Sucampo's CEO Discusses Q1 2013 Results - Earnings Call Transcript

Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP)

Q1 2013 Results Earnings Call

May 7, 2013 5:00 PM ET

Executives

Silvia Taylor - SVP, IR, Public Relations and Corporate Communications

Dr. Ryuji Ueno - Chairman and CEO and Chief Scientific Officer

Stan Miele - SVP, Sales and Marketing and President, Sucampo Pharma Americas LLC

Taryn Joswick - Vice President, Clinical Development

Cary Claiborne - Chief Financial Officer

Greg Deener - Vice President, Marketing, Strategy and Implementation

Analysts

Jason Kolbert - Maxim Group

Ed Arce - MLV & Co.

Yemi Ogunkoya - Cantor Fitzgerald

Christian Glennie - Edison Investment Research

Dan Trang - Stonegate Securities

Operator

Good day, ladies and gentlemen. And welcome to the First Quarter 2013 Sucampo Pharmaceuticals, Inc. Earnings Conference Call. My name is Chantelle, and I will be your facilitator for today’s call. At this all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to your host for today, Ms. Silvia Taylor, Senior Vice President of Investor Relations, Public Relations and Corporate Communications. Please proceed, ma’am.

Silvia Taylor

Thank you, Operator, and good afternoon, everyone. Thank you for joining us today. The earnings release and its attachments announcing Sucampo’s first quarter 2013 financial and operational highlights was distributed this afternoon. For those of you who have not yet seen it, you will find it posted in the For Investors section of our website at www.sucampo.com shortly. We also plan to file our 10-Q this week, and once filed a link to that document will also be posted on our website.

Now please turn to slide two of our presentation deck. On slide three, the agenda today is as follows. Dr. Ryuji Ueno, Chair of the Board, Chief Executive Officer and Chief Scientific Officer, will provide an overview of the quarter.

Stan Miele, Senior Vice President of Sales and Marketing and President of Sucampo Pharma Americas LLC, will review developments in the U.S. for AMITIZA and RESCULA, as well as AMITIZA developments Japan and Europe.

Taryn Joswick, Vice President of Clinical Development will review our pipeline activities followed by Cary Claiborne, Sucampo’s Chief Financial Officer, who will review the financials.

Finally, Cary will provide closing comments just ahead of the Q&A portion of the call. Additional members of Sucampo’s team are present and available to answer your questions then.

Before we begin, on slide four please note that various remarks management makes on this conference call and the information contained in today’s earnings release are as of May 7, 2013. The company assumes no obligation to update forward-looking statements contained in this conference call, earnings release or the attachments as a result of new information or future events or development.

This conference call, earnings release and the attachments contain forward-looking information about the company’s future operating and financial performance, business plans and prospects, in-line products and product candidates, and share repurchase plans that involve substantial risks and uncertainties. Please refer to the forward-looking statement in the 10-K found on our website for additional risk factors affecting our forward-looking statements.

Now, I will turn the call over to Dr. Ueno, who has pre-recorded his remarks because he is traveling on business and not able to join us live today.

Dr. Ryuji Ueno

Everyone, thank you for joining our conference call today. I regret that I cannot join you live for today’s call, in fact, as you listen to this, I’m flying over the Pacific Ocean on my way to Japan for business trip. But I'm glad that I still can address you all today.

To begin, please turn to slide six. In the first quarter of 2013 we continue to fulfill our mission of bringing prostone-based medicines to patients around the world. 2013 is carrying the torch of success that first lit in 2012.

We recently announced that the FDA has approved our supplemental new drug application for AMITIZA as the first and only oral medication for the treatment of opioid-induced constipation in patients with chronic, non-cancer pain.

This is the third indication for our AMITIZA and now that the indication has been approved, we will be receiving a $10 million milestone payment from our U.S. partner Takeda following the first sales of the drug in the United States.

AMITIZA prescriptions grew year-over-year in the first quarter, despite the entrance of new competitor in the market. And now we are ready for further growth as the first ever oral treatment for OIC in adult patients with non-cancer pain.

Takeda has reported that year-over-year net sales during the first quarter grew by 7% to $64.9 million compared to the first quarter of 2012. This is very significant as AMITIZA continues to show strong year-over-year growth even in the face of competitive pressure by our new market entrance.

