CORCEPT THERAPEUTICS INC

1. Basis of Presentation and Summary of Significant Accounting Policies

Description of Business and Basis of Presentation

Corcept Therapeutics Incorporated (collectively, “Corcept,” the “Company,” “we,” “us,” and “our”) is a commercial-stage pharmaceutical company engaged in the discovery and development of medications to treat severe endocrinologic, oncologic, metabolic and neurologic disorders by modulating the effects of the hormone cortisol. In 2012, the United States Food and Drug Administration (“FDA”) approved Korlym (“mifepristone”) 300 mg tablets, as a once-daily oral medication for the treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing’s syndrome who have type 2 diabetes mellitus or glucose intolerance and have failed surgery or are not candidates for surgery. We have discovered and patented four structurally distinct series of selective cortisol modulators, consisting of more than 1,000 compounds. We are developing compounds from these series as potential treatments for a broad range of serious disorders.

We were incorporated in the State of Delaware in May 1998. Our headquarters are located in Menlo Park, California.

Basis of Presentation

We have prepared the following in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X: (i) condensed consolidated balance sheet as of March 31, 2024 and (ii) condensed consolidated statements of income, comprehensive income, cash flows and stockholders’ equity for the three-month periods ended March 31, 2024 and 2023. These do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation (which in the applicable periods consist only of normal, recurring adjustments) have been included. Operating results for the three-month period ended March 31, 2024 are not necessarily indicative of the results for the remainder of 2024 or any other period. These financial statements and notes should be read in conjunction with the financial statements for the year ended December 31, 2023 included in our Annual Report on Form 10-K. The December 31, 2023 balance sheet was derived from audited financial statements at that date.

There have been no material changes to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2023.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. This ASU is effective for public companies with annual periods beginning after December 15, 2024, with early adoption permitted. We plan to adopt this guidance for the fiscal year ending December 31, 2025. We are currently evaluating the effects adoption of this guidance will have on the condensed consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, to improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses. The standard is effective for public companies with annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 with early adoption permitted. We plan to adopt this guidance for the fiscal year ending December 31, 2024. We are currently evaluating the effects adoption of this guidance will have on the condensed consolidated financial statements.

2. Composition of Certain Balance Sheet Items

Inventory

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

Prepaid expenses and other current assets

Accrued and other liabilities

Other assets

As of March 31, 2024 and December 31, 2023, other assets included $6.3 million and $6.4 million of deposits for clinical trials, respectively.

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

The available-for-sale securities in our condensed consolidated balance sheets are as follows:

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

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

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

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

We classified accrued interest on our marketable securities of $2.0 million and $1.7 million as of March 31, 2024 and December 31, 2023, respectively, as prepaid and other current assets on our condensed consolidated balance sheets.

As of March 31, 2024, all of our long-term marketable securities had original maturities of no more than 27 months and all our marketable securities classified as short-term have maturities of less thanone year. The weighted-average maturity of our holdings was 6 months. As of March 31, 2024, our long-term marketable securities had remaining maturities between 12 months and 19 months. None of our marketable securities changed from one fair value hierarchy to another during the three months ended March 31, 2024.

4. Commitments and Contingencies

There have been no material changes in our obligations under contractual agreements described in our Annual Report on Form 10-K for the year ended December 31, 2023.

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

Melucci Litigation and Settlement

On March 14, 2019, a purported securities class action complaint was filed in the United States District Court for the Northern District of California by Nicholas Melucci (Melucci v. Corcept Therapeutics Incorporated, et al., Case No. 5:19-cv-01372-LHK) (the “Melucci litigation”). The complaint named us and certain of our executive officers as defendants asserting violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder and alleges that the defendants made false and materially misleading statements and failed to disclose adverse facts about our business, operations and prospects. The complaint asserts a putative class period extending from August 2, 2017 to February 5, 2019 and seeks unspecified monetary relief, interest and attorneys’ fees. On October 7, 2019, the Court appointed a lead plaintiff and lead counsel. The lead plaintiff’s consolidated complaint was filed on December 6, 2019.

