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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): March 2, 2017

 

 

Sucampo Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   001-33609   30-0520478
(State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer
Identification No.)

 

805 King Farm Blvd, Suite 550

Rockville, Maryland 20850

(Address of principal executive offices, including zip code)

 

(301) 961-3400

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On March 8, 2017, Sucampo Pharmaceuticals, Inc. (“the Company”) announced its consolidated financial results for the fourth quarter and full year ended December 31, 2016. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

 

The information in this Item 2.02 and Exhibit 99.1 to this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is not incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in any such filing.

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On March 2, 2017, Mr. Andrew Smith, the Company’s Chief Financial Officer, notified the Company’s Board of Directors of his intent to leave that position effective March 20, 2017. Mr. Smith has indicated that he has no disagreements with management.

 

Mr. Smith and the Company will enter into a Separation Agreement and General Release, most of the terms of which were previously negotiated pursuant to his Employment Agreement. Under the separation agreement, Mr. Smith will receive a lump sum separation payment equal to his annual base salary, and payment of health insurance premiums for a period of up to twelve months in exchange for a general release from all claims against the Company, and certain cooperation, non-solicitation, confidentiality, and non-disparagement provisions in favor of the Company. In addition, effective upon his separation, all of Mr. Smith’s previously awarded stock options, covering a total of 106,366 shares of the Company’s class A common stock, will vest and become immediately exercisable.

 

On March 2, 2017, in connection with Mr. Smith’s resignation, the Company’s Board of Directors appointed Mr. Peter Pfreundschuh, CPA as Chief Financial Officer and principal financial officer, effective March 20, 2017. Mr. Pfreundschuh, age 48, served as Vice President, Finance and Chief Financial Officer of Immunomedics Inc., a biopharmaceutical company, from September 2013 to June 2016 and as a consultant to that company from June 2016 to August 2016. From November 2008 until June 2013, Mr. Pfreundschuh was the Chief Financial Officer of CircuLite Inc., a commercial medical device company. Prior to that, Mr. Pfreundschuh was the Executive Director of Business Development and Licensing for AstraZeneca Pharmaceuticals L.P. Before AstraZeneca, he served at Johnson and Johnson in a variety of capacities, including Controller of the R&D division and Controller/Director of Marketing and Global Business Analytics, as well as Chief Financial Officer/Treasurer for 3 Dimensional Pharmaceuticals, which was acquired by Johnson and Johnson. Mr. Pfreundschuh has also held management positions at Alimenterics, Inc., and American Standard Companies, Inc., and was a Senior Auditor at Ernst & Young, LLP. Mr. Pfreundschuh received an M.B.A. with a concentration in finance from Rider University, a B.S. in accounting from Rutgers University School of Business, and continued his education through the Executive Strategic Marketing Program in Healthcare at the Kellogg School of Management at Northwestern University. He is a licensed Certified Public Accountant in New Jersey.

 

 

The Company and Mr. Pfreundschuh will enter into an employment agreement pursuant to which Mr. Pfreundschuh will (i) receive a one-time retention bonus of $75,000, (ii) receive an initial annual base salary of $375,000, (iii) be eligible to receive annual bonuses in accordance with the Company’s non-equity incentive plan and other benefits available to executive officers of the Company, (iv) be eligible to receive severance payments under certain circumstances, and (v) be subject to standard restrictions on competition or interference with the Company following termination. In addition, in connection with the commencement of his employment, Mr. Pfreundschuh will be awarded an option to purchase 150,000 shares of the Company’s class A common stock. In accordance with the Company’s option grant policy, the grant will have an exercise price equal to the closing price of the Company’s common stock on the Nasdaq Global Market on the date of grant. The option will vest over a four-year period, with 25% vesting on the March 20, 2018 and the remaining 75% vesting in equal monthly increments over the three-year period thereafter.

 

The Company expects that it and Mr. Pfreundschuh will enter into the Company's standard form of indemnification agreement, a copy of which has been filed on November 9, 2016 as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2016.

 

There are no arrangements or understandings between Mr. Pfreundschuh and any other persons pursuant to which Mr. Pfreundschuh was appointed as an officer of the Company. There are no transactions, or proposed transactions, during the last two years with the Company to which Mr. Pfreundschuh was or is to be a party, in which Mr. Pfreundschuh, or any member of his immediate family, has a direct or indirect material interest that would require disclosure under Item 404(a) of Regulation S-K. There is no familial relationship between Mr. Pfreundschuh and any other director or executive officer of the Company.

