Strength In Sucampo Heading Into FDA Decision And Analyst Activity

The pharmaceutical company Sucampo Pharmaceuticals (NASDAQ: SCMP) saw some interest from Wall Street yesterday after the equity research firm Cantor Fitzgerald initiated coverage on the stock with a "Buy" rating, causing shares to jump by over 7.9% (or $.50 per share) by the closing bell. This reactionary rally was also based on slightly better-than-average volume.

This brought YTD gains on SCMP to nearly 40%, and continued the highly bullish trend that was started in SCMP in early March after the company released better-than-expected results for the fourth fiscal quarter of year 2012. The press release of the initial earnings release can be found here.

Although top-line growth was expected to be surprisingly good, it seems that the year-over-year figure posted by the company (145%) implied that the company would possibly exceed growth expectations based on the success of AMITIZA (lubiprostone).

AMITIZA, along with RESCULA (unoprostone isopropyl ophthalmic solution, make up Sucampo's FDA approved pipeline, targeting two very different indications. AMITIZA is currently approved for constipation in the US and other major markets, and is close to expanding its indication into the OIC (opioid-induced constipation) space while RESCULA is a prostone that is being developed/commercialized for the treatment of patients with open-angle glaucoma or ocular hypertension.

2012 has been a particularly good year for Sucampo, as they had received approval for AMITIZA in Japan and the United Kingdom, which paves the way for revenue from three continents (Europe, Asia and North America) this year. They also brought two more prostones into their pipeline, which brings the company's total number of programs to 5. They also did well with their milestone payments.

Perhaps most importantly, they received FDA approval for the RESCULA sNDA with a PDUFA goal date in December 2012. This made RESCULA the first BK (ion) channel activator available for the lowering of intraocular pressure in patients with open-angle glaucoma or ocular hypertension, which gives it a way to compete quite nicely with existing therapeutics.

What makes Sucampo distinct from the many other pharmaceutical companies that are targeting these increasingly popular indications is that Sucampo is the only one that is introducing prostone drugs into these markets. I believe that the favorable safety profile of these compounds should work to Sucampo's benefit in the coming years, as the FDA may be more lax about approving compounds that are naturally occurring.

In addition, Sucampo's extensive patent protection on its discovered prostone molecules should keep the drug relatively safe from generics even after the FDA's standard term of exclusivity ends.

Going forward, investors will want to keep a close eye on prescription sales and sales revenue generated from the ongoing marketing of AMITIZA and RESCULA in the US and abroad. We are also going to see an FDA decision on the sNDA that was submitted for AMITIZA for the opioid-induced constipation indication in "late April."

I say "late April" instead of an actual PDUFA date because the company, for some reason, is refusing to disclose the exact PDUFA date of the AMITZA sNDA. The company's statements imply that they remain quite confident in the application's chances to boost AMITZA sales revenue down the line, although the notion that the company wants to keep a date a secret may raise a few eyebrows.

SCMP may be a good play for the run-up potential going into late April, although I think that the bulk of the most recent good news has been priced in by the short-term speculation. A larger trend worth noting is Sucampo's swing into profitability in the last quarter, which drastically decreases the necessity for the company to raise additional cash (either by debt or equity financings).

The company will have to continue sales growth on its two commercialized products to justify its valuation, although the notion that the company is making very consistent progress towards this is encouraging and justifies the recent "buy" rating from Cantor.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.