AMITIZA in Japan continued to exceed expectations. As reported to us by Abbott, all launched metrics have been surpassed, and both revenue and patient numbers are tracking above expectation after the first three months of 2013.

In the first quarter, Sucampo had $2.2 million of product sales revenue from Japan, which has doubled our internal forecast. This $2.2 million in Q1 followed $5 million we reported in Q4 sales which included initial product stocking.

In Europe, we are taking the steps necessary for the successful AMITIZA launch in the United Kingdom and the Switzerland, with expansion to additional European markets next year.

In Switzerland, we completed regulatory filings for an OIC indication in February and we’ll actively market already approved CIC indication in the second quarter of 2013.

In United Kingdom where we received approval for AMITIZA for CIC in 2012, we continue to work on securing the nice endorsement. We also completed filing for the OIC indication in March, partly receive approval in the U.K., we plan to seek approval for OIC in other EU countries following the mutual recognition procedure. Additionally, during the first quarter, we began the mutual recognition procedure to seek approval for AMITIZA for CIC in additional European Union markets.

In addition to these activities to support the global AMITIZA business, upon the approval for the OIC indication, we have received increase interest in strategic alliance for AMITIZA.

As a result, we have recently begun discussions with potential partners on licensing of AMITIZA for new indications and new territories outside of the United States, including, Europe and several Asian and emerging markets.

Turning now to RESCULA, our second market product. In the first quarter, we launched the RESCULA, unoprostone isopropyl ophthalmic solution for the lowering of intraocular pressure in patients with open-angle glaucoma or ocular hypertension in the United States market. And we are pleased with the initial acceptance of the drug among physicians, patients and managed care. Early this month from targeted physicians has been positive and they continue to seek ways to add RESCULA through their treatment on the mentarium.

We are beginning to seek initial prescriptions flow through the national IMS audit and we anticipate that examples are utilized and patient have a positive experience, this will result in growing sales.

Launching RESCULA ourselves in the U.S. is an important milestone have accomplished now executing our full launch plan without a presence of our larger pharmaceutical partner.

In addition to the success we achieved with AMITIZA and RESCULA, we also continue to make significant investments in and progress towards advancing our pipeline of prostone-based candidate.

In the first quarter, we initiated our Phase 2a trial of SPI 017 for the intravenous treatment of pain associated with severe lumbar spinal stenosis. We expect this trial to conclude in the fourth quarter of 2013. Lumbar spinal stenosis is caused by degenerative changes in the lumbar spinal and it is a common disease among the aging population.

Regarding the progress of our Phase 1a trial of an oral spray formulation of SPI-8811 or cobiprostone for the prevention and/or treatment of oral mucositis. The trial is completed and we expect the results in the second quarter of 2013. Thereafter, we anticipate initiating the next trial in the program in the fourth quarter of 2013. Oral mucositis is a common toxic reaction of cancer treatments and is an area of the high unmet medical need.

Also of note, in February, we announced that R-Tech Ueno, Sucampo’s development partner signed an agreement for unoprostone isopropyl with the Japan Science and Technology Agency of the Japanese government. This agreement states that the Japanese government must provide the majority of funding up to US$22 million needed for the phase 3 clinical developments cost for unoprostone isopropyl for retinitis pigmentosa, RP.

R-Tech Ueno has enrolled the first patient in this program, which was announced in the fourth quarter of 2013 and Sucampo is codeveloping unoprostone isopropyl with our partner for the U.S. and Europe. Unoprostone isopropyl for RP has orphan drug status in the U.S. And we have filed for orphan drug status in Europe as well. We anticipate filing for FDA and EMA approval of the product for RP at a late stage based on the success of this trial.

Finally, planning continues for our development program of AMITIZA for pediatric functional constipation in the U.S. and Europe. We expect to initiate the program in the third quarter of this year. I’m very pleased with accomplishments we have had in 2013 thus far, along with the pipeline developments I just outlined. The AMITIZA business continues to expand both in new indications and in new geographic markets. And we are confident RESCULA will begin contributing to our topline in the second half of this year.

As I’ve stated previously, our goal is to increase long-term shareholder value. Therefore in 2013, we will be investing only in the activities that will generate future cash flow and enhance our company’s value. 2013 is the year of investment, but at the same time we are aggressively analyzing our operations to ensure we are as efficient as possible. And we are making efforts to streamline our operations and expenses in many areas across the company, including the discontinuation of non-value creating activities.

