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Sucampo Pharmaceuticals Inc. Reports Operating Results (10-Q)

November 03, 2010 | About:
10qk

10qk

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Sucampo Pharmaceuticals Inc. (SCMP) filed Quarterly Report for the period ended 2010-09-30.

Sucampo Pharmaceuticals Inc. has a market cap of $143.9 million; its shares were traded at around $3.44 with and P/S ratio of 2.2. SCMP is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Research and development revenue was $9.1 million for the three months ended September 30, 2010 compared to $7.0 million for the three months ended September 30, 2009, an increase of $2.0 million or 28.8%. The increase was primarily due to $7.7 million in revenue recognized under the agreement with Abbott for the three months ended September 30, 2010, which included revenue recognized from the $5.0 million milestone earned upon the filing of the Japanese marketing application, as compared to $3.5 million recognized for this program for the three months ended September 30, 2009. We recognize the revenue from the payments from Abbott using a percentage-of-completion model over the estimated term of the CIC development program.

Total research and development expenses for the three months ended September 30, 2010 were $6.3 million compared to $7.4 million for the three months ended September 30, 2009, a decrease of $1.1 million or 15.2%. The decrease was primarily due to the July 2009 completion of the initial two phase 3 pivotal clinical trials of Amitiza for the treatment of OBD and the July 2009 completion of the phase 2 clinical trial of cobiprostone for the prevention of NSAID-induced ulcers, partially offset by a slight increase in overall preclinical and basic development costs related to SPI-017 and pre-clinical compounds. We incurred data purchase costs of approximately $250,000, which were necessary to submit the marketing application in Japan.

General and administrative expenses were $6.1 million for the three months ended September 30, 2010, compared to $4.3 million for the three months ended September 30, 2009, an increase of $1.8 million or 42.2%. The increase in salaries, benefits and related costs was primarily attributable to an increase in the number of key personnel and a change in the incentive compensation plans for 2010. The increase in legal, consulting and other professional expenses relates primarily to costs incurred in connection with ongoing legal matters, including our dispute with Takeda.

Milestone royalties – related parties expense was $1.3 million for the three months ended September 30, 2010. The milestone royalties consist of $1.0 million payable to SAG upon the filing of the Japanese marketing application, and $250,000 payable to SAG, reflecting 5% of the $5.0 million development milestone payment that we earned from Abbott in September 2010. There was no corresponding expense during the three months ended September 30, 2009.

Interest income was $113,000 for the three months ended September 30, 2010, compared to $211,000 for the three months ended September 30, 2009, a decrease of $98,000, or 46.4%. The decrease was primarily due to lower interest rates earned by our investments and a shift in the composition of our portfolio from auction rate securities, or ARS, which bear higher interest rates, to other types of investments. Our remaining investment in ARS was redeemed in June 2010. The increase in other income was primarily attributable to foreign exchange gains and losses.

Research and development revenue was $15.9 million for the nine months ended September 30, 2010 compared to $20.0 million for the nine months ended September 30, 2009, a decrease of $4.1 million or 20.3%. The decrease was primarily due to reduced revenue recognized in respect to the OBD program for Amitiza in the U.S., partially offset by $12.0 million in revenue recognized under the agreement with Abbott. The research and development revenue recognized under the agreement with Takeda decreased to $3.9 million for the nine months ended September 30, 2010 from $12.5 million for the nine months ended September 30, 2009, generally reflecting the July 2009 completion of the two phase 3 efficacy trials funded by Takeda and the change in estimated costs and timeline to complete the OBD program, including an additional phase 3 efficacy trial. Since Takeda funds the first $50.0 million of the development expenses for the OBD program and we and Takeda share equally development costs that exceed that amount, we expect to fund about 50.0% of the upcoming phase 3 trial.

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