 

The foregoing description of the employment agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the employment agreement, which will be filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the fiscal period ending March 31, 2017.

 

Item 7.01 Regulation FD Disclosure.

 

On March 8, 2017, the Company will host a conference call with investors to discuss the Company's financial and operating results for the fourth quarter and full year ended December 31, 2016. The conference call including slides will be made available to the public via conference call and webcast. The slides from the presentation are being furnished as Exhibit 99.2 to this Current Report on Form 8-K.

 

The information in this Item 7.01 and Exhibit 99.2 to this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Item 8.01 Other Events.

 

On March 2, 2017 (the “Notice Date”), Sucampo received a Paragraph IV certification notice letter (the “Notice Letter”) regarding an Abbreviated New Drug Application (“ANDA”) submitted to the FDA by Amneal Pharmaceuticals (“Amneal”) requesting approval to market, sell and use a generic version of the 8 mcg and 24 mcg AMITIZA® (lubiprostone) soft gelatin capsule products for opioid-induced constipation.

 

In its Notice Letter, Amneal alleges that U.S. Patent Nos. 6,982,283; 7,064,148; 8,026,393; 8,097,653; 8,338,639; 8,389,542 and 8,779,787 (collectively, the “Patents”), which cover compositions, formulations and methods of using AMITIZA, are invalid, unenforceable and/or will not be infringed by Amneal’s manufacture, use or sale of the product described in its ANDA. The latest of the Patents expire in 2027. The Company is currently reviewing the Notice Letter. By statute, if the Company initiates a patent infringement lawsuit against Amneal within 45 days of the Notice Date, the FDA would automatically stay approval of the Amneal ANDA until the earlier of 30 months from the Notice Date or entry of a district court decision finding the patents invalid or not infringed. AMITIZA is currently protected by 15 issued patents that are listed in the FDA’s Orange Book.

 

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

 

99.1       Press Release issued by the Company on March 8, 2017.

99.2       The corporate update presentation slides dated March 8, 2017.

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

SUCAMPO PHARMACEUTICALS, INC.

 

Date:  March 8, 2017 By:   /s/  Andrew P. Smith
 

Name: Andrew P. Smith

Title:   Chief Financial Officer

 

 

 

 

 

 

 

 

EdgarFiling

EXHIBIT 99.1

Sucampo Reports Fourth Quarter and Full Year 2016 Financial Results

Continued Revenue Growth Leads to Strong Income Growth

Company Reiterates 2017 Guidance

Company Announces Key Executive Transitions

Company to Host Conference Call Today at 8:30 a.m. EST

ROCKVILLE, Md., March 08, 2017 (GLOBE NEWSWIRE) -- Sucampo Pharmaceuticals, Inc. (Sucampo) (NASDAQ:SCMP), a global biopharmaceutical company, today reported consolidated financial results for the fourth quarter and full year ended December 31, 2016.

Summary of ResultsQ4-16% Increase / (Decrease) over Q4-15FY-16% Increase / (Decrease) over FY-15
Revenue$73.0M32%$230.1 M50%
Net Income GAAP$15.3M51%$18.5M(45%)
EPS GAAP – diluted$0.34  49%$0.42(43%)
EBITDA$19.4M(23%)$87.1M44%
Adjusted Net Income$30.7M60%$66.2M52%
Adjusted EPS – diluted$0.6858%$1.5158%
Adjusted EBITDA$42.8M54%$117.7M68%

Additionally, today Sucampo announced two updates to its executive management team.  Andrew Smith, Chief Financial Officer, will be leaving Sucampo to move back to Europe with his family to pursue professional opportunities there.  He will remain in his CFO role through March 20 and will thereafter assist in the transition of his responsibilities.  Peter Pfreundschuh, CPA will become Sucampo’s new Chief Financial Officer, effective on March 20.  Also, effective March 20, Jones “Woody” Bryan, Ph.D. will become Sucampo’s new Senior Vice President of Business Development and Licensing.

