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Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP)

Q2 2008 Earnings Call

August 18, 2008 10:00 am ET

Executives

John R. Woolford - Investor Relations

Ryuji Ueno, MD, Ph.D., Ph.D. - Chairman, Chief Executive Officer, Chief Scientific Officer and Co-Founder

Jan Smilek - Vice President, Finance and Acting Chief Financial Officer

Brad E. Fackler - Executive Vice President of Commercial Operations

Analysts

Andrew Finkelstein - Leerink Swann

Ian Sanderson – Cowen and Company

Unidentified Analyst

Gary Nachman - Leerink Swann

Operator

Welcome to Sucampo’s Second Quarter 2008 financial results conference call. (Operator Instructions) For opening remarks and introduction, I would like to turn the call over to John R. Woolford from Westwicke Partners, Sucampo’s Capital Markets and Investor Relations Consultant.

John R. Woolford

With me on today’s call are Dr. Ueno, Sucampo’s Founder, Chairman, Chief Executive and Scientific Officer; Jan Smilek, Vice President of Finance and Acting Chief Financial Officer; and Brad E. Fackler, Executive Vice President of Commercial Operations.

Dr. Ueno will begin today’s call with a brief overview of recent corporate highlights and events. Jan will then provide a summary of our financial results for the quarter and Brad will follow with an update on our commercial activities surrounding AMITIZA. Finally, Dr. Ueno will conclude with a brief update on upcoming clinical and preclinical milestones we expect to see for the remainder of 2008.

Before we begin, please note that various remarks management makes on this conference call about Sucampo’s future expectations, plans, and prospects constitute forward-looking statements for 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 we encourage listeners to review them as they are found in the company’s filings with the Securities and Exchange Commission. 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, August 18, 2008. These statements should not be relied upon as representing the company’s view 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.

Now I would like to turn it over to Dr. Ueno, Sucampo’s Founder, Chairman, and Chief Executive Officer.

Ryuji Ueno

Before I highlight our recent corporate milestones and achievements, I would like to take this opportunity to thank our former executives Mariam Morris and Kei Tolliver for their dedicated service to Sucampo. Although they have decided to leave their full-times positions with the company, I’m pleased that both of them will continue to be involved and will assist Sucampo under consulting agreements.

We recently announced the addition of David Dodds to the position of Commercial Director for Europe. David will be responsible for establishing Sucampo’s European sales and marketing infrastructures and strategic initiatives. David is a talented and experienced pharmaceutical marketing executive with over 20 years of experience. His experience in the European marketing industry is particularly important as we progress AMITIZA towards commercialization in Europe. We expect to hire additional key executives in coming quarters for both Sucampo and its subsidiaries to facilitate the company’s activities and further strengthen the management team.

As many of you know, Sucampo achieved several important milestones in the second quarter. Most notably, on April 29th, the US Food and Drug Administration approved our supplemental new drug application for AMITIZA 8 mcg for irritable bowel syndrome with constipation for IBS-C in women 18 years of age and older. AMITIZA has a unique and novel mechanism of action that works locally in the intestine by activating the chloride channel to increase fluid secretion and has been an established therapy for chronic idiopathic constipation or CIC in adults since 2006. This was Sucampo’s second consecutive approval within the 10-month producer timeline. The approval triggered a $50 million milestone payment from Takeda providing Sucampo with capital that can be reinvested back into our clinical and pre-clinical pipeline.

Shortly after the approval, AMITIZA 8 mcg became available to patients seeking treatment for IBS-C. As a reminder, AMITIZA is the only approved prescription drug for IBS-C available in the United States, and when combined with our previous approval for chronic idiopathic constipation, AMITIZA has created a unique position in the constipation marketplace. AMITIZA has the potential to address medical needs of more than 30 million patients in the United States alone. The approval represents another step in our strategy to establish AMITIZA as a franchise product addressing multiple gastrointestinal indications.

Our international strategy for AMITIZA remains on track. During the second quarter, we announced that marketing approval applications (MAAs) have been received and validated by individual regulatory agencies in nine European countries. With a validation the agencies have begun the formal review of the applications. In addition, we filed our market approval application in Switzerland in June.

In Japan, Sucampo completed the dosing of the last patient in its ongoing phase 2B clinical study for chronic idiopathic constipation. We expect to report results from this study next month.

