What happened

Shares of Corcept Therapeutics Inc. (NASDAQ:CORT) fell over 17% on Friday after the company announced second-quarter and first-half 2018 earnings results. The business reported significant growth in both revenue and net income thanks to strong market traction for its drug Korlym. Despite the growth, management decided to walk back its original full-year 2018 revenue guidance to a new range of $250 million to $270 million, down from the previous range of $275 million to $300 million. 

Management also announced a $100 million share repurchase program, but it wasn't enough for Mr. Market to overlook the reduced sales guidance. As of 11:43 a.m. EDT, the stock had settled to a 10.4% loss.

A scientist in the lab with a distressed look on his face.

Image source: Getty Images.

So what

Is the stock move an overreaction? Well, maybe yes and maybe no.

In the first half of 2018, Corcept Therapeutics reported $120 million in net product sales and $35.6 million in net income, marking increases of 90% and 109%, respectively, from the year-ago period. That's all driven from the company's first and only approved drug, Korlym, which treats hyperglycemia associated with the endocrine disorder known as Cushing syndrome.

The problem is that Wall Street is increasingly concerned that generic competition will encroach on Korlym's turf (and perhaps soon), which makes it easy for analysts to interpret the reduced full-year 2018 revenue guidance as a sign that the sky is falling. While generics could sting (since Korlym is the company's only approved product), shareholders who peek over the horizon could see reasons for optimism.

The strength of Korlym so far (and the profitability of the business) is allowing the company to continue developing its pipeline. One drug, relacorilant, has reported impressive interim results from a phase 2 trial investigating its potential to treat the same condition as the company's lone marketed drug. Early results indicate relacorilant could avoid the two most serious adverse events experienced by patients taking Korlym. Maintaining that success through the duration of clinical development could lead to greatly improved outcomes for both patients and the company.

Now what

Corcept Therapeutics stock is down 30% since the beginning of 2018, which seems a bit harsh given the financial performance to date, even with the risk of generic competition hanging overhead. Korlym has single-handedly driven the business to profitability and allowed the company to self-fund pipeline development. That includes relacorilant, which could one day replace Korlym, avoid the risk of generic competition, and improve the lives of patients. If the drug candidate's development continues to impress, then investors may want to give this stock a closer look.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.