Pharmaceutical IPO: Sucampo Inc. Files S-1 (SCMP)

Abbi Adest submits: Sucampo Pharmaceuticals (Proposed ticker: SCMP) filed an S-1 on Wednesday. This company, with 35 employees, focuses on proprietary drugs based on prostones, most notably the drug Amitiza, a constipation drug for adults. Key details from the SEC filing:

Company Description

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. The therapeutic potential of prostones was first identified by one of our founders, Dr. Ryuji Ueno. We believe that most prostones function as activators of cellular ion channels and, as a result, may be effective at promoting fluid secretion and enhancing cell protection, which may give them wide-ranging therapeutic potential, particularly for age-related diseases. We are focused on developing prostones with novel mechanisms of action for the treatment of gastrointestinal, respiratory, vascular and central nervous system diseases and disorders for which there are unmet or underserved medical needs and significant commercial potential.

In January 2006, we received marketing approval from the U.S. Food and Drug Administration, or FDA, for our first product AMITIZA(lubiprostone) for the treatment of chronic idiopathic constipation in adults. AMITIZA is the only prescription product for the treatment of chronic idiopathic constipation that has been approved by the FDA for use by adults of all ages, including those over 65 years of age, and that has demonstrated effectiveness for use beyond 12 weeks. Studies published in The American Journal of Gastroenterology estimate that approximately 42 million people in the United States suffer from constipation. Based on these studies, we estimate that approximately 12 million people can be characterized as suffering from chronic idiopathic constipation.

Key Financial Data

●Revenue: 2004 revenues were $2.65 million while 2005 saw an increase to $47 million. Q1 revenues increased from $14 million in 2005 to $25 million in 2006. These increases were attributable to the receipt of one-time milestone payments totaling $30.0 million in 2005 and $20.0 million in the quarter ended March 31, 2006.

● Net Income: The company has only recently initiated commercial sales of their first product, Amitiza, for the treatment of chronic idiopathic constipation in adults, and they have not yet recorded
any product revenues. The company has incurred significant operating losses since formation and, as of March 31, 2006, it had an accumulated combined deficit of $27.0 million. Their combined net losses were $22.0 million in 2003 and $19.7 million in 2004.

Key Competitors: Novartis Pharmaceuticals (NVS), Braintree Laboratories, Inc., Solvay S.A, Alizyme plc, Adolor Corporation (ADLR), Progenics Pharmaceuticals, Inc (PGNX)

Notable Issues to Watch For

US Government Price Caps : Recent federal legislation will increase the pressure to reduce prices of prescription drugs paid for by Medicare, which could limit the company's ability to generate revenues. In 2003, the United States government enacted legislation providing a partial prescription drug benefit for Medicare recipients, which became effective at the beginning of 2006. Government payment for some of the costs of prescription drugs may increase demand for any products for which we receive marketing approval. However, to obtain payments under this program, the company will be required to sell products to Medicare recipients through drug procurement organizations operating pursuant to this legislation. These organizations will negotiate prices for our products, which are likely to be lower than those that the company might otherwise obtain. Future legislation could limit payments for pharmaceuticals such as AMITIZA and the other product candidates that we are developing.

Underwriters: Banc of America Securities LLC, Deutsche Bank Securities, Leerink Swann & Company