Beyond AMITIZA, Sucampo also continues to develop its pipeline of additional prostones in other significant therapeutic categories and I’ll provide additional details on our ongoing development efforts later in this call.

Finally, before I turn the call over to Jan for a discussion of our financial results, I’d like to mention that early this month AMITIZA was selected as one of the finalists for the prestigious 2008 Prix Galien Award. Prix Galien recognized the technical, scientific, and clinical research skills necessary to develop innovative medicines. We are pleased that AMITIZA is a finalist for this award, considered the highest accomplishment for pharmaceutical research and development. Jan, please go ahead.

Jan Smilek

We released our second quarter 2008 financial results on Thursday and hopefully you have had a chance to review the release as well as our quarterly Form 10-Q that was filed at the same time. If not, both of the documents are available on our website at www.sucampo.com. With that said, let me review the financial highlights of the second quarter of 2008.

Sucampo reported net income of $29.9 million or $0.71 per diluted share in the second quarter of 2008 compared with net income of $13.9 million or $0.39 per diluted share in the second quarter of 2007. Total revenues in the second quarter increased $18.8 million or 38.4% to $67.7 million from $48.9 million in the second quarter ended June 30, 2007. Product royalty revenues increased to $10.9 million from $9.6 million in the same period last year. This increase reflects the continuing acceptance by patients and physicians of AMITIZA 24 mcg for the treatment of chronic idiopathic constipation and also the revenue recognized by Sucampo for the initial stockings of AMITIZA 8 mcg in preparation for its recent launch and subsequent sales.

Based on stipulations of our agreement with Takeda, we were able to recognize approximately $1.9 million of the royalty revenue upon the completion of the initial stockings rather than when the inventories draw down as the scripts are written. As you know, product growth revenue for the second quarter of 2007 was positively impacted by increased AMITIZA orders in respect to the withdrawal of Novartis’ Zelnorm in April 2007.

Sequentially, product royalty increased by $4.8 million or approximately 79% from $6.1 million from the first quarter of 2008. Besides the factors that I mentioned earlier, approximately $800,000 of the increase between the quarters was attributed to the recognition of revenue from Takeda shipments that were delayed at the end of the first quarter as we discussed during our first quarter earnings conference call. Brad will provide additional detail on the commercial activities later on in this call.

R&D revenue increased $17.3 million to $55.4 million in the second quarter of 2008 compared with $38.1 million in the second quarter of 2007. The increase in R&D revenue was primarily due to the $50 million development milestone received from Takeda upon FDA approval of AMITIZA 8 mcg for IBS-C. We recognized a $30 million milestone in the second quarter of 2007 upon the filing of the supplemental NDA for IBS-C. The remaining R&D revenue for 2008 is associated with the payments received from Takeda for our ongoing AMITIZA trial for opioid-induced bowel dysfunction, pediatric constipation, and in patients with renal and hepatic impairments.

Turning to the expense side of the income statement, total operating expenses decreased $4.3 million to $23.8 million in the second quarter from $28.1 million in the second quarter of 2007. The decrease is due primarily to one-time cash and stock awards of $10.2 million recorded in the second quarter of 2007 to compensate Sucampo’s founders for stock options previously granted and then terminated. Excluding this one-time charge, the operating expenses increased by $5.9 million reflecting primarily our continuing investment into prostone technology both in the United States and abroad and expenses incurred in preparation for our international expansion.

R&D expenses for the second quarter were $12.9 million, an increase of $4.8 million from $8.1 million in the second quarter of 2007. The higher spending levels were associated with our ongoing clinical development programs for AMITIZA in the United States and Japan. Phase 2 clinical trial expenses for cobiprostone, regulatory activities relating to our European marketing authorization applications for AMITIZA, and also for pre-clinical and basic development costs associated with SPI-017 and other prostone compounds.

Our G&A expenses decreased approximately $9.4 million to $3.6 million during the second quarter from $13 million in the second quarter of 2007. The decrease is due primarily to one-time cash and stock awards mentioned earlier. Excluding this one-time charge, the G&A expenses increased by approximately $800,000 due to the increase in operational headcount and increase in rent and depreciation expenses associated with the company’s new office space, and an increase in cost associated with operational, compliance, and regulatory requirement of being a publicly traded company with international operations.