“The strong financial results we achieved in the fourth quarter concluded an incredibly successful 2016 highlighted by significant growth in revenues, earnings and EBITDA and the achievement of several key corporate objectives,” said Peter Greenleaf, Chairman and Chief Executive Officer of Sucampo.  “We expect to maintain this momentum through 2017, with continued strong financial performance and execution on strategic transactions to further boost growth and diversify our product portfolio.  Additionally, I’d like to thank Andrew for his years of service to Sucampo, and I wish him and his family all the best as he embarks on the next phase of his professional life.  I’d also like to extend a warm welcome to Peter and Woody and look forward to the contributions they will make to Sucampo in these key roles.”

For the three months ended December 31, 2016, Sucampo reported year-over-year total revenue growth of 32% to $73.0 million.  Product sales revenue increased to $42.3 million, representing year over year growth of 43%, and product royalty revenue grew 15% year-over-year to $26.3 million. Revenue in the fourth quarter of 2016 also included a one-time milestone of $10 million related to the achievement of certain Amitiza sales milestones in Japan from Mylan N.V., versus a one-time sales milestones of $5 million in 2015.

Sucampo reported GAAP net income of $15.3 million, or $0.34 per diluted share during the fourth quarter of 2016 compared to GAAP net income of $10.2 million, or $0.23 per diluted share, during the fourth quarter of 2015, an increase of 51% and 49%, respectively.

Sucampo reported adjusted net income of $30.7 million, or $0.68 per diluted share, during the fourth quarter of 2016, compared to adjusted net income of $19.2 million, or $0.43 per diluted shares, during the fourth quarter of 2015, an increase year-over-year of 60% and 58%, respectively. Adjusted Net Income adjusts for specified items that can be highly variable or difficult to predict, and various non-cash items, which includes amortization of acquired intangibles, inventory step-up adjustment, R&D intangible asset impairment, restructuring costs, legal settlement, acquisition related expenses, amortization of debt financing costs, debt extinguishment, R&D license option expense, acquisition related acceleration of deferred revenue, foreign currency translations and the tax impact of these adjustments.

For the full year 2016, Sucampo reported year-over-year total revenue growth of 50% to $230.1 million.  Product sales revenue increased to $128.8 million, representing 94% year-over-year growth, and product royalty revenue grew 11% year-over-year to $82.5 million. Revenue for the year 2016 and 2015 included an additional $55.5 million and $11.8 million due to the acquisition of R-Tech Ueno, which we acquired on October 20, 2015. Excluding the additional revenues from the acquisition, base revenue grew by 22%.

For the full year 2016, Sucampo reported GAAP net income of $18.5 million, or $0.42 per diluted share compared to GAAP net income of $33.4 million, or $0.73 per diluted share, during the full year 2015, a decrease of 45% and 43%, respectively.  The fluctuation was primarily due to the release of inventory step-up and intangible amortization resulting from the aforementioned RTU acquisition.  On an adjusted basis, Sucampo reported net income of $66.2 million, or $1.51 per diluted share, during the full year 2016, compared to net income of $ 43.7 million, or $0.96 per diluted shares, during the full year 2015, an increase year-over-year of 52% and 58%, respectively.

Fourth Quarter 2016 Operational Review

CORPORATE

AMITIZA

United States

Global Markets

In Japan, Sucampo's revenue from sales of AMITIZA to Mylan was $26.2 million for the fourth quarter of 2016, compared to $17.9 million in the same period of 2015, an increase of 46%. Revenue in the fourth quarter of 2016 and 2015 included Japan sales milestones of $10 million and $5 million, respectively. For the full year 2016, revenue from sales of AMITIZA to Mylan was $72.7 million, compared to $53.9 million in the same period of 2015. Unit volume as reported by Mylan grew more than 41% for the full year 2016 compared to the full year 2015, to 137.0 million units versus 89.7 million units in 2015

Corporate

Research and Development

Fourth Quarter and Full Year 2016 Financial Review

Certain prior year non-GAAP amounts have been reclassified for consistency with the current period- adjusted presentation. These reclassifications had no effect on the reported results of operations. A reconciliation of adjusted Net Income to GAAP Net Income and adjusted EBITDA to net income, the most directly comparable GAAP financial measure, is included in the tables below.

