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Why Corcept Therapeutics Incorporated Stock Surged Higher Today

What happened

Shares of the rare-disease specialist Corcept Therapeutics Incorporated (NASDAQ: CORT) rose by 8.78% on heavy volume today, due to a stronger-than-expected second-quarter earnings report. Specifically, the drugmaker easily beat consensus for both revenue and earnings per share for the three-month period, thanks to the rapidly growing sales of its Cushing's syndrome drug Korlym.

Image source: Getty Images.

So what

Based on Korlym's blistering commercial uptake, Corcept also decided to raise its 2017 revenue guidance for a second time this year today, from a range between $125 million and $135 million to between $145 million and $155 million for the full year. Put simply, the company's top line is now on track to grow by a healthy 79% to 91% this year, making it one of the fastest-growing mid-cap biotechs.

Now what

While Korlym's stellar performance so far is certainly reason to be optimistic, Corcept's stock is anything but cheap. The drugmaker's shares, after all, are presently trading at a sky-high forward price-to-earnings ratio of 25.7. That's not a terribly unreasonable valuation for a revenue-generating orphan drug specialist that might be an attractive buyout target. But the company will arguably need additional sources of income to justify further upside.

Unfortunately, Corcept's clinical pipeline is currently composed of mostly early to mid-stage candidates, meaning that the company is probably several years away from bringing a second drug to market. Moreover, the biotech exited the second quarter with only $67.7 million in cash and marketable securities, which isn't enough to pursue either a bolt-on acquisition or external pipeline opportunities to bring in fresh sources of revenue.

So, with the company's shares already trading at around 5 times Korlym's peak sales projection and no additional growth drivers in sight, it might be best to take a pass on this promising biotech after this latest surge higher.

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George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.