Selling and marketing expenses decreased by $0.9 million to $2.9 million in the second quarter of 2008 from $3.8 million in the second quarter of 2007. The decrease primarily reflected savings achieved as a result of moving commercial activities from a third-party contract sales organization to an internal sales force completed in the second half of 2007.

During the second quarter of 2008, we also paid and recorded a milestone royalty expense of $2.5 million upon the $50 million payment from Takeda. Product royalties to related parties increased by $300,000 to approximately $2 million in the second quarter of 2008 from $1.7 million in the second quarter of 2007 and they result directly from the companies increase in product royalty revenue.

For the second quarter of 2008, Sucampo’s consolidated effective tax rate was 32.8% compared to 35% for the second quarter of 2007. The change in the effective tax rate reflects the impact of the FDA approval of the supplemental new drug application for AMITIZA for IBS-C and the related impact on projected income in 2008 and future years from the $50 million milestone payment and expected product royalties.

Let me briefly review our financial and liquidity position. Sucampo’s cash, cash equivalents, and investments totaled approximately $135 million at June 30th as compared with $86.5 million at the end of 2007 including investments classified as non-current and auction rate securities of $20.9 million at June 30, 2008, and $9.4 million at December 31, 2007. During the second quarter of 2008, we reduced our investment in auction rate securities by $625,000 and subsequent to June 30, 2008, by additional an $4.3 million. These securities were redeemed by their issuers at par value without any loss to Sucampo. We continue to closely monitor development surrounding the auction rate securities and we are encouraged by the recently publicized settlements between the brokers, the SEC, and various state regulatory authorities which include a program to redeem auction rate securities at par value. We were informed by our broker that the program will provide Sucampo an opportunity during a 2-year period beginning June 30th 2010 to have all auction rate securities it purchased redeemed at par values if such securities have not been already redeemed.

Finally, in terms of deferred revenue, during the second quarter 2008, we amended our billing procedures and we began receiving quarterly payments from Takeda for anticipated R&D activities related to AMITIZA upfront. Previously, we billed monthly at the end of the month. Based on this change, we recorded approximately $8.1 million of deferred revenue relating to these pre-payments.

Now, I will turn the call to Brad Fackler, our Executive Vice President of Commercial Operations.

Brad E. Fackler

The second quarter was a busy time for both the Sucampo and Takeda commercial teams. Following the FDA approval of AMITIZA 8 mcg for irritable bowel syndrome with constipation, we carried out an aggressive marketing campaign at the Digestive Disease Week or DDW Conference, the world’s largest gathering of gastroenterologists. The 8-mcg product is widely available and in pharmacies and promotion is ongoing. Current activities include sales force promotion which includes patient experience programs, journal advertising, public relations outreach, pharmacy programs, and web-based patient education strategies. As I mentioned before, a key part of the initial activities was focused around DDW. During the conference, Sucampo displayed ten abstracts and posters and had two oral presentations that highlighted AMITIZA’s scientific benefits in both chronic idiopathic constipation and irritable bowel syndrome with constipation.

The AMITIZA booth highlighted the approval of the 8 mcg for IBS-C. Initial feedback from the conference was encouraging and the conference provided us with an opportunity to significantly increase our visibility within the GI community and differentiate AMITIZA as the only product approved for both chronic idiopathic constipation and irritable bowel syndrome with constipation. We are encouraged by the most recent IMS monthly data that demonstrate that total and new AMITIZA prescriptions increased 5.9% and 7.7% respectively from June 2008 to July 2008, the second consecutive monthly increase. As of the week ended August 8, IMS data indicate that 8-mcg prescriptions now account for more than 16% of new AMITIZA scripts and 9.6% of total scripts. We are also seeing an increase in the average number of pills per script from approximately 55 initially to in excess of 58 in the most recently reported weeks. So, we’re seeing growth in the 8 mcg strength that is somewhat more robust than the story told by scripts alone.

Also, since the launch of the 8 mcg for IBS-C, we’ve seen a steady increase in the number of physicians prescribing AMITIZA. IMS data indicate that by the end of July nearly 4500 physicians had prescribed AMITIZA 8 mcg, up from approximately 2000 at the end of June. As you know, according to IMS retail prescription numbers, the total retail prescriptions for the laxative market is down nearly 10% for the second quarter 2008. Despite this trend, AMITIZA prescriptions held fairly steady during this period. We believe there are a few factors that account for these recent trends. AMITIZA has created a unique position in the constipation and IBS-C marketplace. On the other hand, the Takeda and cap integration remains ongoing. I expect their realignment including sales forces to be complete in October.

