Sucampo Pharmaceuticals Inc. Q1 2008 Earnings Call Transcript

Sucampo Pharmaceuticals Inc. (NASDAQ:SCMP)

Q1 2008 Earnings Call

May 8, 2008 10:00 am ET

Executives

David Calusdian - IR

Mariam Morris - CFO

Brad Fackler - EVP, Commercial Operations

Dr. Ryuji Ueno - Chairman of the Board, CEO, CSO and co-Founder

Analysts

Ian Sanderson - Cowen and Company

Gary Nachman - Leerink Swann

David Maris - Banc of America Securities

Operator

Good morning and welcome to Sucampo Pharmaceuticals first quarter 2008 financial results conference call. There will be an opportunity for questions and comments after the prepared remarks. (Operator Instructions)

For opening remarks and introductions, I would like to turn the call over to David Calusdian of Sharon Merrill Associates. Please go ahead, sir.

David Calusdian

Thank you and good morning. With me on today's call are Dr. Ryuji Ueno, Sucampo's Founder, Chairman and Chief Executive Officer; Mariam Morris, Chief Financial Officer; and Brad Fackler, Executive Vice President of Commercial Operations.

Mariam will begin with an overview of our financial results for the quarter, and then Brad will discuss our plans for AMITIZA 8 microgram commercial launch. Dr. Ueno will review our accomplishments for the first quarter of 2008, provide an update on our business strategy and the clinical and preclinical milestones for 2008. Then we will be happy to take your questions.

Before we begin, please note that various remarks management makes on this conference call about Sucampo's future expectations, plans and prospects including without limitation statements regarding the company's plans for the commercial launch of AMITIZA 8 microgram for the IBS-C indication, the potential for additional milestone payments from Takeda, potential future sales of AMITIZA 24 microgram for chronic idiopathic constipation and its pipeline of clinical and preclinical prostone compounds constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Forward-looking statements may be identified by the words project, believe, anticipate, plan, expect, estimate, intend, should, would, could, will, may or other similar expressions. These statements involve risks and uncertainties and actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's periodic filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K. These filings can be accessed through the for investors page of Sucampo's website at www.sucampo.com.

In addition, any forward-looking statements represent the Company's views as of today, May 8, 2008. These statements should not be relied upon as representing the company's views as of any subsequent date. While Sucampo might elect to update forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so.

With that, I would like to turn the call over to Sucampo's CFO, Mariam Morris, for her financial review. Mariam?

Mariam Morris

Thank you, David, and thank you all for joining us for this morning's conference call. As you know we recently achieved a significant development milestone for AMITIZA 8 microgram on April 29th when the FDA approved our sNDA for irritable bowel syndrome with constipation in women 18 years of age or older.

As such, Brad will discuss the commercial launch plans currently underway with our partner, and Dr. Ueno will discuss the impact on our company's strategy and mission. With that said, let me now go through our results for this first quarter of 2008.

Our first quarter revenues increased to $13.6 million for the first quarter of 2008 compared with $13 million in the first quarter of 2007. A key component of total revenue is product royalty revenue, which is currently based on net sales of AMITIZA 24 microgram for chronic idiopathic constipation in the United States. Product royalty revenue more than doubled in the first quarter of 2008 to $6.1 million from $2.3 million in the first quarter of 2007.

When compared with the fourth quarter of 2007, total revenues declined from $17.1 million to $13.6 million in the first quarter of 2008, and the product royalty revenues declined from $8.7 million to $6.1 million in the first quarter of 2008.

The decline in the product royalty revenue reflects a temporary inventory shipment delay at Takeda in March. This delay had the impact of reducing the net sales of AMITIZA in this first quarter despite an increase in total scripts. Our understanding is that this delay will be remedied in April. Brad will provide a bit more detail on script churn shortly.

Another key component of total revenue is research and development revenue which we receive from Takeda for ongoing clinical development work related to AMITIZA. While R&D revenue declined by about $3.3 million in the first quarter to $6.1 million from $9.4 million in the first quarter of 2007, the decrease reflects our completion of clinical development in June 2007 of AMITIZA 8 microgram program designed to treat patients with irritable bowel syndrome with constipation.

