Sucampo Pharmaceuticals, Inc. Announces Third Quarter 2014 Financial Results

November 6, 2014 |

9 min read

Strong Revenue and Sales Growth for AMITIZA

Raises 2014 Earnings Guidance, Excluding Special Items

CEO Peter Greenleaf to Provide Update on Significant Progress Against Strategic Plan

Sucampo to host conference call today at 8:30 am Eastern

BETHESDA, Md., Nov. 6, 2014 (GLOBE NEWSWIRE) -- Sucampo Pharmaceuticals, Inc. (Sucampo) (Nasdaq:SCMP) today reported consolidated financial results for the third quarter and nine months ended September 30, 2014. Sucampo reported year over year growth of 49% to $31.5 million in total revenue, 24% to $16.8 million in product royalty revenue and 118% to $11.7 million in product sales. Sucampo also reported net income of $1.5 million and fully-diluted earnings per share (EPS) of $0.03 during the third quarter of 2014.

Sucampo raised its full year 2014 earnings guidance to $15.0 million to $20.0 million net income, excluding special items, versus previous guidance of $4.0 million to $6.0 million. During the third quarter of 2014, Sucampo recorded a non-cash impairment to its intangible assets of $5.6 million to reflect a reduction in the expected future cash flows received from the sales of RESCULA for the approved indication, which Sucampo has ceased marketing, and no further orders have been made. Details of the impairment charge are discussed in the Cost of Goods and R&D expenses sections below.

	Three Months Ended September 30,	Nine Months Ended September 30,
(In thousands, except per share data)	2014	2014
Total revenues	$ 31,463	$ 77,693
GAAP Diluted EPS	0.03	0.09
Non-GAAP Diluted EPS that exclude RESCULA intangible non-cash impairment¹	0.14	0.20
GAAP net income²	1,480	3,846
Non-GAAP net income that excludes RESCULA intangible non-cash impairment	6,282	8,648

^1. Sucampo is providing certain 2014 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of Sucampo’s performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.
^2. Net income is attributable to Sucampo Pharmaceuticals, Inc. on a consolidated basis.

“In the third quarter, Sucampo’s strong financial performance continued, and I am pleased that we made significant progress against our strategy,” said Peter Greenleaf, Chief Executive Officer of Sucampo. “Our total revenue grew 49% driven by AMITIZA’s continued growth in the US and Japan. The prospects for additional growth of the product are greater than ever given the agreements we signed this quarter: creating a global partnership with Takeda, expanding the current AMITIZA agreement with Takeda for North America, and settling our generic litigation. This is a time of great opportunity for Sucampo, as we continue to execute on our strategy with a focus on the development of our pipeline and the diversification of our science.”

Third Quarter 2014 Operational Review

AMITIZA

United States (U.S.)

AMITIZA^® (lubiprostone) total prescriptions were 342,020, an increase of 4.2%, compared to the third quarter of 2013. Net sales of AMITIZA, reported by Takeda Pharmaceuticals U.S.A., Inc. (Takeda) for royalty calculation purposes, increased 22% to $88.5 million for the third quarter of 2014, compared to $72.5 million in the same period of 2013. Net sales of AMITIZA, reported by Takeda for royalty calculation purposes, increased 18% to $240.5 million for the first nine months of 2014, compared to $204.1 million in the same period of 2013.
Launched a pilot direct-to-consumer (DTC) advertising campaign with Takeda in select U.S. markets for AMITIZA.
Sucampo, Takeda and R-Tech Ueno, Ltd. (RTU) entered into a settlement and license agreement with Anchen Pharmaceuticals, Inc., Par Pharmaceutical, Inc. and Par Pharmaceutical Companies, Inc. that resolved patent litigation among the parties related to AMITIZA 8 mcg and 24 mcg soft gelatin capsules.
Signed an extension to our existing collaboration and license agreement with Takeda covering the U.S. and Canada for AMITIZA.

Global Markets

In Japan, Sucampo’s revenue from sales of AMITIZA to Abbott Japan Co., Ltd. (Abbott) for the third quarter of 2014 was $8.9 million, an increase of $3.7 million compared to the same period of 2013. Sucampo’s revenue from sales of AMITIZA to Abbott for the first nine months of 2014 was $22.2 million, an increase of $11.5 million compared to the same period of 2013. Sucampo also announced that it had earned a $2.5 million milestone payment from Abbott, pursuant to the existing license, commercialization and supply agreement. The milestone payment was triggered by the first occurrence of annual net sales of lubiprostone for chronic idiopathic constipation (CIC) in Japan exceeding JPY 5.0 billion.
Entered into a global license, development, commercialization and supply agreement for AMITIZA with Takeda which expanded Takeda’s exclusive rights to all global markets except Japan and the People’s Republic of China.
Signed an exclusive global manufacturing and supply agreement with RTU for clinical and commercial supplies of AMITIZA in most global markets.
In the European Union (E.U.), the Mutual Recognition Procedure (MRP) started on October 31^st to obtain approval in additional E.U. countries for AMITIZA for CIC. The MRP is anticipated to be completed in the first half of 2015.
In Canada, Sucampo filed AMITIZA for the CIC and opioid-induced constipation (OIC) indications with Health Canada. A decision is anticipated in the second half of 2015.