I look forward to updating you on our progress in this arena in the second quarter. I will now turn the call over to Stan Miele for an update on our commercial development in the United States, Japan and Europe. Stan?

Stan Miele

Thank you. I would like to welcome everyone to the call, if you could please turn to slide eight. As Dr. Ueno mentioned, we recently received FDA approval for our third indication for lubiprostone for the treatment of opioid induced constipation, OIC in patients with chronic noncancer pain. This is a significant milestone for Sucampo and for the millions of patients affected by OIC.

AMITIZA is the first of its kind. It’s the first oral medication approved for OIC in adult noncancer pain patients. As we’ve stated before, OIC is an area of high unmet medical need. This was substantiated by the fact that this indication received priority review status by the FDA.

It is estimated that there are more than 200 million prescriptions for opioid use in the U.S. annually. A substantial number of these prescriptions are for noncancer chronic pain. And scientific literature indicates that approximately 40% to 80% of patients taking opioids chronically for noncancer pain report constipation. This approval is based on results from phase 3, well-controlled studies of 12-weeks duration in patients taking opioids chronically for noncancer pain as well as a long-term, open-label safety study, which provides additional support for use in its population.

There has only been one previously branded product indicated for OIC and it is indicated for palliative care and late stage illness. However, with AMITIZA’s removal, there is now an option for patients to require a product to treat OIC. Based on our research, we know that primary care physicians tend to prescribe the majority of opioid. And we anticipate their reception and acceptance of AMITIZA that it will be positive.

Upon the first sale of this indication, we will receive a $10 million milestone payment from our partner Takeda. We expect to receive it in the second quarter. Planning for the launch of OIC by our U.S. partner Takeda is in full swing, representatives will be in the fields selling this new indication in the week of May 13. There will be coverage at the APS meeting and certainly a large presence surrounding the OIC indication at the DDW meeting in late May.

Additionally, we will be doing an Investor and Media Meeting at DDW on May 20th at 9 a.m. to elaborate on the OIC opportunity and the science behind AMITIZA for OIC. More information on that event will be forthcoming, so please look out for it. Takeda does recognized the importance of increasing both reach and frequency, and they are adding additional physician inclusive of pain specialists and primary care physician who are high prescribers of chronic opioid to their call list.

All efforts will be made to increase the awareness levels of all physicians with a new indication in OIC. Additionally, there will be increased promotional spend as part of the launch effort to ensure a maximal sales effort of this exciting indication.

Next, I’d like to give a brief review of the recent AMITIZA prescription trend. As we reported earlier today, AMITIZA net sales have increased during the quarter by 7% to $64.9 million, compared to $60.7 million in the same period of 2012 as reported by our partner Takeda.

This growth in net sales was primarily due to both volume and price increases. In fact, as reported by IMF, the total prescriptions for this quarter versus the same quarter in 2012 grew by 4%. Importantly, IMS data indicates that both AMITIZA and the new market entrant are pulling from over-the-counter laxatives and stool softeners.

This is further validation that the market is growing and we expect to benefit from the market growth along with our third indication. The continuation of increased prescription combined with our new sNDA approval, leads us to believe we will continue on this course of solid growth given AMITIZA’s excellent safety profile. Since it’s launched over years ago, AMITIZA has been prescribed more than 7 million times. A number, we expect to rise exponentially, once AMITIZA begins to reach the millions of patients in need of relief for OIC.

Now, let's talk about our second approved product, RESCULA. Please turn to slide nine. As we’ve discussed previously in February, we launched RESCULA in pharmacies across the U.S., following the December 2012 sNDA approval from the FDA. As you may know, open angle glaucoma is the most common form of glaucoma and RESCULA has the unique mechanism of action in treating this disease.

Due to the efforts of our commercial team, I'm happy to report that the initial feedback from over 12,000 face-to-face interactions with physicians has been generally positive. The optometry community agrees with our positioning and they are looking for medication that allows them to balance efficacy and safety. Over 70,000 samples have been distributed and advocations have return visits from their 30-day sample. These are beginning to translate into prescription.

As a reminder, the 30-day samples were being shifted to physicians in late February and March, so as these samples work their way through the system, we expect the prescription fill rates to accelerate. This aggressive standpoint has always been part of our strategy, especially over the first several months until we gain better managed care access.

I look forward to continuing to update you on the RESCULA launch and the sales of the AMITIZA indication throughout the year.