We recognized research and development payments and related milestones received from Takeda related to development work over the estimated performance period. And in the quarter ended March 2007, we had recognized $6.1 million in related deferred revenue. The revenues for 2008 represent revenues associated with our current ongoing trials of opioid bowel disease, pediatric constipation, renal and hepatic.

Upon the approval of the IBS-C, we will receive a development milestone payment of $50 million as part of our collaboration and license agreement. This payment will be fully recognized in the second quarter of 2008. We are obligated subsequently to pay a milestone royalty of $2.5 million to Sucampo AG. Subject to future development and commercialization milestones, we may receive up to an additional $60 million in payments from Takeda.

Co-promotion revenue increased in the first quarter to $1.2 million from $1.1 million for the same period in 2007.

Turning to the expense side of the income statement, research and development expenses for the first quarter of 2008 were $10.1 million compared with $5.9 million in the first quarter of 2007. Of the increase, $2.5 million was related to the marketing authorization applications filed in nine European countries during February.

R&D costs in the first quarter of 2008 were comprised primarily of post-marketing studies of AMITIZA, the Phase III clinical trials for opioid-induced bowel dysfunction, the Phase II study of cobiprostone in NSAID-induced ulcers and the development of our preclinical prostone compounds. Dr. Ueno will discuss more on the pipeline later in this call.

General and administrative expenses for the first quarter of 2008 increased to $4.4 million from $2.8 million for the first quarter of 2007. Our higher G&A expenses are due to costs associated with higher operational headcount, non-cash stock option expense, increase of costs associated with the lease of our new offices and overall costs associated with the compliance and regulatory requirements of being a publicly traded company with international operations.

Selling and marketing expenses for the first quarter of 2008 were $2.8 million compared with $3.2 million for the first quarter of 2007. Our lower selling and marketing cost reflects savings resulting from the transition from a contract sales organization to an internal sales force.

Product royalty expense to related parties were $1.1 million for the first quarter of 2008 compared to $411,000 in the first quarter a year ago. The higher expenses are due to higher net sales of AMITIZA. Product royalty expense represents our obligation to pay Sucampo AG a royalty of 3.2% of total AMITIZA net product sales.

Milestone royalties to related parties were $1 million for the first quarter of 2008 compared with zero in the first quarter of 2007. The cost represents our obligation to pay Sucampo AG a royalty of $1 million upon the submission of the MAAs in Europe.

For the three months ending March 31, 2008, Sucampo recorded a tax benefit of $5.6 million compared with a tax provision of $341,000 for the three months ending March 31, 2007. As a result of the aforementioned FDA approval, we reevaluated the related financial impact on our projected income for 2008.

The expected increase in our royalties and increase in research and development revenues from the milestone allowed us to report a tax benefit for the three months ended March 31, 2008, due primarily from a discrete release of $4.8 million and a reduction of the projected annual effective rate applied to pretax income.

Our net income for the first quarter of 2008 was $505,000 or $0.01 per diluted share based on 42.1 million weighted average common shares outstanding. This compares with net income of $516,000 or $0.01 per diluted share based on 35.4 million weighted average common shares outstanding for the comparable period of 2007. The change in the share count reflects those issued in our IPO in August last year as well as the conversion of all outstanding preferred stock to Class A common stock from the closing of the IPO.

Our net income for the quarter reflects the impact of our ability to fully utilize our tax benefits, increasing product royalties and higher operating expenses associated with building an emerging biopharmaceutical organization. Our focus is on using ongoing revenues to support our existing operations while investing milestone payments to discover and develop new clinical candidates and advance them towards commercialization.

Turning to the balance sheet, our cash, cash equivalents and investments totaled $84.9 million at March 31, 2008, compared with $86.5 million at December 31, 2007. The decrease relates primarily to unrealized losses of $1.4 million due to a temporary write-down associated with our holdings in AAA rated non-mortgage related auction rate securities.

At March 31, 2008, these securities were recorded at fair value of $26.3 million. While there is currently no active secondary market for these securities, we do not intended at this time to use a secondary market to dispose of the auction rate securities and have classified these securities as non-current investments.

Now, I would like to turn it over to Brad Fackler, our EVP of Commercial Operations. Brad?

