Note 1 - Business Organization and Basis of Presentation | 3 Months Ended |
Mar. 31, 2014 |
Disclosure Text Block [Abstract] | ' |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | ' |
1 | Business Organization and Basis of Presentation | | | | | | | | | | | |
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Description of the Business |
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Sucampo Pharmaceuticals, Inc., or the Company, is a global biopharmaceutical company focused on innovative research, discovery, development and commercialization of ion channel activators known as prostones. The Company has pioneered the field of prostones. Prostones are naturally occurring fatty acid metabolites which originally thought to be biologically inactive. Prostones have emerged as a promising compound class with physiological activities that can be targeted for the treatment of unmet or underserved medical needs. |
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We believe that prostones act locally to restore normal function in cells and tissues, and because they are quickly metabolized, their pharmacologic activity can be targeted to specific organs and tissues. Prostones possess a unique mechanism of action as highly potent and selective ion channel activators based on in vitro studies. Ion channels are integral parts of cell membranes that regulate the flow of specific ions into and out of cells. This regulation is key to the functioning of cells, such as metabolic processes and survival. As such, prostones are physiological mediators that may have a role in the restoration of cellular homeostasis and tissue regeneration. |
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The Company’s prostone-based compounds target the ClC-2 (chloride) and big potassium, or BK, ion channels. Because these ion channels play an important role in physiology, targeted dosing of prostones may have broad applicability in many disease states in different organ systems. The Company has developed synthetic analogs of the naturally occurring prostones, which have been optimized to be more potent, selective, and stable, thus enabling their use as drugs. Prostones are very selective for their molecular targets, and the approved prostone-based compounds are well-tolerated and generally safe. |
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The Company is focused on developing prostones to treat gastrointestinal, ophthalmic, neurologic, and oncology-based inflammatory disorders, and is also considering other potential therapeutic applications of the Company’s drug technologies. |
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The Company currently generates revenue mainly from product royalties, development milestone payments, clinical development activities and product sales. The Company expects to continue to incur significant expenses for the next several years as the Company continues its research and development activities, seeks regulatory approvals and additional indications for AMITIZA® (lubiprostone), RESCULA® (unoprostone isopropyl) and other compounds, and commercializes the Company’s approved products on a global basis. |
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To date, two prostone compounds – lubiprostone and unoprostone isopropyl - have received marketing approval under the brand names, AMITIZA and RESCULA, globally. |
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In the United States, AMITIZA is marketed for three gastrointestinal indications under the October 2004 collaboration and license agreement with Takeda, or the Takeda Agreement. These indications are CIC in adults, irritable bowel syndrome with constipation, or IBS-C, in adult women and opioid-induced constipation, or OIC, in adults. Takeda also holds marketing rights to AMITIZA in Canada and steps are being taken to file for regulatory approval in Canada. The Company is primarily responsible for clinical development activities under the Takeda Agreement, while Takeda is primarily responsible for the commercialization of AMITIZA in the United States and Canada. The Company and Takeda initiated commercial sales of AMITIZA in the United States for the treatment of CIC, in April 2006, for the treatment of IBS-C in May 2008 and for the treat of OIC in May 2013. |
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In Japan, AMITIZA is marketed under a license, commercialization and supply agreement, or the Abbott Agreement, with Abbott Japan Co. Ltd., or Abbott, for the gastrointestinal indication of chronic constipation, or CC, excluding constipation caused by organic diseases. In early December 2013, the two-week limitation on prescriptions, generally applied to all new approvals of products for the first year after reimbursement price approval by the Japanese government was removed. AMITIZA is Japan’s only prescription medicine for CC. |
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In Switzerland, the Company is commercializing AMITIZA for CIC. The Company announced in February 2014 that the Bundesamt fur Gesundheit revised several reimbursement limitations with which AMITIZA was first approved for reimbursement and inclusion in the Specialitätenliste to allow all Swiss physicians to prescribe AMITIZA to patients who have failed previous treatments with at least two laxatives over a nine month period. The Company filed for the OIC indication in Switzerland and anticipates a decision in the first half of 2014. |
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In the United Kingdom, the Company is commercializing AMITIZA for CIC. In the first quarter of 2014, the submission for the National Institute for Health and Care Excellence endorsement for CIC was completed. The Company filed for the OIC indication in the United Kingdom and in March 2014, the Company received notification from Medicines and Healthcare Products Regulatory Agency that the application was not approved. The Company is exploring all available options for a path forward. The Company is also considering seeking approval for AMITIZA in other European Union countries for CIC following the Mutual Recognition Procedure. Since February 2012, AMITIZA has also been available through a Named Patient Program throughout the European Union, Iceland and Norway. |
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The Company holds license agreements for RESCULA in the United States and Canada and the rest of the world, with the exception of Japan, Korea, Taiwan and the People’s Republic of China. The Company is commercializing RESCULA (unoprostone isopropyl ophthalmic solution) 0.15% for the lowering of intraocular pressure, or IOP, in patients with open-angle glaucoma or ocular hypertension. According to the U.S. approved product labeling, RESCULA may be used as a first-line agent or concomitantly with other topical ophthalmic drug products to lower intraocular pressure. RESCULA is a BK channel activator, which is different from other IOP lowering agents. |
