Corcept Therapeutics Sued for Alleged FDA Warning Ignorance as Relacorilant NDA Faces Setback

What happened

A securities class action lawsuit has been filed against Corcept Therapeutics, alleging that the company ignored repeated FDA warnings against submitting its New Drug Application for Relacorilant, leading to a 50% stock plunge on revealed evidence gaps. This regulatory issue strikes at the core of Corcept's late-stage diversification strategy, previously highlighted in the DeepValue report as reliant on Relacorilant's approval for Cushing's syndrome to reduce dependence on its profitable but generic-exposed Korlym franchise. The lawsuit suggests that management may have downplayed or omitted critical FDA feedback, casting doubt on the integrity of the NDA submission and the company's transparency with investors. Given the master report's emphasis on binary regulatory risk with an expected FDA decision by end-2025, this development likely indicates a Complete Response Letter or rejection, directly challenging the investment thesis. Consequently, the stock's sharp decline reflects a sudden repricing of regulatory expectations and exposes heightened legal and governance risks.

Implication

The class action lawsuit introduces significant legal overhang and potential damages, which could strain Corcept's cash-generative base and impair future capital allocation. Regulatory setbacks for Relacorilant undermine the diversification catalyst, forcing a re-evaluation of valuation multiples that previously embedded success assumptions, now appearing overly optimistic. With the Cushing's franchise facing generic pressures and reimbursement headwinds, the lack of pipeline relief increases downside risk, potentially accelerating revenue erosion. Management's credibility is now in question, as allegations of ignoring FDA warnings suggest poor governance, which may deter investor trust and complicate future regulatory interactions. Moving forward, investors should prioritize monitoring lawsuit developments, any FDA communications, and management's response, while remaining cautious about further downside from operational and legal uncertainties.

Thesis delta

The prior HOLD/NEUTRAL stance balanced profitable operations with binary regulatory risk on Relacorilant, expecting a clear approval or delay outcome by end-2025. This news shifts the thesis towards a SELL or strong HOLD with heightened skepticism, as the lawsuit and stock plunge indicate not just a delay but potential negligence and evidence gaps, invalidating assumptions about management execution and regulatory transparency. Investors must now account for increased legal liabilities, damaged investor confidence, and a higher probability of pipeline failure, necessitating a reassessment of Corcept's long-term viability beyond its core franchise.