Brad Fackler

Thank you, Mariam, and good morning, everyone. We are extremely pleased with the recent FDA approval of AMITIZA 8 microgram for irritable bowel syndrome with constipation in women 18 years and older. We at Sucampo are very proud of the fact that we are two for two in successful approvals within the 10-month PDUFA timeline. The Sucampo commercial team and our partners at Takeda are currently finalizing our launch plans for AMITIZA 8 microgram in the IBS-C indication.

As a background, IBS-C is a disorder characterized by cramping, abdominal pain, bloating and constipation. It affects at least twice as many women as men. With our recent approval, AMITIZA 8 microgram is now the only commercially available and proven first-line treatment for IBS-C that is effective across the entire spectrum of symptoms.

We have an aggressive campaign planned to formally launch the product by the end of June. In preparation for the approval, we have been training the sales forces, holding discussions with managed care customers and preparing launch materials. We also held a series of collaborative meetings with 30 of the top IBS-C clinicians. These meetings provide the opportunity to partner with the leading GI experts to better respond to the needs in the marketplace.

A key part of the launch will be focused around this year's Digestive Disease Week conference which begins May 17th in San Diego. This is the world's largest gathering of gastroenterologists. We are expecting to attract significant attention for AMITIZA 8 microgram at the DDW conference. We had 12 abstracts and 2 oral presentations selected for this meeting, including those which highlight the IBS-C data.

In addition to the activities at the conference, we're planning a complete product launch campaign. This will include a full-scale field force launch along with journal advertising, patient education, public relations outreach and pharmacy programs. If any of you are in San Diego during the week of May 17th, we hope you'll stop by the AMITIZA booth.

As excited as we are in looking forward to the AMITIZA 8 microgram launch, we cannot forget about the ongoing success of AMITIZA 24 microgram. AMITIZA 24 microgram for chronic idiopathic constipation continues to perform very well in the market. This is very important leading up to the IBS-C launch.

Total AMITIZA prescriptions for the first quarter 2008 increased by nearly 5% compared to the fourth quarter of 2007, and new prescriptions grew by 6.7% in the first quarter of 2008 compared to fourth quarter 2007. Our January totals for both new and total prescriptions were our highest monthly totals to date at 45,000 and 93,000 respectively. After a slight decline in February, AMITIZA rebounded to about 43,000 new prescriptions and 90,000 total prescriptions in March.

A key part of the prescription increases have been driven by the field promotion of the Sucampo, Takeda and TAP sales forces. At the beginning of April, the TAP sales force moved AMITIZA into first detailing position from second position to enhance the sales of AMITIZA 24 microgram and to prepare for the launch of AMITIZA 8 microgram. Additionally, we attribute the AMITIZA growth to Takeda's recently completed direct-to-consumer television campaign that had begun in November. The campaign created significant consumer awareness and directly resulted in increased prescriptions and market share growth.

We expect that this higher level of awareness of AMITIZA in the marketplace will serve as a strong foundation for the 8 microgram dosage formulation now that we have the approval for IBS-C. Our own Sucampo sales force, which targets long-term care facilities and key opinion leaders within academic medical centers, continues to perform well. We are seeing an increasing portion of the total AMITIZA sales coming from these segments.

Because AMITIZA 8 microgram has no age limit and a very low adverse event profile, it is ideally suited for the long-term care market. Our sales team's success in implementing our Novell Account Management business model means we will play a vital role in the launch.

In summary, we are committed to a successful AMITIZA 8 microgram launch and very excited about the opportunity to bring relief to millions of additional patients who suffer from the symptoms of irritable bowel syndrome with constipation.

With that, I'd like to turn the call over to Dr. Ueno.

Ryuji Ueno

Thank you, Brad. The first quarter was another very successful period for Sucampo. Awareness of AMITIZA continued to expand after 24 months from its initial launch. New and total prescriptions continued to grow, and we continued to make progress in advancing our clinical development programs.

AMITIZA has a unique and novel mechanism of action that works locally in the small intestine by activating the chloride channel to increase fluid secretion. And AMITIZA 24 microgram is an established therapy for chronic idiopathic constipation in adults that has been approved and readily available since 2006.