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The Company’s other clinical development programs include the following: |
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Lubiprostone for a Reformulation and Pediatric Functional Constipation |
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The new drug application for the liquid formulation of lubiprostone will not be filed in the second half of 2014 as the U.S. Food and Drug Administration will require additional data to characterize pharmacokinetics of the new formulation and a pharmacodynamics, pharmacokinetics, and tolerability study of the reformulation showed directional improvement, but not statistical significance, in spontaneous bowel movement frequency. Based on the findings, Takeda Pharmaceutical Company Limited, or Takeda, has agreed to fund 100% of the costs for the additional reformulation work for lubiprostone. As part of the pediatric development program, in March 2014, the Company’s first patient enrolled into a follow-on, open-label safety extension study of a global phase 3 clinical trial of lubiprostone in patients 6 to 17 years of age for pediatric functional constipation. This is the first of two open-label extension studies. One of the pediatric trials may use a new age appropriate formulation of lubiprostone. |
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Intravenous and Oral Ion Channel Activators for Lumbar Spinal Stenosis |
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Two ion channel activators, in both the intravenous, or IV, and oral, or PO, forms, are in clinical development for the treatment of lumbar spinal stenosis, or LSS. The Company initiated a phase 1b study to evaluate the safety and pharmacokinetic of an of the orally administered ion channel activator. This compound is in clinical development for LSS. This trial is expected to conclude in the third quarter of 2014. The Company plans to conduct an additional phase 2a study in the second half of 2014 to evaluate the clinical effectiveness of the intravenous ion channel activator with LSS. |
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Cobiprostone as an Oral Spray for Oral Mucositis |
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The Company completed a phase 1b clinical trial for the target indication of prevention and/or treatment of oral mucositis. The results of the phase 1b showed that cobiprostone was well-tolerated and revealed low systemic exposure. |
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Basis of Presentation |
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The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, and the rules and regulations of the Securities and Exchange Commission, or SEC, for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s Consolidated Financial Statements as of and for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on March 12, 2014. The financial information as of March 31, 2014 and for the three months ended March 31, 2014 and March 31, 2013 is unaudited. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of the Company’s management, all adjustments, consisting only of normal recurring adjustments or accruals, considered necessary for a fair statement of the results of these interim periods have been included. The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or for a full fiscal year. |
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The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries: Sucampo AG, or SAG, based in Zug, Switzerland, through which the Company conducts certain of its worldwide and European operations; Sucampo Pharma, Ltd., based in Tokyo and Osaka, Japan, through which the Company conducts its Asian operations; Sucampo Pharma Americas LLC, based in Bethesda, Maryland, through which the Company conducts its North and South America operations; and Sucampo Pharma Europe, Ltd., based in Oxford, United Kingdom. We liquidated Ambrent Investments S.à r.l., based in Luxembourg, at the end of 2013. All significant inter-company balances and transactions have been eliminated. |
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The preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
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Revisions to Previously Issued Financial Statements |
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The Company has revised the March 31, 2013 condensed consolidated statements of operations and comprehensive income (loss) to correct an error in the improper presentation of gross profit. As a result of this revision, gross profit will be removed as a sub-total and cost of goods sold will be disclosed as an operating cost under the heading “Costs and expenses”. Gross profit was presented on the condensed consolidated statements of operations and comprehensive income (loss) beginning in the period ended December 31, 2012 and for periods ended March 31, June 30 and September 30, 2013. |
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In addition, the Company has revised the March 31, 2013 condensed consolidated statements of cash flows to correct an error in the classification of foreign exchange gains and losses in net cash used in operating activities, investing activities and the effect of exchange rates on cash and cash equivalents. The error in classification affects the year ended December 31, 2013 and the periods ended September 30, 2013, June 30, 2013 and March 31, 2013. |
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The revisions had no impact on income from operations or net income and were determined to not be material to any previously issued financial statements. Accordingly, the Company will revise previously reported interim and annual periods in future filings. The following revisions have been made to the previously reported March 31, 2013 balances: |
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| | Presentation as of March 31, 2013 | |
(In thousands) | | As Previously | | Revision | | As Revised | |
Reported | Adjustment |
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Gross profit | | $ | 15,637 | | | $ | (15,637 | ) | | $ | - | |
Total costs and expenses | | | (18,245 | ) | | | (1,282 | ) | | | (19,527 | ) |
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Net cash provided by (used in) operating activities | | | (5,639 | ) | | | 1,063 | | | | (4,576 | ) |
Net cash provided by (used in) investing activities | | | (7,946 | ) | | | (74 | ) | | | (8,020 | ) |
Effect of exchange rates on cash and cash equivalents | | | (64 | ) | | | (989 | ) | | | (1,053 | ) |
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