Now, for commercial update on Japan, please refer to slide 10. We are very pleased with the sales progress made by our partner in Japan during the first quarter. As Dr. Ueno stated at the top of the call, had it reported to us that all launch metrics have been surpassed in both revenue and patient numbers are tracking above expectation after the first three months of 2013.

Our goal for this year is to continue driving the growth and sales of AMITIZA in the region. Sucampo sales were $2.2 million for the first quarter compared to $5 million in fourth quarter 2012, which included supplies of launch inventories. Activities of AMITIZA in Europe have been focused on United Kingdom and Switzerland.

In the U.K., we initiated the NICE endorsement process that will lead to a more widespread subscriber base. This quarter we initiated the mutual recognition procedure to gain approval for AMITIZA for CIC in additional European Union country, using the U.K. as the reference member state.

We expect to get approval in these additional market some time in the first half of 2014 During the first quarter, we also submitted our filings for OIC regulatory approval in the United Kingdom and Switzerland, meeting one of our key value drivers for the year. We anticipate approval in the first half of 2014. And once approved, we plan to move forward with our direct launch of AMITIZA for OIC in the U.K. and Switzerland together with seeking approval in other EU countries.

With that, I will turn the call over to Taryn Joswick to discuss our pipeline. Taryn?

Taryn Joswick

Thank you, Stan. Good afternoon everyone. It’s pleasure to speak with you. Please refer to slide 12 for updates to our research pipeline. We are very pleased to have approval of AMITIZA OIC and we are looking forward to the next step in our AMITIZA development program beginning with a pediatric indication.

We remain on track regarding our pediatric functional constipation program for lubiprostone and are moving forward with our plans to initiate the first Phase 3 pediatric functional constipation trial in the U.S., Canada and Europe in the third quarter of 2013. As we have previously discussed, we are also developing a liquid formulation of AMITIZA which is significant because it can potentially allow us to provide AMITIZA to new patient population who cannot swallow the current gel cap formulation, including pediatric and geriatric patient population.

Importantly, Takeda will fund a significant amount of the development cost for the pediatric indication as well as 100% of the development cost for the new liquid formulation. We’re also evaluating additional life cycle opportunities for AMITIZA with our partner.

On slide 13, we are continuing our progress on the Phase 2 trial of SPI-017 for the management of severely symptomatic lumbar spinal stenosis. We dosed our first patient in the fourth quarter of 2012 and we will conclude this trial in the fourth quarter of 2013.

As we’ve mentioned, this trial is being conducted in Japan with the only currently approved medication for LSS is an oral PGE1 analog. We believe that prostone represent a significant therapeutic advantage over the current treatment option in Japan given their favorable safety profile. At this time in the United States and Europe, there are no medications approved for this specific indication.

Now, please turn to slide 14. Development also continues for a new indication for cobiprostone for oral mucositis. We have developed a new spray formulation of cobiprostone for this indication and are currently testing the formulation in clinical trials.

We are pleased to announce that the Phase 1a trial has completed and we are currently awaiting results. These trials allow us to fill our corporate mission of using innovative research and development to meet unmet medical needs of patients. And we look forward to updating you as the development programs progress.

With that, I will turn the call over to Cary Claiborne. Cary?

Cary Claiborne

Thank you, Taryn. Good afternoon everyone. I’d like to review the financial highlights for the quarter with you. I’ll start with slide 16. Total revenue for the first quarter of 2013 was $16.9 million, compared to $14.4 million in the first quarter of 2012, a growth rate of 17%.

Product royalty revenue for the first quarter of 2013 was $11.7 million, an increase of $0.8 million from $10.9 million in last year's first quarter. The increase in product royalty revenue was due to an increase in net sales of AMITIZA, driven by both volume and price increases.

As reported to us by Takeda, net sales of AMITIZA increased 7% to $64.9 million for the first quarter of 2013, compared to $60.7 million the first quarter of 2012. R&D revenue for the first quarter of 2013 was $2.8 million, compared to $2.6 million during last year's first quarter.

The increase was primarily due to increased R&D activities reimbursed to us by Takeda. Product sales revenue for the first quarter of 2013 was $2.2 million compared to 0 in last year's first quarter. The increase was primarily due to the sale of AMITIZA product to Abbott in Japan.