Of course, the most exciting recent highlight is about the approval of AMITIZA 8 microgram to treat irritable bowel syndrome with constipation in women 18 years of age or older. As Brad mentioned, we're especially pleased that we achieved the second consecutive FDA approval within the shortest 10-month PDUFA timeline.

With its approval for IBS-C, AMITIZA has established a unique position in the marketplace. As the FDA itself noted in the press release issued last week, AMITIZA is the only approved prescription drug therapy for IBS-C available in the United States. Sucampo's fundamental strategy is to establish AMITIZA as a franchise product, and we are succeeding on that front.

AMITIZA is now the only prescription drug therapy for IBS-C in chronic idiopathic constipation, giving us a potential market opportunity of more than 30 million patients in the US alone. We believe that the combination of these indications will enable us to steadily increase prescriptions and product royalty revenue going forward.

According to the American College of Gastroenterology, irritable bowel syndrome affects 58 million people in the United States. And it is estimated that 60% to 75% of IBS sufferers are women. Additionally, irritable bowel syndrome with constipation accounts for approximately one-third of these cases.

Irritable bowel syndrome is a disorder characterized by such clinical symptoms as abdominal pain, discomfort and others. The sNDA was based on a clinical study program that included two Phase III multi-center double-blinded, randomized placebo-controlled trials involving 1,154 patients followed by one long-term open-label extension trial involving 476 adults diagnosed with IBS-C.

In the two Phase III studies, patients received AMITIZA 8 microgram or placebo taken twice daily over a 12-week period. In both trials, patients receiving AMITIZA 8 microgram twice daily were nearly twice as likely to achieve an overall response in improving clinical symptoms of IBS. That is statistically significant compared to those receiving placebo.

The safety profile of AMITIZA was established during the double-blinded period and further confirmed by an open-label clinical trial with treatment period of up to 52 weeks. In the pivotal three-month trials, AMITIZA showed good safety profile. The incidence of serious adverse events is 1% in both AMITIZA and placebo groups, and the related adverse events are 22% in AMITIZA and 21% in the placebo group.

AMITIZA 8 microgram has a unique mechanism of action to treat IBS-C symptoms by activating the chloride channel and by restoring the barrier function in the small intestine. AMITIZA 8 microgram is the only product with this novel mechanism of action for IBS.

Brad discussed briefly our launch plans for the AMITIZA 8 microgram, and we're looking forward to working with Takeda to educate physicians and adult women with IBS-C about the conditions and how it may be treated with AMITIZA. We are pleased that AMITIZA is now in the first position for TAP's over 700 person sales force, which cover the primary care physicians.

We believe that the addition of IBS-C indications with AMITIZA 8 microgram will help enhance AMITIZA's overall position in the primary care and gastroenterology markets in the United States.

As Mariam mentioned, with the FDA's approval of AMITIZA 8 microgram for IBS-C, Sucampo receives a $50 million milestone payment from our partner. From a business perspective, the FDA approval is an important event for Sucampo for several reasons.

First, it enhances our ability to continue developing cobiprostone and SPI-017 to fulfill unmet medical needs. We take our commitment to physicians and patients seriously and all of our employees take tremendous pride in our mission to create safe and highly efficacious therapies.

Second, in relation to Takeda, both parties continue to its commitment to maximize AMITIZA through ongoing development and commercial activities. Third, Sucampo will further facilitate international initiatives such as introduction of AMITIZA in Europe and Japan. Now, I would like to provide an update on our clinical development programs.

Our Phase IV post-marketing study of AMITIZA for chronic constipation in pediatric patients is on track to be completed in the second half of this year. We have completed our Phase IV study of patients with renal impairment and have submitted our final clinical study report to the FDA in April. Our Phase IV study in patients with hepatic impairment is expected to be completed later this year.

We also have two pivotal Phase III studies of AMITIZA capsules actively underway in patients with opioid-induced bowel dysfunction, a debilitating condition that can often times contribute to their pain symptoms. According to IMS Health, more than 200 million prescriptions were written for opioids and 2006 in the United States alone. Many studies indicate that a high percentage of patients receiving opioids are likely to experience significant constipation and other related symptoms.

