares that remained available for issuance of new grants under the 2004 Plan were transferred to the 2012 Plan. After that date, no additional options were or will be issued under the 2004 Plan. Vested options under the 2004 Plan that are not exercised within the remaining contractual life and any options under the 2004 Plan that do not vest because of terminations after the effective date of the 2012 Plan will be added to the pool of shares available for future grants under the 2012 Plan.F-17CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, Continuedexpectassume the vesting period of the options that we grant under the 2012 Plan to be generally equivalentequal to the requisite service period.On February 10, 2017, our Board of Directors authorized an increase of 4.5 million shares in the number of shares available under the 2012 Plan, which was equivalent to 4% of the shares of our common stock outstanding as of December 31, 2016, pursuant to the terms of the 2012 Plan.2015, 20162018, 2019 and 2017stock plan activity:activity under the 2004 Plan and the 2012 Plan:Outstanding Options Shares
Available For
Future GrantOptions
Shares
Subject to
Options
OutstandingWeighted-
Average
Exercise
PriceWeighted-
Average
Remaining
Contractual
LifeAggregate
Intrinsic
Value(in years) Balance at December 31, 2019 Balance at December 31, 2019 8,624 23,600 $ 8.77 Increase in shares authorized for grant 4,582 — Shares granted (5,225) 5,225 $ 13.84 Shares exercised — (2,819) $ 8.97 Shares canceled and forfeited Shares canceled and forfeited 1,060 (1,060) $ 13.11 Balance at December 31, 2020 Balance at December 31, 2020 9,041 24,946 $ 9.62 6.17 $ 412,494 Options exercisable at December 31, 2020 Options exercisable at December 31, 2020 17,047 $ 7.83 5.09 $ 312,481 Options fully vested and expected to vest
at December 31, 2020Options fully vested and expected to vest
at December 31, 202024,254 $ 9.51 6.10 $ 403,738 2017, 20162020, 2019 and 20152018 was $22.4$28.8 million, $14.8$26.6 million and $5.5$26.6 million, respectively, based on the difference between the closing price of our common stock on the date of exercise of the options and the exercise price. grant date fair value of options to employees and directors that vested during the years ended December 31, 2017, 20162020, 2019 and 20152018 was $12.3$34.0 million, $7.0$30.2 million and $5.4$22.6 million, respectively.F-18CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, ContinuedThe following is a summary of options outstanding and options exercisable at December 31, 2017.The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that option holders would have received had all option holders exercised their options on December 31, 2017. The aggregate intrinsic value is the difference between our closing stock price on December 31, 2017 and the exercise price, multiplied by the number of in-the-money options.Assumptions used in determining fair value-based measurements for options to employees and directorsYear Ended December 31, 2020 2019 2018 Weighted-average assumptions for stock options granted: Risk-free interest rate 1.20% 2.34% 2.68% Expected term 6.0 years 6.0 years 5.9 years Expected volatility of stock price 59.1% 67.4% 67.9% Dividend rate 0% 0% 0% Weighted-average grant date fair value-based measurement $7.55 $7.09 $10.11 differentiated bydepending on whether the granteeoption holder is an employee, an officer or a director.a weighted-average combination of the volatility of our own stock price. For stock options granted to employees with expected terms of less than the period of time that we have been a public company, theThe volatility is based on historical data of the price for our common stock for periods of time equivalentequal to the expected term of these grants.calculatedcalculate employee stock-based compensation expense using the number of options we expect to vest, based on awards ultimately expected to vestour estimate of the option grantees’ average length of employment, and reduced it for estimatedby our estimate of option forfeitures. ASC 718 requiresWe estimate forfeitures to be estimated at the time of option grant and revised, if necessary,revise this estimate in subsequent periods if actual forfeitures differ from those estimates.Summary of compensation expense related to options to employees and directorsWe recognized compensation expense of $13.4 million, $7.1 million and $6.0 million related to options to employees and directors during the years ended December 31, 2017, 2016 and 2015, respectively. F-19CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, Continued2017,2020, we had $33.7$54.8 million of unrecognized compensation expense for employee and director options outstanding as of that date, which had a weighted-average remaining weighted-average vesting period of 2.872.39 years.Stock Options to Non-EmployeesWe expense stock-based compensation related to service-based option grants to non-employees on a straight-line basis over the vesting period of the options, which approximates the period over which the related services are rendered, based on the fair value-based measurement of the options