For the third quarter of 2012, income from operations was a loss of $1.6 million, a decrease of $2.9 million or 63%, compared to a loss from operations of $4.5 million for the third quarter of 2011. For the first nine months of 2012, income from operations was a loss of $4.6 million, a decrease of $16.7 million or 78%, compared to a loss from operations of $21.3 million in the same period last year.Recent Operational Highlights –
- As reported previously, the Japanese Ministry of Health, Labor and Welfare approved lubiprostone (AMITIZA) for the treatment of chronic constipation (CC) (excluding constipation caused by organic diseases), Japan’s first-ever approval of a prescription drug for this indication. Following reimbursement negotiations with the Japanese regulatory authorities, we expect our partner, Abbott Japan, Ltd., to launch the product later this month to primary care and specialist physicians. This event will trigger a $15.0 million milestone payment to Sucampo.
- In July, Sucampo filed a supplemental new drug application (sNDA) with the FDA for a new indication for AMITIZA for the treatment of OIC in patients with chronic, non-cancer pain. This is the first oral product to be filed with the FDA for this indication. In September, the FDA confirmed that the filing has been accepted for priority review, with an action date of late January 2013.
- Also as previously reported in September, the United Kingdom approved AMITIZA for the treatment of chronic idiopathic constipation (CIC).
- For RESCULA, during the quarter, Sucampo awaits a complete response letter from the FDA, currently anticipated to be received by the end of 2012. The FDA’s action will reflect discussions with the FDA concerning updates to the product’s label and clearance of the manufacturer’s, R-Tech Ueno, Ltd, facility. Sucampo plans to launch RESCULA in the U.S. shortly after the approval of the sNDA. We continue to evaluate the opportunities to obtain an appropriate label in the E.U. and other European countries, and the timing of seeking reauthorization in these countries to commercialize unoprostone isopropyl.
- As mentioned during our September Analyst Meeting, Sucampo initiated a phase 1 trial of SPI-8811 (cobiprostone oral spray), whose target indication is prevention of oral mucositis. The phase 1 trial is designed to investigate the tolerability, safety, and pharmacokinetic profile of an oral spray formulation of SPI-8811 after its single oral cavity administration in Japanese healthy adult volunteers. The trial is continuing and we expect it to conclude in the first quarter of 2013. Oral mucositis, an inflammation of the oral mucosa which includes symptoms of severe mouth pain, sores, infection, and dehydration, is a common toxicity of cancer treatments and is an area of unmet medical need.
- Additionally, Sucampo continued to plan for the initiation of a phase 2 study in the first quarter of 2013 for SPI-017. The target indication for this compound will be the management of symptoms associated with severe lumbar spinal stenosis. Lumbar spinal stenosis is caused by degenerative change in the lumbar spine, and is a very common disease observed in the growing aging population.
- As was described at our September Analyst Meeting, we have continued to plan for another indication for lubiprostone, or AMITIZA, for pediatric functional constipation. In addition, we are undertaking development of a new liquid formulation of AMITIZA. This liquid formulation is significant because it can potentially allow us to provide AMITIZA to new patient populations who may need it but cannot swallow the current gel cap formulation. In support of a pediatric indication, in the first quarter of 2013 we will be initiating a phase 3 pediatric functional constipation trial in the US, Canada, and Europe. Takeda will fund a significant amount of the development costs for the pediatric indication, and 100% of the development costs for the new, liquid formulation.
- In September, AMITIZA was approved by the United Kingdom’s Medicines and Healthcare products Regulatory Agency for the treatment of CIC.
- In June, AMITIZA received regulatory approval in Japan for the treatment of CC (excluding constipation caused by organic disease).
- In July, we filed an sNDA with the FDA for the treatment of OIC in patients with chronic, non-cancer pain, which has been accepted for priority review.
- In July, we received the binding decision from the International Court of Arbitration, International Chamber of Commerce (ICC), which has concluded our dispute with Takeda.