Research and Development

In October, four abstracts on lubiprostone were presented at the American College of Gastroenterology 2014 Annual Scientific Meeting.

Corporate

Peter Kiener, D. Phil was appointed Chief Scientific Officer.
Mr. Matthias Alder was appointed Executive Vice President, Business Development & Licensing.
Steven Caffé, M.D. was appointed Senior Vice President, Regulatory Affairs.
Cary Claiborne, Chief Financial Officer (CFO), will leave Sucampo on November 7. A search for a new CFO is ongoing.

Third Quarter 2014 Financial Review

Net income was $1.5 million, or $0.03 per diluted share, for the third quarter of 2014 compared to a net income of $1.5 million, or $0.04 per diluted share, in the same period in 2013. Net income was $3.8 million, or $0.09 per diluted share, for the first nine months of 2014 compared to a net income of $4.7 million, or $0.11 per diluted share, in the same period in 2013.
Total revenues were $31.5 million for the third quarter of 2014 compared to $21.2 million in the same period in 2013, an increase of 49%. Total revenues were $77.7 million for the first nine months of 2014 compared to $65.1 million in the same period in 2013, an increase of 19%. The increase for both periods was primarily due to higher royalty revenue on AMITIZA net sales in the U.S. and the growth of AMITIZA sales in Japan as well as a $2.5 million milestone earned in Japan. The increase for the nine months in 2014 royalty revenues and product sales from the same period in 2013 were offset by the 2013 receipt of the $10.0 million milestone payment from Takeda upon the first commercial sale of AMITIZA for OIC.
Costs of goods sold were $5.0 million for the third quarter of 2014 compared to $6.3 million for the same period of 2013, a decrease of 21%. The decrease was primarily due to a $3.0 million non-cash write-off of RESCULA inventory in the prior year period which did not reoccur, partially offset by higher product purchases expenses as a result of increased volume of AMITIZA sales in Japan. Costs of goods sold were $12.2 million for the first nine months of 2014 compared to $9.5 million for the same period of 2013, an increase of 29%. The increase for the nine months was primarily due to increased volume of AMITIZA sales in Japan partially offset by the $3.0 million non-cash write-off of RESCULA inventory in the prior year which did not reoccur.
Intangible assets impairment was $5.6 million for the third quarter of 2014 compared to nil for the same period of 2013. The non-cash impairment reflects a reduction in the expected future cash flows received from the sales of RESCULA in the FDA approved indication, which is no longer marketed and for which no orders have been placed for additional inventory.
R&D expenses were $5.3 million for the third quarter of 2014 compared to $4.5 million for the same period of 2013, an increase of 18%. R&D expenses were $14.7 million for the first nine months of 2014 compared to $14.5 million for the same period of 2013, an increase of 1%. The increase for both periods was primarily due to increased costs of our lubiprostone pediatric trial.
G&A expenses were $8.1 million for the third quarter of 2014 compared to $5.4 million for the same period of 2013, an increase of 49%. G&A expenses were $23.6 million for the first nine months of 2014 compared to $18.6 million for the same period of 2013, an increase of 27%. The increase for both periods was primarily due to a significant increase in legal fees incurred prosecuting a patent infringement lawsuit filed by us in February 2013. The increase for the nine months was partially offset by a reduction in pharmacovigilance costs that were associated with launching AMITIZA in Japan in 2013.
Selling & Marketing expenses were $3.8 million for the third quarter of 2014 compared to $6.0 million for the same period of 2013, a decrease of 37%. Selling & Marketing expenses were $11.5 million for the first nine months of 2014 compared to $16.0 million for the same period of 2013, a decrease of 28%. The decrease for both periods was primarily due to the replacement of our in-house sales force with a lower-cost contract sales force in 2014 and a $1.5 million non-cash write-off of RESCULA in samples in the prior year that did not reoccur this year. The decrease for the first nine months of 2014 was partially offset by increased commercialization costs in Europe for AMITIZA.

Earnings Excluding Special Items

Net income excluding special items for the third quarter of 2014 was $6.3 million, or $0.14 per diluted share, compared to a net income of $4.0 million, or $0.09 per diluted share, in the third quarter of 2013. Net income excluding special items for the first nine months of 2014 was $8.6 million, or $0.20 per diluted share, compared to a net income of $7.0 million, or $0.16 per diluted share, in the first nine months of 2013.

Non-GAAP (generally accepted accounting principles) EPS for the third quarter and nine months ended September 30, 2014 of $0.14 and $0.20, respectively, exclude RESCULA intangible impairment.

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