As Dr. Ueno and Stan mentioned earlier, this is about double our internal forecast for the first quarter. And it follows up the $5 million in sales we reported in the fourth quarter of 2012, which included initial product stocking.

Now, please move to slide 17, which features additional Q1 financial highlights. Let’s take a look at income next. For the first quarter of 2013, income from operations was a loss of $2.6 million compared to a loss of $0.3 million in the first quarter of 2012.

For the first quarter of 2013, Sucampo reported a net loss of $3.1 million or $0.08 per diluted share compared to a net loss of $1.9 million or $0.05 per diluted share in the first quarter of 2012. The net loss in 2013 includes a tax provision of $1.1 million and also reflects commercialization and launch costs for RESCULA.

Now, taking a look at operating expenses, R&D expenses which are comprised of expenses for clinical development of the lubiprostone pediatric indication, clinical development of the liquid formulation of lubiprostone, Phase 1 trial expenses for oral mucositis and clinical development expenses for our lumbar spinal stenosis program were a total of $5.6 million for the first quarter of 2013, compared to $3.4 million for the same period of 2012. The increase was primarily due to the initiation of our Phase 3 clinical trial of lubiprostone for pediatric patients.

G&A expenses were $7.2 million in the first quarter of 2013, compared to $7.3 million for the same period in 2012, a decrease of $0.1 million. The slight decrease in G&A expense was primarily due to lower legal, consulting and other professional expenses as a result of the conclusion of certain legal matters in 2012, partially offset by continued investment in corporate marketing and branding and staff to support business growth as well as pharmacovigilance costs of $1 million in Japan under our agreement with Abbott, which we record in G&A on our P&L.

Selling and marketing expenses were $5.4 million in the first quarter, compared to $4.1 million in last year’s first quarter. The increase in selling and marketing expenses relates primarily to commercialization and launch costs for RESCULA, including the establishment of a Medical and Scientific Affairs department and other related functions necessary to support the launch.

Let’s move onto the balance sheet. Please refer to slide 18. As of March 31, 2013, cash, cash equivalents, restricted cash and investments were $95.8 million, compared to $91.4 million at December 31, 2012. As of March 31, 2013, most payable were $62.4 million compared to $52.9 million as of December 31, 2012.

During the first quarter of 2013, we purchased approximately 68,000 shares of our common stock at a cost of $0.3 million. You recall that in November 2012, our board authorized an increase in our stock repurchase program.

We are now authorized to repurchase up to a total of $5 million of our common stock, up from the previously announced $2 million in September 2011.

Now, please turn your attention to slide 20. We have set the following key value drivers for the year that we believe will increase long-term shareholder value. I’m pleased that we have achieved already four of these value drivers, so early in the year.

The 2013 key value drivers include approval of the OIC indication for AMITIZA in the U.S. which as we discussed today, we’ve already achieved. Receipt of $10 million payment from our partner, Takeda, following the first sale of AMITIZA for OIC which we anticipate will be in the second quarter of this year.

Achieving first patient in our pediatric constipation Phase 3 trial for AMITIZA in the second half of 2013. Pursuing strategic alliances for AMITIZA for new indications and new territories outside of the U.S., including Europe and several agents in emerging markets. Continued growth of AMITIZA sales in Japan.

Filling for approval of AMITIZA in the treatment of OIC in the U.K. and Switzerland. The continuation of our progress on achieving NICE endorsement and launching AMITIZA in the U.K. Submission of filings to expand AMITIZA’s CIC indication to other European market.

The launch of RESCULA which we have achieved and the continuous success or rollout of the product in the U.S. Completion of our oral mucositis Phase 1a for cobiprostone in the second quarter of 2013, which we have achieved and initiation of the next trial and the program for mucositis in the fourth quarter of 2013. Completion of our spinal stenosis Phase 2a trial for SPI-017 in the fourth quarter of 2013.

So as you can see, we have a busy year ahead of us. I thank you for your continuous support as we help deliver patient relief and work to increase shareholder value. We are now ready to start the Q&A portion of the call. So, Operator, please open up the line for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Jason Kolbert of Maxim Group. Please proceed.

Jason Kolbert - Maxim Group

Hi guys. Congratulations. Seems like you’re really making some great progress. Can you talk just a little bit about what the pull through actually looks like in Japan? Obviously, a big stock number in fourth quarter and now is this kind of a run rate that we can base our assumptions on going forward for Japan? And then I want a transition to a few questions on RESCULA?