- In Japan, we expect our partner, Abbott Japan, Ltd., to conduct a comprehensive launch of the product later this month to primary care and specialist physicians.
- In Switzerland, we have concluded pricing negotiations with the authorities for an appropriate reimbursement price for the treatment of CIC and plan to actively market AMITIZA there beginning in early 2013.
- In the UK, we intend to market AMITIZA in the first quarter of 2013.
- In the U.K. and Switzerland, we expect to file with regulatory agencies for approval of the OIC indication.
- In the U.S., we expect to obtain further improvements in the label during the fourth quarter of 2012 to fully reflect current scientific understanding in advance of the RESCULA launch shortly thereafter.
Operating ExpensesR&D expenses were $5.6 million for the third quarter of 2012, compared to $8.7 million for the third quarter of 2011. For the first nine months of 2012, R&D expenses were $14.2 million, compared to $25.8 million for the same period of 2011. For both periods, the decrease was primarily due to higher expenses in 2011 associated with the phase 3 trial of lubiprostone for OIC patients. G&A expenses were $7.3 million for the third quarter of 2012, compared to $7.9 million for the third quarter of 2011. G&A expenses were $22.6 million for the first nine months of 2012, compared to $29.3 million for the prior year period. For both periods, the decrease in G&A expense was primarily due to lower legal, consulting and other professional expenses as a result of the conclusion of certain legal matters, partially offset by increases in corporate marketing and branding and staff organizations to support business growth. Selling and marketing expenses were $4.3 million for third quarter of 2012, compared to $2.2 million for the third quarter of 2011. Selling and marketing expenses were $14.5 million for the first nine months of 2012 compared to $6.7 million for the prior year period. The increase in selling and marketing expenses relates primarily to some non-recurring pre-commercialization planning activities for AMITIZA and RESCULA. Income from Operations For the third quarter of 2012, income from operations was a loss of $1.6 million, a decrease of $2.9 million or 63%, compared to a loss from operations of $4.5 million for the third quarter of 2011. For the first nine months of 2012, income from operations was a loss of $4.6 million, a decrease of $16.7 million or 78%, compared to a loss from operations of $21.3 million in the same period last year. Non-Operating Income (Expense) Non-operating expenses were $0.5 million for the third quarter of 2012, compared to income of $0.6 million for the same period in 2011. The third quarter of 2012 includes a foreign exchange gain of $8,000 compared to a gain of $1.2 million in the same period in 2011. Non-operating expenses were $0.9 million for the nine months ended September 30, 2012, compared to $3.7 million for the same period in 2011. Non-operating expenses for the nine months ended September 30, 2012, included a foreign exchange gain of $0.7 million, compared to foreign exchange loss of $2.0 million for the same period 2011.
Net LossNet loss for the third quarter of 2012 was $5.9 million, compared to net loss of $4.1 million for the same period in 2011. Net loss for the first nine months of 2011 was $8.7 million, compared to a net loss of $20.0 million for the same period in 2011. Comprehensive Loss Comprehensive loss for the third quarter of 2012 was $6.1 million, compared to comprehensive loss of $6.1 million for the same period in 2011. Comprehensive loss for the first nine months of 2012 was $10.4 million, compared to comprehensive loss of $18.7 million for the same period in 2011. Cash, Cash Equivalents, Restricted Cash and Marketable Securities At September 30, 2012, cash, cash equivalents, restricted cash and investments were $82.1 million, compared to $93.4 million at December 31, 2011. At September 30, 2012, notes payable were $61.2 million, compared to $59.6 million at December 31, 2011. These include current notes payable of $20.3 million at September 30, 2012, compared to $20.4 million at December 31, 2011. Conversion of Class B common stock On August 30, 2012, Sucampo announced that its majority shareholder and only holder of its class B common stock, S&R Technology Holdings, LLC, or S&R, had converted all of its 26,191,050 issued and outstanding shares of Sucampo’s class B common stock into shares of Sucampo’s class A common stock. S&R held all of Sucampo’s class B common stock. Class B common stock holders were entitled to ten votes per share while class A common stock holders were entitled to one vote per share. Sucampo’s articles of incorporation permit the holder of class B common stock to convert the shares of class B common stock into shares of class A common stock at any time and on a one-for-one basis. As a result of the conversion, there is now only a single class of Sucampo’s common stock outstanding, totaling 41,905,364 shares, each of which is entitled to one vote per share.
