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

August 07, 2009 | About:

Sucampo Pharmaceuticals Inc. (SCMP) filed Quarterly Report for the period ended 2009-06-30.

Sucampo Pharmaceuticals Inc. is an emerging pharmaceutical company focused on the discovery development and commercialization of proprietary drugs based on prostones a class of compounds derived from functional fatty acids that occur naturally in the human body. Sucampo is focused on developing prostones for the treatment of gastrointestinal respiratory vascular and central nervous system diseases and disorders. Sucampo Pharmaceuticals Inc. has a market cap of $322.6 million; its shares were traded at around $7.71 with a P/E ratio of 14.2 and P/S ratio of 2.9.

Highlight of Business Operations:

Under the terms of the agreements, we made an upfront payment of $3.0 million and maybe required to pay up to $5.5 million in additional milestone payments to R-Tech based on the achievement of specified development and commercialization goals. The first milestone payment of $500,000 is payable upon the re-launch of Rescula for the treatment of glaucoma and is considered probable of occurring; therefore, this amount is recorded as part of the initial cost of the acquired assets. We allocated the acquisition cost between an intangible asset of $3.4 million and a non-current prepaid inventory of $81,500 as of June 30, 2009, both of which are reflected in other non-current assets in the accompanying condensed consolidated balance sheet. We are amortizing the $3.4 million over the 10-year life of the license agreement, which we believe approximates the useful life of the underlying rights and data. The annual amortization expense is estimated at approximately $342,000 through April 2019.

Research and development revenue was $7.4 million for the three months ended June 30, 2009 compared to $55.4 million for the three months ended June 30, 2008, a decrease of $48.0 million or 86.7%. This decrease was primarily due to the $50.0 million development milestone received from Takeda in May 2008 upon FDA approval of Amitiza for the treatment of the irritable bowel syndrome with constipation in adult women and due to reduced revenue recognized in respect to the pediatric, renal, hepatic and OBD trials for Amitiza in the U. S. funded by Takeda. The decrease was offset in part by $3.9 million in revenue recognized from the initial upfront payment and development milestone payment received under the agreement with Abbott in Japan. We are recognizing the revenue from the upfront and development milestone payments from Abbott in Japan using a percentage-of-completion model over the term of the CIC development program.

Product royalty revenue represents royalty revenue earned on net sales of Amitiza in the United States. For the three months ended June 30, 2009 and 2008, we recognized $8.9 million and $10.9 million, respectively, of product royalty revenue, a decrease of $2.0 million or 18.2%. The decrease was primarily due to the product royalty revenue of approximately $1.9 million recognized from initial stockings of Amitiza 8 mcg for irritable bowel syndrome with constipation in April 2008.

Milestone royalties related parties expense was $375,000 for the three months ended June 30, 2009, reflecting the 5% royalty payment we owed to SAG as a result of the $7.5 million development milestone payment we received from Abbott for the initiation of the first phase 3 study in Japan. We expensed $2.5 million for the three months ended June 30, 2008, reflecting the 5% royalty payment to SAG as a result of the $50.0 million development milestone payment we received from Takeda.

Research and development revenue was $12.9 million for the six months ended June 30, 2009, compared to $61.5 million for the six months ended June 30, 2008, a decrease of $48.6 million or 79.0%. This decrease was primarily due to the $50.0 million development milestone received from Takeda in May 2008 upon FDA approval of Amitiza for the treatment of the irritable bowel syndrome with constipation in adult women and to reduced revenue recognized in respect to the pediatric, renal, hepatic and OBD trials for Amitiza funded by Takeda, offset in part by $3.9 million in revenue recognized from the initial $10.0 million upfront payment and the $7.5 million development milestone payment received under the agreement with Abbott in Japan.

Milestone royalties related parties expense was $875,000 for the six months ended June 30, 2009, compared to $3.5 million for the six months ending June 30, 2008. The milestone royalties of $875,000 reflect the 5% royalty payment we owed to SAG as a result of the $10.0 million upfront payment and the $7.5 million development milestone payment we received from Abbott in 2009. The milestone royalties of $3.5 million for the six months ended June 30, 2008 consist of $1.0 million paid to SAG upon the filing of the European marketing authorization application, and of $2.5 million paid to SAG, reflecting 5% of the $50.0 million development milestone payment that we received from Takeda in 2008.

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