Cary Claiborne

Sure. Hi, Jason. This is Cary. I’ll start maybe Stan can chime in. I think it’s still little too soon to say take the $2 million -- $2.2 million a quarter and annualize that early on, but as we said it was about double our internal forecast so thus far they are exceeding all there metrics and we’re pretty pleased with it. But I think we need a couple more quarters under our belt to really be able to trend it from there.

Jason Kolbert - Maxim Group

Okay. And help me understand on the U.S. launch of RESCULA given the fact that there’s been so much product detailing. Can you give us any indication of what the prescriptions look like so far and what should we be kind of expecting going forward based on if everybody who got a sample got a script, how many scripts would that be?

Cary Claiborne

Stan, would you…

Stan Miele

Hi, Jason. Sure. Hi Jason. This is Stan. So, I think it’s fair to say again at this very early stage, it’s always nice to assume that you would have a one-for-one exchange when you initially deploy your samples. At this point in time what is reasonable to expect is that you’d see anywhere from 20% to 25% of the initial samples so then it translates into an early prescription run rate.

And so with that being said, we started in the late February, March timeframe getting the samples distributed. They are 30-day samples. So from an early prescription standpoint, we can look at the early new prescription run rate for the early first month, I’d say they were at 0.05% under new prescription which is in line with what we targeted but was basically one month worth of prescription during a month where it’s nothing but essentially samples that has to be taken into perspective.

So at this point in time, we are aligned with exactly what we had projected. We anticipate a good 20% to 25% of those early samples just begin transitioning into prescriptions and then from there it goes along with exactly what we had anticipated for longer term patient trial, patient utilization, positive patient experience and that will lead into more prescription.

Jason Kolbert - Maxim Group

Terrific. Thank you so much. One last question, this one for Taryn, I just want to talk a little bit about the oral mucositis product SPI-8811 and that data should be coming at any time. Will we have any hints of efficacy and what is an acceptable efficacy measure or endpoint in oral mucositis?

Taryn Joswick

So this was actually the first in man study with that product. So this is a Phase 1a in healthy volunteers. We won’t have any indication of efficacy after this first trial and obviously the next study or series of studies that we intend to do is to look at multiple dose tolerability with the products and then start to move into patients.

So in terms of the endpoints that are viable in oral mucositis, I think we’re still obviously looking at what the ideal product profile would be for that indication and we’re working with clinicians who work in this area to determine what would be the ideal product profile for products for oral mucositis, but certainly prevention and treatment of the condition is what we’re looking at and that’s our goal for the…

Jason Kolbert - Maxim Group

And just tell me mechanistically what are the prostones actually impacting, because obviously other things have been tried growth factors and given the fact that these patients often have or are cancer patients, probably the last thing you want to give them. So what’s kind of the ideology behind this?

Taryn Joswick

Well, I think, certainly, the rationale behind the use of cobiprostone specifically in oral mucositis is the property of the barrier function protective properties of the product. The cobiprostone is a CIC-2 activator and we see similar barrier function properties as we see with AMITIZA with this product. And so obviously that mechanism of action we believe would be viable in a patient who is experiencing oral mucositis due to head and neck radiation.

Jason Kolbert - Maxim Group

Got it. Congratulations on a nice quarter.

Taryn Joswick

Thank you.

Cary Claiborne

Thanks.

Silvia Taylor

Thanks.

Operator

Your next question comes from the line of Ed Arce of MLV & Co. Please proceed.

Ed Arce - MLV & Co.

Hello, everyone. Thanks for taking my questions. I just wanted to start off with one on the upcoming launch of AMITIZA for OIC. You mentioned that Takeda is planning to increase its promotional spend and I think you had also mentioned there were some added positions, but I just wanted to confirm that, and strongly we don’t want to steal any thunder from DDW. But if you could just talk around what -- what you could share with us at this point? Thanks.

Stan Miele

Hi Ed. This is Stan. So thanks for the question. So as I have continuously said that we actually can’t disclose the number of reps per se from the footprint perspective of what Takeda is doing, but I will say that it is very reasonable to articulate that upon approval over 50,000 notifications went out to in excess of 50,000 physicians about the OIC indications. But it is very clear to Takeda that they do recognize they need to increase their reach and their footprint so that is inclusive of pain specialists, as well as primary care physicians who have typically not been in there with their initial footprint.

