What happened
Corcept Therapeutics (CORT 0.32%) shares, which closed at $17.10 a share on Thursday, rose 11.6% on Friday. The stock opened at $17.52, then climbed to as high as $19.14 in early afternoon trading. The stock's 52-week high is $31.18 and its low is $15.83. Corcept, which focuses on developing drugs to address medical issues related to cortisol activity, is down more than 24% for the year.
So what
The move was a bounce back from the stock's lows on Wednesday, when it dropped nearly 17% after Corcept divulged that the U.S. Attorney's Office for the District of New Jersey was investigating whether the company had broken any laws regarding the sales and promotion of its drug, Korlym, which is used to treat hyperglycemia (high blood sugar) in adults with Cushing syndrome who also have type 2 diabetes mellitus or glucose intolerance.
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There was no news to ascribe to the bounce back. Rather, some investors may desire to take advantage of Corcept's suddenly lower stock price.
It's important to note that Korlym is the company's only marketed drug, so an investigation regarding its sales is significant to Corcept. The company has another drug, relacorilant, which is in phase 3 trials to treat endogenous Cushing syndrome and hypercortisolism connected with cortisol-secreting adrenal adenoma or hyperplasia. The company also said, in its third-quarter report, that it expects to start phase 3 trials next year using a compound of relacorilant and nab-paclitaxel to treat ovarian cancer.
In the third quarter, the company reported revenue of $96.1 million, up 11% year over year, and earnings per share of $0.24, compared to $0.17 in the third quarter of 2020. Despite those improved numbers, investors were concerned when the company adjusted downward its full-year guidance in the report, saying that it now expected revenue of $365 million to $375 million, instead of the range of $355 to $385 previously reported.
Now what
There's plenty to be wary about regarding the biotech stock. Just the prospect of an investigation into the company's sales practices could drag the stock down. On the positive side, it is that rare early-stage biotech that is already profitable and has the potential to become more so with several therapies in late-stage trials. The news regarding the investigation may provide a decent entry point for investors who are not as concerned about the risk and are willing to overlook it because of the company's long-term prospects.