In this pivotal Phase III studies, we are targeting to enroll a total of 840 patients at up to 190 sites in the U.S. and the Canada. We currently have 168 active sites. In addition to the two pivotal trials, we expect to receive 12-month long-term study results by the end of 2009. If oral AMITIZA is approved for this indication, it would open a new therapeutic window for both inpatient and outpatient treatment for OBD.

In addition to AMITIZA's ability to reach across multiple indications, we're continuing with our own development program of cobiprostone, our next generation prostone compound. I mentioned on our last call that we had initiated a dose finding Phase II study of cobiprostone for NSAID-induced ulcers. Cobiprostone has a novel mechanism of action different from acid reducers such as proton pump inhibitors and H2 antagonists.

Without affecting acid production in the stomach, cobiprostone has the ability to prevent ulcer formation by enhancing the tight junctions and repairing the stomach mucosa. The primary efficacy endpoint for this trial is overall incidence of gastric ulcer during study treatment. We continue to be on schedule in enrolling our target group of 120 patients with 24 U.S. sites currently active. We expect to complete this trial later this year.

We plan to initiate a Phase II proof-of-concept study for cobiprostone for portal hypertension, liver indications by the end of June. We are also making progress with our lead preclinical compound SPI-017 and plan to move the compound into the clinical development within this year.

With respect to our commitment to patients with unmet medical needs, we're actively conducting pharmacological and toxicological studies on six of our preclinical prostone compounds to identify eligibility for clinical study in additional medical uses for the future.

While we have already realized a significant amount of success from AMITIZA, our strong pipeline of clinical and preclinical prostone compounds provide us with tremendous growth opportunities as we focus on the development and commercialization of therapies for a wide range of diseases.

In summary, as the awareness of AMITIZA continues to grow in the marketplace, we expect an increase in new and total prescriptions. We believe that the approval of AMITIZA 8 microgram for irritable bowel syndrome with constipation creates a unique position in the marketplace and will be a catalyst for further prescription growth of AMITIZA.

With that, we will be happy to answer your questions. Back to the operator. Rob?

Question-and-Answer Session

Operator

(Operator Instructions)

Our first question is coming from the line of Ian Sanderson with Cowen and Company. Please proceed with your question.

Ian Sanderson - Cowen and Company

Thank you and good morning. Thanks for taking the question. Mariam, can you provide some additional color on Takeda's AMITIZA shipment delays in the quarter if you know what the cause was there? And did that actually result in trade stockouts that may have impacted prescription filling in the quarter? And you mentioned that this was to be resolved in April. Do you know if it actually was resolved in April?

Mariam Morris

Yes, we do have preliminary reports from Takeda, and we did see their correction based on those preliminary reports. It was basically just a delay in their shipping in order to effectively manage their inventory.

Ian Sanderson - Cowen and Company

So, this was an intentional --?

Mariam Morris

It's the way the shipping delayed. They shipped that so it would be destination primarily. And so, the timing in which they shipped caused the delay.

Ian Sanderson - Cowen and Company

And so you get paid on product that is actually shipped out the door from Takeda? Is that correct?

Mariam Morris

That's the way the net sales work currently. Yes, that is correct.

Ian Sanderson - Cowen and Company

Okay. And --?

Brad Fackler

And Ian, this is Brad. I should point out that that delay was just in the shipment from the Takeda warehouse to the wholesalers, and we have no indication that there was any kind of impact at the retail level.

Mariam Morris

That's right.

Ian Sanderson - Cowen and Company

Okay. And is your understanding or where do they stand in terms of manufacturing and trade stocking for the 8 microgram dose?

Brad Fackler

We're on track with that right now. In fact, as we speak, we believe product is moving into the warehouses at this point. We along with our partners at Takeda are actively involved in a stocking campaign to ensure that we have adequate levels in the retail outlets when the actual promotion starts.

Ian Sanderson - Cowen and Company

Okay. And then finally, just why the late June commercial launch? I know they are making a big push at the DDW later this month. What's the delay there?

Brad Fackler

Yes, well, this launch will take place before the end of June. We are making a big push at DDW, and I think what we need to make sure is that we have sufficient levels in the retail sector prior to going out with the field forces to do that.

Ian Sanderson - Cowen and Company

Okay. Thank you.

Operator

Our next question is coming from the line of Gary Nachman with Leerink Swann. Please proceed with your question.