Board ClassificationIn accordance with Sucampo’s articles of incorporation, upon the date of the conversion of the class B stock to class A stock, Sucampo’s Board of Directors was automatically divided into three classes. All directors within a class have the same three-year term of office. The class terms expire at successive annual meetings so that each year a class of directors is elected. The current terms of director classes expire in 2013 (Class I directors), 2014 (Class II directors), and 2015 (Class III directors). Stock Repurchase Plan In September 2011, the Board of Directors approved a program to repurchase our class A common stock under the previously approved repurchase plan, up to an aggregate of $2.0 million. On November 2, 2012, our Board authorized the increase of the amount of the program up to an aggregate of $5.0 million. During the third quarter of 2012, we repurchased 123,135 shares at a cost of $555,809. Company to Host Conference Call Today In conjunction with this third quarter financial and operating results press release, Sucampo will host a conference call today at 5:00 pm Eastern. To participate on the live call, please dial 866-788-0545 (domestic) or 857-350-1683 (international), and provide the participant passcode 34887168, five to ten minutes ahead of the start of the call. A replay of the call will be available within a few hours after the call ends. Investors may listen to the replay by dialing 888-286-8010 (domestic) or 617-801-6888 (international), with the passcode 21448920. Investors interested in accessing the live audio webcast of the teleconference may do so at http://investor.sucampo.com and should log on before the teleconference begins in order to download any software required. The archive of the teleconference will remain available for 30 days. About unoprostone isopropyl (RESCULA ® ) Sucampo holds development and commercialization rights to unoprostone isopropyl throughout the world except in Japan, Korea, Taiwan and the People’s Republic of China. Unoprostone isopropyl (trade named RESCULA) first received marketing authorization in 1994 in Japan and was subsequently approved in over 40 countries, including approval in 2000 by the FDA.
About lubiprostone (AMITIZA ® )AMITIZA (lubiprostone) is a prostone, a locally acting chloride channel activator, indicated for the treatment of CIC (24 mcg twice daily) in adults and for IBS-C (8 mcg twice daily) in women 18 years of age and older in the United States. In Japan, lubiprostone (24 mcg twice daily) is indicated for the treatment of chronic constipation (excluding constipation caused by organic diseases). In Switzerland, lubiprostone 24 mcg twice daily is indicated for the treatment of chronic idiopathic constipation. In the U.K., lubiprostone 24 mcg twice daily is indicated for the treatment of chronic idiopathic constipation and associated symptoms in adults. About Sucampo Pharmaceuticals, Inc. Sucampo Pharmaceuticals, Inc. is a global pharmaceutical company focused on innovative research, discovery, development and commercialization of proprietary drugs based on prostones. The therapeutic potential of prostones was first discovered by Ryuji Ueno, M.D., Ph.D., Ph.D., Sucampo’s Chairman, Chief Executive Officer, and co-founder. Prostones, naturally occurring fatty acid metabolites that have emerged as promising compounds with unique physiological activities, can be targeted for the treatment of unmet or underserved medical needs. For more information, please visit www.sucampo.com. AMITIZA is a registered trademark of Sucampo AG. RESCULA is a registered trademark of R-Tech Ueno, Ltd, and has been licensed to Sucampo. Sucampo Forward-Looking Statement This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include statements regarding product development, product launch or regulatory approval, product potential, future financial and operating results, and other statements that are not historical facts. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the impact of pharmaceutical industry regulation and health care legislation; competitive products entering the markets in which Sucampo’s products are marketed; Sucampo's ability to accurately predict future market conditions; dependence on the effectiveness of Sucampo's patents and other protections for innovative products; the risk of new and changing regulation and health policies in the U.S. and internationally; and the exposure to litigation and/or regulatory actions. No forward-looking statement can be guaranteed and actual results may differ materially from those projected. Sucampo undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this presentation should be evaluated together with the many uncertainties that affect Sucampo's business, particularly those mentioned in the risk factors and cautionary statements in Sucampo's Form 10-K for the year ended December 31, 2011, which Sucampo incorporates by reference.