Additionally, some managed care plans seem to be encouraging patients to use OTC treatments rather than prescription therapy. Currently, Sucampo is working with Takeda to create payer and pull-through strategies to more aggressively address this trend. Our own Sucampo sales force which targets long-term care facilities and key opinion leaders within the academic medical centers continues to perform in line with our internal expectations. Sales for these segments are not reflected in the IMS retail prescription data and Sucampo continues to see an increasing portion of the total AMITIZA sales coming from these institutional segments. AMITIZA sales increased 3.5% sequentially for the second quarter versus the first quarter. Year-over-year, the increase was over 48%. As AMATIZA 8 mcg and 24 mcg have no upper age restrictions and a favorable adverse event profile, it is ideally suited for the long-term care market. Our sales team success in implementing our novel account management business model confirms that Sucampo continues to play a vital role in the success of AMITIZA.

Now, I’ll turn the call back to Dr. Ueno.

Ryuji Ueno

Now, I’d like to provide an update on our clinical development program starting with AMITIZA. As we have previously announced, our phase 4 study of patients with renal impairment is complete, and we submitted our final clinical study report to FDA in April. Our phase 4 study in patients with hepatic impairment is expected to be completed later this year, and we plan to file the results with FDA during the fourth quarter of this year. Our two pivotal phase 3 studies of AMITIZA 24 mcg capsules in patients with opioid-induced bowel dysfunction, a debilitating condition that can often contribute to the exacerbation of the pain symptoms, remain ongoing. We are targeting to enroll a total of 840 patients at up to 190 sites in the US and Canada; we currently have 189 active sites with over 400 patients enrolled. We expect to report data from the two pivotal phase 3 studies by the middle of next year.

According to IMS Health more than 200 million prescriptions were written for opioids in 2006 in the United States alone. Many studies indicate that a high percentage of patients receiving opioids are likely experience significant constipation and other symptoms of opioid bowel dysfunctions. If Sucampo is ultimately successful in getting approval for oral AMITIZA for this indication, it would provide the company with another substantial growth opportunity.

I am also pleased with the progress of our ongoing phase 2 dose finding study for chronic idiopathic constipation in Japan. As we informed you previously, we expect to announce the results from this double-brand study in the next month.

Now, onto cobiprostone, one of our next-generation prostone compounds. We continue to be on schedule in enrolling a target of 120 patients with 16 US sites currently active in our phase 2 dose finding 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 junction and repairing the stomach mucosa. The primary efficacy endpoint for this trial is overall incidence of gastric ulcers during study treatment and we expect to complete this trial later this year.

Also, we recently announced that we enrolled the first patient in a single-center phase 2 trial evaluating the safety and efficacy of cobiprostone for the treatment of portal hypertension in patients with liver cirrhosis. Cirrhosis is a chronic degenerative liver disease in which scar tissue replaces normal healthy tissue blocking the flow of blood through the organ. The obstruction in blood flow from cirrhosis is a common cause of portal hypertension. This phase 2 doubled-branded randomized placebo controlled study will enroll approximately 30 patients at the University of Texas, Southwestern Medical Center in Dallas. The primary efficacy endpoint is a change from baseline in hepatic venous pressure gradient following 28 days of study treatment. Secondary endpoint include acute changes in portal pressure following initial dosing with cobiprostone as well as changes in other markers of liver disease and patient reported quality of life measures.

We continue to make progress with our lead pre-clinical compound, SPI-017, and continue to expect the compound to move into clinical development later this year for peripheral vascular disease and Alzheimer’s disease.

Let me summarize the call by saying that AMITIZA has created a unique position in the constipation market by adding the IBS-C indication to chronic idiopathic constipation. The milestone revenue of $50 million received during the quarter facilitates our pipeline compound development.

That ends our prepared comments for this morning, and we would now be happy to answer your questions.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Andrew Finkelstein with Leerink Swann.