Gary Nachman - Leerink Swann

Hi. Good morning and congratulations on the IBS approval.

Mariam Morris

Thank you.

Gary Nachman - Leerink Swann

Just a follow on Ian's question. So, what were the inventory levels at the end of the first quarter? It seems like they were probably pretty high before then. Do you have a read on that?

Mariam Morris

I do not have access to the inventory levels. I only get sales results.

Gary Nachman - Leerink Swann

Okay. So, is it fair to say that in the second quarter now, I mean there should be a significant jump in royalties: one, from the correction in April; and two, from the stocking for the 8 microgram dose? Is that a fair assessment?

Mariam Morris

We will have to defer part of the stocking as part of our analysis as well as Takeda until it's pulled through.

Gary Nachman - Leerink Swann

You're talking about the 8 microgram dose?

Mariam Morris

Yes.

Gary Nachman - Leerink Swann

But there should be a pop-up I guess from the adjustment in April, the correction.

Mariam Morris

You should see the correction, yes.

Gary Nachman - Leerink Swann

Okay. And, Brad, I know it's a little preliminary here, but how will the 8 microgram tablets be priced relative to the 24 and how do you think formularies are going to be handling the new indication?

Brad Fackler

That's two questions. The 8 and the 24 microgram will be priced at parity. And right now, our initial as our partners at Takeda have gone out and met with a number of the managed care organizations, we believe that the availability that we have with the 24 will be transferred to availability with the 8 microgram in the vast majority of the cases.

Gary Nachman - Leerink Swann

Do you think that the new indication and the lower dose now helps you from a formulary standpoint maybe shifting more over to tier-2 over time?

Brad Fackler

That will be seen as we go forward. We have enjoyed relatively good access through managed care previous to this. At the very least, we don't see that this will impair that access at all.

Gary Nachman - Leerink Swann

Okay, good. And for the actual launch, it's great that TAP moved us into the first detail. Do you think Takeda will be adding more sales reps? Will you guys be adding more sales reps and what's a realistic timeframe to start DTC you think for IBS?

Brad Fackler

The overall promotion and the field promotion is something that we constantly talk about with Takeda. Right now, I think just from a customer standpoint, by and large, the target customers for IBS and the target customers for CIC are very highly overlapped.

So, I think that while we're looking at some pop, I'll call it, from the TAP moving it into the position, right now there is nothing that is imminent about an increase in field promotion. Now, you asked about the DTC. We and Takeda do follow the pharma guidelines. That recommends that you don't have any DTC for at least six months after the launch.

Gary Nachman - Leerink Swann

Okay. But it's safe to assume that in six months timeframe you should be able to launch some kind of program theoretically?

Brad Fackler

That's something that has been in discussion, yes.

Gary Nachman - Leerink Swann

Okay. And then lastly, Mariam, just on the deferred tax assets and the recognition of the tax benefits associated with that, how will that flow through for the rest of the year? Was it just a one-time hit in the first quarter or will there be more over the course of the next few quarters? Thanks.

Mariam Morris

The discrete release was $4.8 million. That was the final release of all of our remaining deferred tax assets in the United States. So, that should complete any release associated with our tax benefit. We will continue to have tax benefits associated with losses in our foreign operation, but those will continue to be valued 100%. So, this should be the only pop that we see related to my tax benefits. That does affect my annualized effective tax rate and will bring it down for the year.

Gary Nachman - Leerink Swann

Okay. Thank you.

Operator

(Operator Instructions)

We have a follow-up question from the line of Ian Sanderson with Cowen and Company. Please proceed with your question, sir.

Ian Sanderson - Cowen and Company

Thanks for the follow-up. Can you give us a quick update on what sort of feedback you might be getting on the European filings from the European regulatory authorities? And secondly, any sort of update you have on the European partnership negotiations?

Ryuji Ueno

So, in Europe, we are using decentral procedures covering nine countries in Europe and also Switzerland. And we have established our Basel branch where we can monitor the safety Swissmedic monitoring. So that was already set.

And also, currently we have filed these countries in Europe and we are waiting for one of our countries which need some pharmaco-vigilance people set in the office inside the country. That is underway and that will be soon. If we complete all these processes, we'd make some release to the public that we have completed such an application and accepted. But as I mentioned, the last country is waiting for one person to take care of some local activities.