On February 8, 2023, we reached an agreement in principle (the “Proposed Settlement”) to resolve all claims in the Melucci litigation. Under the Proposed Settlement, we have agreed to make a one-time payment of $14.0 million, which will be covered in full by our insurers. In connection with the Proposed Settlement, we recorded a settlement expense of $14.0 million and corresponding insurance recovery of $14.0 million in operating expenses on our consolidated statement of income in the fourth quarter of 2022. The Court granted preliminary approval of the Proposed Settlement on January 4, 2024, following which we paid $14.0 million into escrow. Our insurers reimbursed us in full. Payment of any funds out of the designated escrow is pending the Court’s final approval of the Proposed Settlement, a hearing for which is scheduled for June 6, 2024.

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

5. Leases

We lease our office facilities in Menlo Park, California. On March 19, 2024, we entered into an amendment to extend our lease through July 31, 2024. The amendment extended the lease term byone month, for which we do not expect to record an additional right of use asset and corresponding lease liability. We will record $0.2 million of rent expense in connection with this lease amendment.

As the operating lease for our facilities does not expressly state an interest rate, we calculated the present value of remaining lease payments using a discount rate equal to the interest rate we would pay on a collateralized loan with monthly payments and a term equal to the monthly payments and remaining term of our lease. We recognize operating lease payments as expenses using the straight-line method over the term of the lease.

Operating lease expense for each of the three months ended March 31, 2024 and 2023 was $0.6 million.

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

As of March 31, 2024, future minimum lease payments under non-cancelable operating leases were as follows (in thousands):

As of March 31, 2024, future minimum lease payments under non-cancellable short-term leases were $0.7 million for the remainder of 2024. We do not recognize right-of-use assets or lease liabilities for leases with a term of twelve months or less, rather, we recognize the associated lease payments in the condensed consolidated statements of income on a straight-line basis over the lease term.

As of March 31, 2024, we had one additional operating lease that has not yet commenced, with lease obligations of approximately $9.6 million for our new office lease. This operating lease will commence on or around July 1, 2024. See Note 9 “Subsequent Events” to our Unaudited Condensed Consolidated Financial Statements for more information on our new office lease.

6. Stockholders’ Equity

Treasury Stock

In January 2024, our Board of Directors approved a program authorizing the repurchase of up to $200 million of our common stock (the “Stock Repurchase Program”). Purchases under this program may be made in the open market, in privately negotiated transactions or otherwise. The timing and amount of any repurchases will be determined based on market conditions, our stock price and other factors. The program does not require us to repurchase any specific number of shares of its common stock and may be modified, suspended or discontinued at any time without notice.

During the three months ended March 31, 2024, we purchased less than 0.1 million shares of our common stock under the Stock Repurchase Program in open market transactions at an average price of $23.82 per share, for an aggregate purchase price of $0.5 million. As of March 31, 2024, $199.5 million of the current authorization remained available for the repurchase of shares of our common stock.

We recorded purchased shares as treasury stock on our condensed consolidated balance sheets at cost. As of March 31, 2024 and December 31, 2023, we had 31.2 million and 30.9 million treasury shares outstanding, respectively.

Incentive Award Plan

We haveone stock option plan – the Corcept Therapeutics Incorporated 2012 Incentive Award Plan (the “2012 Plan”).

Stock Options

During the three months ended March 31, 2024, we issued 0.4 million shares of our common stock upon the exercise of stock options. Some option holders exercised their options on a “net exercise” basis, pursuant to which they surrendered to us, and we purchased from them, at the current market price, shares equal in value to the associated exercise price and tax withholding obligations. During the three months ended March 31, 2024, we purchased 0.1 million shares in connection with option net exercises and paid $0.9 million to satisfy associated tax withholding obligations.

During the three months ended March 31, 2023, we issued 0.5 million shares of our common stock upon the exercise of stock options. Some option holders exercised their options on a “net exercise” basis, pursuant to which they surrendered to us, and we purchased from them, at the current market price, shares equal in value to the associated exercise price and tax withholding obligations. During the three months ended March 31, 2023, we purchased 0.3 million shares in connection with option net exercises and paid $1.1 million to satisfy associated tax withholding obligations.