Andrew Finkelstein - Leerink Swann

I was hoping you could give some additional color on AMITIZA in terms of the amount of stocking seen for the 8 mcg in the second quarter as well as on the promotional front, when you might consider starting DTC with Takeda and any differences in the formulary position between the two strengths?

Brad E. Fackler

First of all, the stocking program went quite well in that we stocked slightly over what our goal was, and so at the time of launch it was available in approximately 65% of the retail outlets around the country. DTC is ongoing now. There is a web-based program that is out there and that is essentially since the DDW meeting there has been a callout in the amitiza.com website and other associated websites that announced the approval of the 8 mcg strength. Beginning very shortly, we will also enhance that and it will include a lead generation within the website as well as connections from key search engines such as Yahoo and Google. In addition, we will be kicking off in-physician office patient education programs as well as some in-pharmacy compliance programs, and as I said those will be kicking off very shortly.

Formulary, we continue to enjoy high levels of availability through managed care plans. We generally are at tier 2 or tier 3 coverage. We have unrestricted access in about 90% of the covered lives. In general, most of the plans have considered the 8 mcg as a line extension, so there are no additional hurdles that have been placed on that, and the copays have remained fairly constant in the mid $30 range. As I said in my comments, we are detecting that these plans are seen to be, and I should say, seen to be because we are still researching this at this point, but they seem to be facilitating the use of the OTC which obviously would result in no cash outlay for the plan. So we are working with Takeda right now to address pull-through and other strategies that can help us pull this through the channels.

Operator

Your next question comes from the line of Ian Sanderson with Cowen and Company.

Ian Sanderson – Cowen and Company

Actually a followup on the AMITIZA stocking numbers, could you just maybe give us the net impact? You had trade inventory of, I think it was estimated that you booked royalty revenues of $1.9 million related to the inventory stocking in Q2, and then there was the $800,000 delayed shipments from Q1, so maybe give us an idea of what the net royalty revenue impact from those was in Q2, and then secondly on the R&D spending side, the numbers seem relatively high for the quarter, and just what we should be a reasonable run rate to expect for the balance of the year?

Jan Smilek

This is Jan. Let me address the first question first. The numbers that you’ve quoted, those are actually the numbers that had half the impact on the quarter, so those are not the total numbers, but numbers that had impact on the second quarter, the $800,000 related to the delay in shipments that we were not able to recognize during the first quarter of 2008, and then the $1.9 million is the number that we recognized. There is a smaller number that we will recognize relating to the initial stocking period in the third quarter, but it’s in hundreds of thousands of dollars, not in millions. The stocking period was, I think, from the beginning of May to mid May, so it was only a 2-week period, and royalty revenue actually includes the 8-mcg sales that happened subsequent to that period as well.

Ian Sanderson – Cowen and Company

Are you saying there is that trade inventory levels have normalized, so we shouldn’t expect kind of a reversal effect in Q3?

Brad E. Fackler

I think that certainly the trade inventories for the 8 mcg are still at what I would consider stocking levels, and it will take us, if we can go by what happened in the original launch, up to about 6 to 7 months to work through that initial stocking, and remember stocking an inventory is a responsibility of Takeda, and I think just the important thing to note is because of the way our revenues are calculated, we don’t necessarily need to wait on everything to be pulled through as does Takeda in that, so you will see some differences in what Takeda may report and what we report on a quarterly basis.

Jan Smilek

But it is limited to $1.9 million. There is nothing else. With respect to the R&D spending, I guess what you can infer from our comment on revenue is that is probably the amount that we are right now budgeting for the next quarter for R&D spend. It was about $8.1 million.

Operator

Your next question comes from [inaudible].

Unidentified Analyst

I have a couple of questions. I will just ask them one at a time. Can we just start off with tax? I noticed that your tax rate for the first six months is 22.7%, and last year it was in the mid 30s, so going forward, can you give us any indication in the next six months and next 12 months, what do you expect your tax rate to be?

Jan Smilek

For the next 6 months, it’s going to be closer to the tax rate that we’ve recognized in the second quarter of 2008, and we expect that the tax rate is going to be close to normal next year, although obviously that will depend on the developments in the company and the programs that we’re expecting in 2009. As we said during the first quarter, the low tax rate in the first quarter was relating to the release of some deferred tax asset valuation allowances that we had and since we had received a $50 million milestone payment, we were able to release those allowances, and there was a discreet release and there was obviously an impact on the future revenue with respect to some NOLs as well, so that’s why the tax rate was so low, and you see, during the second quarter, it’s normalizing a little bit.