using the Black-Scholes option pricing model. The assumptions used in these calculations are similar to those used for the determination of fair value-based measurement for options granted to employees and directors, with the exception that, for non-employee options, the remaining contractual term is utilized as the expected term of the option and the fair value-based measurement related to unvested non-employee options is re-measured quarterly, based on the then current stock price as reflected on the NASDAQ Capital Market.We recorded charges to expense for non-employee stock options of $31,000, $56,000 and $87,000 for the years ended December 31, 2017, 2016 and 2015, respectively.As of December 31, 2017, there were no awards outstanding to non-employees. Expensenon-cash stock-based compensation by financial statement classification. Year Ended December 31, 2020 2019 2018 (in thousands) Stock-based compensation capitalized in inventory Stock-based compensation capitalized in inventory $ 238 $ 120 $ 87 Cost of sales Cost of sales 66 144 259 Research and development 11,222 9,541 7,012 Selling, general and administrative 22,251 19,628 16,476 Total stock-based compensation $ 33,777 $ 29,433 $ 23,834 9.(Loss) Per ShareBasic(loss) per share is computed by dividing theour net income (loss) by the weighted-average number of common shares outstanding during the period. We used the treasury stock method to determine the number of dilutive shares of common stock resulting from the potential exercise of stock options. The statements of consolidated comprehensive income show the computation of net income (loss) per share for each period, including the number of weighted-average shares outstanding, is shown on the face of the statements of comprehensive income (loss).F-20CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, Continued(loss) per share for each period,period:Year Ended December 31, 2020 2019 2018 (in thousands, except per share data) Numerator: Net income $ 106,011 $ 94,181 $ 75,410 Denominator: Weighted-average shares used to compute basic net income per share 115,412 114,349 115,343 Dilutive effect of employee stock options 8,782 8,217 11,345 Weighted-average shares used to compute diluted net income per share 124,194 122,566 126,688 Net income per share Basic $ 0.92 $ 0.82 $ 0.65 Diluted $ 0.85 $ 0.77 $ 0.60 numbercomputation of weighted-average shares outstanding.Ondiluted net income per share, on a weighted-average basis 1.111.2 million, 9.9 million and 4.45.0 million stock options outstanding during the years ended December 31, 20172020, 2019, and 2016,2018, respectively,excluded from the computation of diluted netas follows:Year Ended December 31, 2020 2019 2018 (in thousands) Domestic $ 131,634 $ 116,676 $ 92,153 Foreign (32) 0 0 Income before income taxes $ 131,602 $ 116,676 $ 92,153 per share because including them would have reduced dilution.We have excluded the impact of all common stock equivalents relating to shares underlying outstanding options and warrants from the calculation of diluted net loss per common sharetax expense for the year ended December 31, 2015 because all such securities are antidilutive.The following table presents information on securities outstanding as of the end of each period that could potentially dilute the per share data in the future.10. Income Taxes The income tax (benefit) for the year ended December 31, 20172020, 2019, and 2018 consisted of the following:Year Ended December 31, 2020 2019 2018 (in thousands) U.S. federal taxes: Current $ 6,094 $ 1,716 $ 0 Deferred 14,418 15,944 14,243 Total U.S. federal taxes 20,512 17,660 14,243 State taxes: Current 5,368 3,900 2,676 Deferred 520 935 (176) Total state taxes 5,888 4,835 2,500 Foreign taxes: Foreign taxes: Current Current $ 41 $ 0 $ 0 Deferred Deferred $ (850) $ 0 $ 0 Total foreign taxes Total foreign taxes (809) 0 0 Total $ 25,591 $ 22,495 $ 16,743 F-21There was no income tax benefit or expense for the years ended December 31, 2015 and 2016. The income tax benefit for the year ended December 31, 2017 resulted primarily from the partial release of our valuation allowance, described more fully below.On December 22, 2017 President Donald Trump signed into U.S. law the Tax Cuts and Jobs Act of 2017 (“Tax Act”). The Tax Act introduced a broad range of tax reform measures that significantly change the federal income tax regime. Among other things, the Tax Act reduces the corporate income tax rate from 35% to 21% effective for tax years including or commencing on January 1, 2018, repeals corporate alternative minimum tax, limits various business deductions, modifies the maximum deduction of net operating loss with no carryback but indefinite carryforward provision, expands the deduction limit applicable to compensation paid to top executives of publicly traded companies, and includes various international tax related provisions. In accordance with ASC 740, the companies are required to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions of Tax Act is for tax years beginning after December 31, 2017, or in the case of certain other provisions of the law, January 1, 2018.Accounting