Restricted Stock Awards (“RSAs”)

During the three months ended March 31, 2024 and 2023, we granted employees 0.4 million and 0.3 million RSAs with a weighted-average grant date fair value of $23.14 and $22.39 per share, respectively. RSAs include voting and dividend rights and are therefore “participating” shares for the purpose of calculating basic and diluted net income per share. See“Note 7” below.

Employee Stock Purchase Plan (“ESPP”)

Our ESPP allows employees to set aside, by means of payroll deductions, up toten percent of their annual compensation for the purchase of our common stock. Shares are issued to participating employees from the 2012 Plan on March 1st, June 1st, September 1st and December 1st (or, if those dates fall on holidays or weekends, on the first business day thereafter) at the then-current fair market value of our stock, as determined at the close of trading on those days.

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

During the three months ended March 31, 2024 and 2023, we issued less than 0.1 million and 0.1 million shares of our common stock in connection with our ESPP, respectively. As of March 31, 2024 and December 31, 2023, we recorded $1.4 million and $3.2 million, respectively, of stock-based compensation related to RSAs granted in connection with our ESPP in “Accrued and other liabilities” on our unaudited condensed consolidated balance sheet.

Stock-based Compensation

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

We value restricted stock at the closing market price of our common stock on the date of grant.

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

7. Net Income Per Share

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

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

As of March 31, 2024, we had 26.1 million stock options,0.1 million RSUs and 1.0 million RSAs outstanding. As of December 31, 2023, we had 23.4 million stock options,0.1 million RSUs and 0.7 million RSAs outstanding.

We excluded from the computation of diluted net income per share, on a weighted-average basis,11.5 million stock options outstanding during the three months ended March 31, 2024 and 10.4 million stock options and unvested RSUs outstanding during the three months ended March 31, 2023, because including them would have reduced dilution.

8. Income Taxes

We recorded income tax expense of $7.2 million for the three months ended March 31, 2024, compared to $2.6 million for the three months ended March 31, 2023. The increase during the three months ended March 31, 2024 was primarily due to increased pretax book income compared to the corresponding period in 2023.

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

During the three months ended March 31, 2024, unrecognized tax benefits increased by $0.7 million.

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

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the right to deduct research and development expenditures for tax purposes in the period the expenses were incurred and instead requires all U.S. and foreign research and development expenditures to be amortized over five and fifteen tax years, respectively. Congress has considered legislation that would defer the amortization requirement to later years, but as of March 31, 2024, the requirement has not been modified.

9. Subsequent Events

Pharmaceutical Manufacturer Services Amendment

Effective April 1, 2024, we amended the pharmaceutical manufacturer services agreement between us and Optime Care, Inc. (“Optime”), dated as of August 4, 2017 (the “Optime Agreement”), to extend its term to March 31, 2027, with automatic renewal for successive three-year terms.

The material terms of the Optime Agreement are described in our Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on August 7, 2017, as qualified by reference to the original agreement, a copy of which was filed as an exhibit to our Quarterly Report on Form 10-Q filed with the SEC on November 2, 2017.

New Office Sublease Agreement

On April 12, 2024, we entered into asix-year sublease (the “Sublease”) with Zuora, Inc. for office space located at 101 Redwood Shores Parkway, Redwood City, California 94065 (the “Building”), effective from July 1, 2024. The leased property will serve as our new headquarters. The portion of the premises subject to the Sublease is approximately 50,632 rentable square feet. Pursuant to the Sublease, we will also have access to additional square feet of common amenities in the Building (“Shared Amenities Space”). The Sublease is expected to commence on or around July 1, 2024 and will end on June 30, 2030. We will be obligated to pay a base rent of an average of $1.4 million annually and a Shared Amenities Space base rent of an average of $0.2 million annually over the term of the lease. Pursuant to the Sublease, under certain circumstances, we also have the right to sublease additional space in the Building. As a result of the agreement, we expect to record a right-of-use asset and corresponding lease liability related to the leased property based on the present value of lease payments in the third quarter of fiscal year 2024.