|Sucampo Pharmaceuticals, Inc.|
|Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)|
|(in thousands, except per share data)|
|Three Months Ended September 30,||Nine Months Ended September 30,|
|Research and development revenue||$||737||$||2,885||$||6,418||$||6,591|
|Product royalty revenue||13,890||10,563||36,521||30,724|
|Contract and collaboration revenue||139||155||433||463|
|Research and development||5,615||8,725||14,202||25,838|
|General and administrative||7,256||7,926||22,598||29,317|
|Selling and marketing||4,278||2,243||14,474||6,689|
|Total operating expenses||17,149||18,894||51,274||61,844|
|Loss from operations||(1,653||)||(4,522||)||(4,649||)||(21,298||)|
|Non-operating income (expense):|
|Other income (expense), net||8||1,224||727||(2,033||)|
|Total non-operating income (expense), net||(520||)||640||(935||)||(3,717||)|
|Loss before income taxes||(2,173||)||(3,882||)||(5,584||)||(25,015||)|
|Income tax provision||(3,776||)||(196||)||(3,112||)||5,009|
|Net loss per share:|
|Basic net loss per share||$||(0.14||)||$||(0.10||)||$||(0.21||)||$||(0.48||)|
|Diluted net loss per share||$||(0.14||)||$||(0.10||)||$||(0.21||)||$||(0.48||)|
|Weighted average common shares outstanding - basic||41,678||41,877||41,697||41,864|
|Weighted average common shares outstanding - diluted||41,678||41,877||41,697||41,864|
|Other comprehensive income (loss):|
|Unrealized gain on investments, net of tax effect||28||100||23||108|
|Foreign currency translation||(175||)||(2,121||)||(1,767||)||1,161|
|Comprehensive income (loss)||$||(6,096||)||$||(6,099||)||$||(10,440||)||$||(18,737||)|
|Sucampo Pharmaceuticals, Inc.|
|Condensed Consolidated Balance Sheets (Unaudited)|
|(in thousands, except share data)|
|September 30,||December 31,|
|Cash and cash equivalents||$||57,246||$||50,662|
|Product royalties receivable||13,346||10,795|
|Unbilled accounts receivable||571||2,036|
|Accounts receivable, net||1,235||4,616|
|Prepaid and income taxes receivable||3,316||2,845|
|Deferred tax assets, current||33||163|
|Deferred charge, current||673||3,057|
|Restricted cash, current||15,113||15,113|
|Prepaid expenses and other current assets||2,611||1,177|
|Total current assets||100,373||114,916|
|Property and equipment, net||1,563||1,669|
|Intangibles assets, net||7,660||8,364|
|Deferred tax assets, non-current||1,728||2,089|
|Deferred charge, non-current||5,381||26,751|
|Restricted cash, non-current||3,548||2,129|
|LIABILITIES AND STOCKHOLDERS' EQUITY:|
|Deferred revenue, current||3,841||3,888|
|Deferred tax liability, current||51||2,167|
|Notes payable, current||20,300||20,400|
|Total current liabilities||36,447||47,081|
|Notes payable, non-current||40,883||39,227|
|Deferred revenue, non-current||7,101||7,045|
|Deferred tax liability, non-current||5,125||23,019|
|Preferred stock, $0.01 par value; 5,000,000 shares authorized at September 30, 2012 and December 31, 2011; no shares issued and outstanding at September 30, 2012 and December 31, 2011||-||-|
|Class A common stock, $0.01 par value; 270,000,000 shares authorized at September 30, 2012 and December 31, 2011; 41,901,785 and 15,690,780 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively||419||157|