The next question is partnering? We hit this milestone, because we all are focused on this approval of the IBS-C. But fortunately, we could get the approval for the IBS-C. Now, we turn our efforts to the successful launch of AMITIZA in Europe. So, we started from the business plan and how can we align with our partners. So, we already started various types of partnering, large-scale or medium-scale pharmaceuticals. We have already started together with a recruitment in European countries. So, we actively are talking with various options, large to small. That is the current situation.

Ian Sanderson - Cowen and Company

Okay. And if I could just follow-up on the filing status, so with this what appears to be a bit of an ongoing processing issue, would you be in line for approval, say, in mid-'09, number one? And number two, the indication in Europe, would it just be chronic constipation, because there is no IBS indication or can you just talk about what you might get on the label there?

Ryuji Ueno

In Europe, if all our countries we submitted accepted our application, then the [calocal] review is going to start. So, if the things are going on well, the approval would be given about 12 months. That's my understanding. But after that, we need to negotiate about health insurance reimbursement price. I cannot say the definitive period, but we need to add these timelines as well.

Ian Sanderson - Cowen and Company

Okay.

Ryuji Ueno

And the second question, can you repeat that?

Ian Sanderson - Cowen and Company

Just what the label will look like in Europe.

Ryuji Ueno

Okay. In Europe, as you know, Zelnorm has never launched in Europe. So, we made a search, but there is no good knowledge about IBS itself. So, we rather keep the IBS focused on CIC. Chronic constipation is our current thought. But starting from chronic constipation, there is another option to jump into the opioid-induced constipation in the future. So, rather than create a market, we would stay in the current marketplace in Europe is our current strategy.

Ian Sanderson - Cowen and Company

And is the dose just the 24 microgram?

Ryuji Ueno

Yes, currently 24 microgram is the only dosage. But in the future, as you know, we are doing pediatric constipation study in which we use the 12 microgram strength. So, we are thinking of launching our 12 and 24 in Europe.

Ian Sanderson - Cowen and Company

Okay. Thank you.

Ryuji Ueno

Thank you.

Operator

Our next question is a follow-up question from Gary Nachman with Leerink Swann. Please proceed with your question, sir.

Gary Nachman - Leerink Swann

Okay. Thanks for taking the follow-up. I know you guys have been very busy, but how are discussions going to bring another product in for your sales force in the U.S.? And do you think that's going to wait now until after the launch of IBS-C? Thanks.

Brad Fackler

Yes, we're progressing right now with several companies and are making progress in those discussions. At this point, yes, nothing will happen from an implementation standpoint until sometime sufficiently after the launch. We want to make sure that we don't have disruption and that we can concentrate fully on the 8 microgram launch.

Gary Nachman - Leerink Swann

Okay. And at this point, do you think you're leaning more towards a GI product or another product or it's all up for grabs?

Brad Fackler

We're looking at options in both of those categories, and I wouldn't be comfortable saying at this point.

Gary Nachman - Leerink Swann

Okay. Thank you.

Operator

(Operator Instructions)

Our next question is coming from the line of Kim Vukhac with BAM. Please proceed with your question.

David Maris - Banc of America Securities

Hi. It's David Maris. A quick question. I don't know if you covered this. I just jumped on. On the earlier stage pipeline, for the remainder of 2008 and maybe into the first quarter 2009, what data should we be expecting or updates on the pipeline programs?

Ryuji Ueno

Well, the preclinical pipelines, the most advanced one is SPI-017. So, we are now actively trying to start the Phase I trial for SPI-017. So, that will be our international development. And also, we are trying to choose further prostone pipeline compounds, and what we have already started after the approval is facilitate such research activities. So, hopefully we can show more research data in the future to back up the IBS launch or future OBD indications.

David Maris - Banc of America Securities

Great. Thank you very much.

Operator

At this time, we have reached the end of the Q&A session. I will now turn the conference back over to Dr. Ueno for any closing or additional remarks.

Ryuji Ueno

Thank you very much for joining us this morning. We look forward to keeping you updated on our progress. Thank you very much.

Operator

And that concludes our conference call. Thank you for joining us today.

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