Unidentified Analyst

The second question is in relation to the ARSOs. You had $20.9 million at the end of the quarter, and subsequent to the end of the quarter, if I understood you correctly, you then sold another $4.3 and another $0.625, so that would bring your current balance to just under $16 million. Is that correct?

Jan Smilek

Actually $0.625 was redeemed before the end of the quarter. That was during the second quarter, and the $4.3 million was subsequent to the second quarter. The number that you see is we had $20.9 million in long term and we had the $3.9 in short term as of 06/30, so the number was higher than what you said before. We also had about $2.2 of unrealized loss on those securities and the numbers that I quoted were fair values, but we expect that given the changes in the auction rate securities markets and the recently announced settlement, we will see some changes in the unrealized losses as well.

Unidentified Analyst

Is there ongoing risk to the balance of the $20.9? Can you quantify that?

Jan Smilek

We believe that the risk is relating specifically to the illiquidity with respect to auction rate securities. We don’t see that the risk is with respect to specific securities. It’s more of an illiquid situation on the auction rate securities markets. We believe that the collateral has not been impaired, and we collect the interest income, and we don’t necessarily think that there’s a permanent impairment. This is a temporary impairment currency that we’re recording.

Unidentified Analyst

If I could ask a commercial question, going back to the comments on the DTC, are there plans to do more extensive DTC, for example, through the media? The obvious comparable is the Novartis DTC campaign that was done. Could you comment on whether we could see something on that scale ultimately with DTC?

Brad E. Fackler

We’re still in discussions with Takeda, and no decision has been made as of yet on the future of any kind of television campaign. I will say that we continue to work with the Takeda team on looking for the best ways to get out and to get the message out not only to the physicians in a professional promotion, but also to patients and consumers in consumer direct and direct to patient programs.

Unidentified Analyst

Do have a sense of when you would be in a position to share more with us as to how those DTC may ramp up?

Brad E. Fackler

We’re in constant discussions on that, so all I can say is that we just have not yet made a decision.

Unidentified Analyst

If I could ask a corporate development question, do you have any update as to what’s happening with discussions in Europe in terms of any sort of partnership in Europe?

Ryuji Ueno

In Europe, partnering discussion is going on. We are seeking opportunities for partnering.

Unidentified Analyst

Are you looking for one partner for all of Europe, or are you trying to do it on a more regional basis?

Ryuji Ueno

We retain all the options. Some of the candidates are bigger pharma, but some are smaller pharma, and we haven’t yet reached a conclusion, but we’re working with some potential partners.

Unidentified Analyst

Do you believe there is a possibility that a partnership would be solidified ahead of your approval in Europe?

Ryuji Ueno

We’re now analyzing when is the best time to make a partner because if the phase is going to the latter stage, for example, after the approval, the condition is going to be better in general, so we would like to make a partner when we think it is the best time. So, still these are all currently under discussion.

Operator

Your next question is a followup question from the line of Gary Nachman from Leerink Swann.

Gary Nachman – Leerink Swann

On AMITIZA, if you could remind us what you’re thinking about the timeline and size of the opportunity in Japan, and then in the US, any updates you might want to provide on your efforts to have another product for your sales force to promote.

Ryuji Ueno

I’ll talk about maybe the Japan side. The same thing to the Europe case. We have already started seeking partnering opportunities in Japan. In the Japanese case, the agency asked us to go back to the phase 2 dose-finding studies, and as you know we have almost completed the study, and we’ll look up the data next month, so we hope we could get good results from the dose-finding studies next month, and also from the partnering point, if the phase 2 is successful, we need to go to phase 3 trial, so we are now evaluating the same thing to the Europe, when is a good time for partnering, but we’ve already recognized potential partners, so we are now actively seeking and analyzing when is the best time and who to be partnered with. This is the Japanese situation.

Brad E. Fackler

And in terms of a potential co-promotion product for our sales force, we have been in discussions with a number of companies and we continue in discussion with companies around a number of different products. Those discussions are progressing, and at this time we don’t have anything to report other than we are in active discussions around that opportunity.

Operator

We’re showing no more questions at this time.

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.

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