So I think you can surmise from this that that means additional reps and then there are also going forward from a financial standpoint due to the fact that that heightened expectation as an aggressive launch so they’re going forward any (inaudible) associated with this. Yeah, it sounds like there we have some background noise and…

Ed Arce - MLV & Co.

Yeah.

Stan Miele

… I hope you have been able to listen to through that.

Ed Arce - MLV & Co.

Most of it. I apologize for that. Just in light of that, I will just ask one more follow up and then I will get back in the queue. I want to get little more details around the idea that you would be looking to now license AMITIZA indications in the territories. I think that’s fairly new development? You could just give a little more detail around that? Thanks.

Stan Miele

Sure. If I could ask if somebody is on the line, if you could perhaps mute your line that would be very beneficial for all of us. So, I will say that clearly and Dr. Ueno is very clearly indicating that we’re still moving forward with the standalone scenario for Europe.

However, based on the third indication for OIC, there is an expressed interest from many potential large pharma partners that are looking for a product such as AMITIZA. And so we are now certainly entertaining and exploring those opportunities and I think we’re always leaving ourselves open for whatever is optimal to maximize the sales and shareholder value as it relates to AMITIZA.

So I think we are working essentially on two parallel paths, one path being the standalone and certainly, the other path is to also explore other potential opportunities for partnership.

Ed Arce - MLV & Co.

Thanks a lot, Stan. Appreciate it.

Stan Miele

You’re welcome.

Operator

Your next question comes from the line of Irina Rivkind of Cantor Fitzgerald. Please proceed.

Yemi Ogunkoya - Cantor Fitzgerald

Hi. This is Yemi actually calling in for Irina. Just have a couple of questions, first question is can you discuss the new patients to brand as it relates to AMITIZA? Has this number of new patients in the market been increasing since your competitor has been driving more patients into the market. Does it reflect that 4% growth? And in terms of RESCULA, we have been tracking RESCULA prescription so are you trying to recognize revenues? Are there RESCULA revenues in that 2.2 million number that you reported this quarter?

Cary Claiborne

This is Cary. I’ll start with the revenue side and I’ll let Stan talk through the prescription side of it. We’re going to be recognizing RESCULA revenue on an as written basis, based on prescription. So there is minimal revenues in Q1 because of that. Because as we talked about, there is number of sampling. Samples really went out towards the end of February. So we did not really expect a lot of prescription to be written in the first quarter.

So unlike other companies that are -- maybe booking the revenue on an as ship basis, we’re -- because one we don’t have the history for product. We’re going to be basing it on prescriptions actually written. So there is a very small amount in Q1.

Yemi Ogunkoya - Cantor Fitzgerald

Okay.

Stan Miele

Right. And then as it relates to the new brand, I mean, it’s still actually quiet consistent with what we have discussed previously and with that being said, that’s still -- we're monitoring what happens with the competition. But I think importantly for AMITIZA as well, there is still a fairly high percentage of the prescription that we are getting at this point in time as part of our growth are in fact new to brand prescriptions.

So this is perfectly aligned with what we have stated all long, that has the new entrant hits to market. Both products are growing and both product are gaining some new to brand prescriptions as oppose to stealing from each other. It’s really trying to get more of those naïve patients. And we do believe that this is also inclusive of why we did still show demonstrated growth year-over-year same time period in the face of the new competitor hitting the market.

Yemi Ogunkoya - Cantor Fitzgerald

Okay. Thanks, guys.

Operator

Your next question comes from the line of Christian Glennie of Edison Investment Research. Please proceed.

Christian Glennie - Edison Investment Research

Hi. Good afternoon. Just following up your OIC in terms of prescriptions and potential sales uptake. How should we think about the sort of ramp up for that indication. Is it something that might occur very quickly or should we be looking more to Q3 and Q4 considering the full effect?

Cary Claiborne

Stan, do you want to talk to that.

Stan Miele

Sure. I know we’re not giving any specific guidance obviously. But as -- I think we’ve also stated that we expect this to be more of our steady growth pattern. And as the physicians -- the beauty is that physicians who prescribe opioids have a target reach patients populations. So unlike CIC or OI or IBSC, where the patients have to seek the care. OIC patients are already seeking care of physicians.