Standards Codification (ASC) 740, Income Taxes, requires companies to recognize the effect of the tax law changes in the period of enactment. However, the SEC staff issued Staff Accounting Bulletin 118 which will allow companies to record provisional amounts during a measurement period that is similar to the measurement period used when accounting for business combinations. We have adjusted our deferred taxes based on the reduction of the U.S. federal corporate tax rate from 35% to 21% and assessed the realizability of our deferred tax assets based on our current understanding of the provisions of the new law. We consider our accounting for the impacts of the new tax law to be provisional and will continue to assess the impact of the recently enacted tax law (and expected further guidance from federal and state tax authorities as well as further guidance for the associated income tax accounting) on our business and consolidated financial statements over the next 12 months. Year Ended December 31, 2020 2019 Deferred tax assets: (in thousands) Federal and state net operating losses $ 5,412 $ 7,391 Capitalized research and patent costs 5,139 7,317 Research credits 15,107 26,164 Stock-based compensation costs 14,043 12,026 Operating lease liability Operating lease liability 630 857 Other 3,473 4,186 Total deferred tax assets 43,804 57,941 Valuation allowance (11,581) (11,410) Deferred tax liabilities Deferred tax liabilities Operating lease right-of-use asset Operating lease right-of-use asset (620) (854) Total deferred tax liabilities Total deferred tax liabilities (620) (854) Net deferred tax assets $ 31,603 $ 45,677 Realizationdependent upon future earnings, ifnot more likely than not, we will establish a valuation allowance. Significant judgment is required in determining any the timing and amount of which are uncertain. Until the quarter ended December 31, 2017, we have maintained a full valuation allowance recorded against our deferred tax assets due toassets. In assessing the Company’s cumulative loss position and uncertainties regarding sustainable future profitability since inception.We regularly assess the ability to realize deferred tax assets based on the weight ofneed for a valuation allowance, we consider all available evidence, including such factors as the historyrecent operating results, projections of recent earnings and expected future taxable income, on a jurisdiction by jurisdiction basis. Duringour ability to utilize net operating losses and tax credit carryforwards, and the fourth quarter, after considering these factors,feasibility of tax planning strategies. Other than valuation allowances against our California net deferred tax assets, we have determined that the positive evidence overcame any negative evidence, primarily due to cumulative income in recent years, and the expectation of sustained profitability in future periods and concluded that it wasis more likely than not thatwe will realize the U.S. federalbenefit related to all other deferred tax assets and other-than-California state deferred tax assets were realizable. Asassets. If we increase a result, we released the valuation allowance, against allwe will include an expense of equal amount in the U.S. federal deferred tax assets and other-than-California state deferred tax assets duringF-22CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, Continuedfourth quarter of fiscal year 2017. We maintain a full valuation allowanceperiod in relation to California deferred tax assets as of December 31, 2017 because of the uncertainty regarding the realizability of these deferred tax assets.decreasedincreased by $116.9 million, $4.3$0.2 million and $2.4$0.2 million for the years ended December 31, 2017, 20162020 and 2015, respectively. The decrease in2019, respectively, and decreased by $1.3 million for the valuation allowance during 2017 was the result of our release of the entire valuation allowance previously established on our federal and non-California state deferred tax assets.2017,2020, we had net operating loss carryforwards available to offset any future taxable income that we may generate for federal income tax purposes of $159.5 million, which expire in the years 2025 through 2036, California net operating loss carryforwards of $95.4$75.2 million, which will begin to expire in the years 2018 through 2035,year 2032, and net operating loss carryforwards from other states of $23.6$2.9 million, which will begin to expire in the years 2023 through 2036. 