|Class B common stock, $0.01 par value; 0 and 75,000,000 shares authorized at September 30, 2012 and December 31, 2011; 0 and 26,191,050 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively||-||262|
|Additional paid-in capital||61,723||59,957|
|Accumulated other comprehensive income||16,110||17,854|
|Treasury stock, at cost; 310,122 and 186,987 shares at September 30, 2012 and December 31, 2011,||(1,256||)||(700||)|
|Total liabilities and stockholders' equity||$||121,131||$||157,569|
|Sucampo Pharmaceuticals, Inc.|
|Key Segment Information (unaudited)|
|Three Months Ended September 30, 2012|
|Research and development revenue||$||665||$||72||$||-||$||737|
|Product royalty revenue||13,890||-||-||13,890|
|Contract and collaboration revenue||141||(15||)||13||139|
|Research and development expenses||2,239||2,543||833||5,615|
|Depreciation and amortization||122||242||10||374|
|Other operating expenses||9,677||1,161||322||11,160|
|Income (loss) from operations||3,388||(3,889||)||(1,152||)||(1,653||)|
|Other non-operating income (expense), net||34||165||(191||)||8|
|Income (loss) before income taxes||$||3,487||$||(4,277||)||$||(1,383||)||$||(2,173||)|
|Three Months Ended September 30, 2011|
|Research and development revenue||$||2,658||$||-||$||227||$||2,885|
|Product royalty revenue||10,563||-||-||10,563|
|Contract and collaboration revenue||141||-||14||155|
|Research and development expenses||6,552||965||1,208||8,725|
|Depreciation and amortization||215||167||(6||)||376|
|Other operating expenses||9,014||403||376||9,793|
|Loss from operations||(1,650||)||(1,535||)||(1,337||)||(4,522||)|
|Other non-operating income (expense), net||(10||)||1,463||(229||)||1,224|
|Loss before income taxes||$||(1,628||)||$||(646||)||$||(1,608||)||$||(3,882||)|
|Nine Months Ended September 30, 2012|
|Research and development revenue||$||5,878||$||74||$||466||$||6,418|
|Product royalty revenue||36,521||-||-||36,521|
|Contract and collaboration revenue||424||(30||)||39||433|
|Research and development expenses||6,250||5,405||2,547||14,202|
|Depreciation and amortization||366||709||30||1,105|
|Other operating expenses||32,475||2,576||916||35,967|
|Income (loss) from operations||6,985||(8,646||)||(2,988||)||(4,649||)|
|Other non-operating income (expense), net||67||82||578||727|
|Income (loss) before income taxes||$||7,157||$||(10,208||)||$||(2,533||)||$||(5,584||)|
|Nine Months Ended September 30, 2011|
|Research and development revenue||$||5,555||$||-||$||1,036||$||6,591|
|Product royalty revenue||30,724||-||-||30,724|
|Contract and collaboration revenue||424||-||39||463|
|Research and development expenses||19,465||2,352||4,021||25,838|
|Depreciation and amortization||668||325||33||1,026|
|Other operating expenses||33,232||807||941||34,980|
|Loss from operations||(13,894||)||(3,484||)||(3,920||)||(21,298||)|
|Other non-operating income (expense), net||(21||)||(1,779||)||(233||)||(2,033||)|
|Loss before income taxes||$||(13,760||)||$||(6,979||)||$||(4,276||)||$||(25,015||)|