We are not saying that we expect this to be a spike as opposed to just a nice study increase as we’ve not only increase the footprint and new physician targets but also as we’ve detail to our existing base of physicians deferred indication.

Christian Glennie - Edison Investment Research

Thank you, Stan. That’s very helpful. Turning to the pediatric trial with AMITIZA, can you talk a little about sort of potential sizes go for that trial, the number of patients and the length of treatments, any particular sort of new onset of conducting the study in the pediatrics that you should be aware of?

Taryn Joswick

This is Taryn. This is not our first pediatric functional constipation trial. We actually conducted one open-label study in about 124 patients some time ago. That was actually published and presented that data at [NAPCAN] I think in 2008 or 2009.

So this program is obviously larger in scope and scale, so a series of double-blinded placebo-controlled studies in children and adolescents with pediatric functional constipation as well as it will also include long term safety valuation as well. And the study we intend to conducted in clinical sites in the United States, Canada and Europe.

In terms of the specific sites et cetera and design of the studies, we’re still in the final stages of the protocol development. And obviously, we will be posting the study design details on clinical trials at the time we start to study in Q3.

Christian Glennie - Edison Investment Research

Okay. Thanks. Is that study that you are learning through the FDA and in terms of agreement on that or is that not necessary?

Taryn Joswick

No, exactly no. This is actually in discussion with the FDA as well to meet our prior commitments of the product.

Christian Glennie - Edison Investment Research

Okay. Thank you.

Taryn Joswick

Thank you.

Operator

(Operator Instruction) Your next question comes from the line of Marco Rodriguez of Stonegate Securities. Please proceed.

Dan Trang - Stonegate Securities

Well, this is Dan Trang sitting in from Macro Rodriguez. I wanted to know if any color could be provided in regards to the feedback of RESCULA from the physicians and from the end user, what if you guys heard from the your end?

Stan Miele

Sure. Dan, I can answer that. I will also ask Greg Deener who is also with us, who is the Senior Vice President of Marketing as well. And Greg also had a lot of interaction with some of our key opinion leaders and in addition has been very actively involved in the launch. So, Gregg, if you want to perhaps add some comments from some initial feedback and then if there is anything you miss I will add some color?

Greg Deener

Okay. Thanks, Stan. So what I would say first of, we’ve told people that this is a generally well tolerated drug, and that feedback has been consistent that it has been a well tolerated drug from clinicians. And what they’ve told us is that our efficacy is the same or better than we've committed to and they do see some patients that have had far better efficacy than they would have expected with the drug.

But again, there is a spectrum and in the mean in our trials, we saw three to four millimeters of mercury improvement. But there was a spectrum there in the studies where we did see some people drastically better and some people not as good. So, I would say overall that tolerability feedback has been very positive. The efficacy has been better than expected or the same as expected. And the thing I would also add I know that you folks are waiting to see the prescriptions as are we. We’ve talked to several people that have had 20, 30, 40 patients that have been treated with samples, but they aren’t yet showing up as prescriptions. There are using this and patients that aren’t tolerating prostaglandin. They are seeing the efficacy being maintained and seeing the tolerability improved.

We are seeing some people use it in combination, both with beta blockers, which is what we’ve been promoting. But some people have been using it in combination with the prostaglandins and continue to do so, based upon the results that they’ve had to date. So overall the feedback that we’ve gotten has been quite positive and if everybody puts the number of number patients on that they’ve told us, we should expect to see more prescriptions soon and we are anxiously awaiting that SRU. Stan, do have any comments?

Stan Miele

No. I think nicely covered, Greg. Nothing else to add to that.

Dan Trang - Stonegate Securities

Okay. And a follow-up question. In terms of the size of pediatric market for AMITIZA, I know that's a bit down the line, but do you have any numbers behind that?

Stan Miele

Greg. Go ahead and answer that, Greg.

Greg Deener

Okay. So the size of the -- if you take a look at the prescriptions in the U.S., a gastroenterologists and the pediatricians have roughly the same number of prescriptions so it’s a large self population and it’s an unmet need in children, which Taryn has had good feedback from the investigators.

Dan Trang - Stonegate Securities

Okay. Thank you.

Operator

(Operator Instruction) At this time, there are no further questions in queue and I would like to turn the call back over for closing remarks. Please proceed.

Taryn Joswick

Okay. Well, that concludes our call. Thank you so much everyone for joining us and have a wonderful evening.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a wonderful day.

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