2017,2020, we also had federal and California research and development tax credits of $19.2$6.8 million and $4.2orphan drug tax credits of $7.8 million, respectively.respectively, and California research and development credits of $8.5 million. The federal research credits will expire in the years 20232039 through 20372040 and the California research credits have no expiration date.Utilization of our net operating losses and tax credit carryforwards may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such limitations could result in the expiration of the net operating losses and tax credit carryforwards before utilization.Due to the adoption of ASU 2016-09 in 2017, all excess tax benefits and deficiencies are recognized as income tax expense in our consolidated statement of comprehensive income (loss). This will result in increased volatility in our effective tax rate. Year Ended December 31, 2020 2019 2018 (in thousands) U.S. federal taxes at statutory rate $ 27,636 $ 24,502 $ 19,354 R&D and other credits (6,666) (4,504) (2,178) State income taxes 4,651 3,819 1,975 Non-deductible compensation 1,508 657 394 Stock-based compensation (1,551) (2,107) (3,165) Other 13 128 363 Total $ 25,591 $ 22,495 $ 16,743 No amounts have been recognized as interest or penalties on income tax related matters.F-23CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, ContinuedYear Ended December 31, 2020 2019 2018 Beginning Balance $ 6,029 $ 4,756 $ 4,139 Increase in tax positions for prior years 158 261 0 Decrease in tax positions for prior years Decrease in tax positions for prior years 0 0 (135) Increase in tax positions for current year 1,284 1,012 752 Decrease in tax positions for current year Decrease in tax positions for current year 0 0 0 Ending Balance $ 7,471 $ 6,029 $ 4,756 2017 and 2016,2020, the total amount of unrecognized tax benefits was approximately $4.1 million and $3.5 million, respectively. Of this balance, approximately $3.4 millionthat would favorably impact the effective tax rate since thewere approximately $6.1 million, and approximately $1.4 million of unrecognized tax benefits would be offset by a change in valuation allowance related to these benefits was released in 2017.allowance. A valuation allowance is maintained on the remaining tax benefits related to California deferred tax assets and would not impact the effective tax rate. We had no0 or immaterial amounts of accrued interest and no0 accrued penalties related to unrecognized tax benefits as of December 31, 2017, December 31, 20162020, 2019 and December 31, 2015. 2018. We do not expect our unrecognized tax benefits to change materially over the next 12 months.Allfrom inception1999 through 2020 remain open and subject to tax examination by the Internal Revenue Service, the California Franchise Tax Board and otherappropriate federal or state taxing authorities until such time as the net operating losses and research credits are either fully utilized or expire.11.authorities.CORT118335miricorilant and CORT125281.exicorilant. We have also entered into a number of agreements to perform clinical studies on miricorilant and CORT113176. See the discussion in Note 2, Significant Agreements, for further discussion regarding the commitments under these agreements.potentialthe possible outcomes assumingof 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.On August 4, 2017, we terminated our pharmaceutical services agreement with Dohmen, dated as of May 21, 2013, as amended July 22, 2013 and again on October 6, 2014 (the “Dohmen Agreement”) for material breach, pursuant to Section 5.2.2 of the Dohmen Agreement. On August 7, 2017, Dohmen filed a complaint in the Court of Chancery of the State of Delaware against us alleging unlawful termination and breach of contract and requesting declaratory relief and damages (the “Dohmen Lawsuit”). On August 29, 2017, we filed a complaint against Dohmen in the Superior Court of the State of Delaware and a motion to dismiss the Dohmen complaint against us. On November 10, 2017, we answered Dohmen’s complaint in the Court of Chancery of the State of Delaware and asserted counterclaims against Dohmen.Dohmen refused to transfer to us the cash it collects from $12.9 million in Korlym® net receivables, despite its obligation to do so. Dohmen has instead placed the funds it collects in an escrow account at U.S. Bank (“Escrow Funds”), subject to release by order of the Court or mutual agreement of Dohmen and Corcept. As of December 31, 2017, the total amount of these receivables has been included in “Other receivable” on our balance sheet. F-24CORCEPT THERAPEUTICS INCORPORATEDNOTES TO FINANCIAL STATEMENTS, ContinuedOn January 11, 2018, we entered into a settlement agreement with Dohmen and mutual release of any and all claims that may have existed between the parties as of that date. Pursuant to the settlement agreement, Dohmen agreed to deliver to us all of the cash Dohmen had collected from the sale of Korlym on our behalf. The total amount delivered by Dohmen to us under the settlement agreement was the $12.9 million of Korlym® net receivables as described above.Nono0 provision for a loss contingency have been recorded to date.12.Quarter Ended March 31 June 30 September 30 December 31 2020 Product revenue, net $ 93,247 $ 88,565 $ 86,327 $ 85,735 Gross profit on product revenue 91,369 87,331 85,111 84,481 Net income 30,065 28,327 21,625 25,994 Basic net income per share $ 0.26 $ 0.25 $ 0.19 $ 0.22 Diluted net income per share $ 0.25 $ 0.23 $ 0.17 $ 0.20 2019 Product revenue, net $ 64,829 $ 72,257 $ 81,505 $ 87,895 Gross profit on product revenue 63,589 70,880 80,054 86,459 Net income 18,274 20,186 26,340 29,381 Basic net income per share $ 0.16 $ 0.18 $ 0.23 $ 0.26 Diluted net income per share $ 0.15 $ 0.17 $ 0.22 $ 0.24 F-25