  
 RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME
 (in thousands, except per share amounts)
     
 Three Months EndedThree Months
Ended		For the Year EndedFor the Year Ended
  December 31,
2016		 December 31,
2015		 December 31,
2016		 December 31,
2015
Adjusted Non-GAAP Net Income:    
GAAP Net Income15,28310,15118,48733,371
Non-GAAP Adjustments:    
Amortization of Acquired Intangibles6,7483,73225,6553,732
Inventory Step Up Adjustment-5,64515,2365,645
R&D  Intangible Asset Impairment--7,286-
Restructuring Costs4559582,350958
Legal Settlement---9,515-
Acquisition Related Expenses-3,9142,1735,135
Amortization of Debt Financing Costs8418703,526870
Loss on Debt Extinguishment14,047-14,047-
R&D License Option--3,000 
Acceleration of Deferred Revenue--4,079--4,079
Foreign Currency Translation7,07012311,280178
Tax Effect of Adjustments-13,762-2,119-27,313-2,119
Total Non-GAAP Adjustments15,3999,04447,72510,320
Adjusted Non-GAAP Net Income30,68219,19566,21243,691
     
Weighted Average Shares - Dilutive    
Adjusted Non-GAAP Net Income Per Share - Diluted44,91044,33843,74945,680
GAAP Net Income per Share - Diluted0.340.230.420.73
Non-GAAP Adjustments0.340.201.090.23
Adjusted Non-GAAP Net Income per Share -  Diluted0.68 0.43 1.51 0.96
     
     
 RECONCILIATION OF INCOME FROM OPERATIONS TO ADJUSTED EBITDA
 (in thousands, except per share amounts)
     
 Three Months
Ended		Three Months
Ended		For the Year
Ended		For the Year
Ended
  December 31,
2016		 December 31,
2015		 December 31,
2016		 December 31,
2015
GAAP Net Income15,28310,15118,48733,371
Adjustments:    
Taxes-8,433-684-4,11210,304
Interest expense5,6206,07023,7616,854
Interest Income-5-27-72-181
Depreciation217221904623
R&D Intangible Asset Impairment -7,286-
Amortization of Acquired Intangibles6,7483,73225,6553,732
Inventory Step Up Adjustment 5,64515,2365,645
EBITDA19,43025,10887,14560,348
Non-GAAP Adjustments:    
Share Based Compensation Expense1,8381,7427,2587,349
Restructuring Costs4559582,350958
Acquisition Related Expenses-3,9142,1735,135
Loss on Debt Extinguishment14,047 14,047-
R&D License Option  3,000 
Legal Settlement---9,515-
Foreign Currency Translation7,07012311,280178
Acceleration of Deferred Revenue--4,079 -4,079
Total Non-GAAP Adjustments23,4102,65830,5939,541
Adjusted EBITDA42,84027,766117,73869,889

Cash, Cash Equivalents, Restricted Cash, and Marketable Securities

Geographic Sales

 
   Three months ended December 31, 2016 Three months ended December 31, 2015
(In thousands) USA Japan Rest of
the
World		 Total USA Japan Rest of
the
World		 Total
                  
AMITIZA Product sales 13,211  26,173 - 39,384 10,311 17,929 - 28,240
AMITIZA Royalty 26,259  - - 26,259 22,792 137 - 22,929
Rescula Product Sales (33) 2,906 - 2,873 49 1,310 - 1,359
 Total 39,437  29,079 - 68,516 33,152 19,376 - 52,528


   Twelve months ended December 31, 2016 Twelve months ended December 31, 2015
(In thousands) USA Japan Rest of
the
World		 Total USA Japan Rest of
the
World		 Total
                  
AMITIZA Product sales 45,164  72,682 792 118,638 10,311 53,855 - 64,166
AMITIZA Royalty 82,264    - 82,264 74,001 137 - 74,138
Rescula Product Sales (11) 10,169 - 10,158 797 1,310 3 2,110
 Total 127,417  82,851 792 211,060 85,109 55,302 3 140,414

Guidance

Sucampo today reiterated its guidance for the full year ending December 31, 2017. Sucampo expects total revenue of $220.0 million to $230.0 million, adjusted net income of $80.0 million to $90.0 million, adjusted diluted EPS of $1.35 to $1.50, and adjusted EBITDA of $145.0 million to $155.0 million. Adjusted net income guidance excludes amortization of acquired intangibles of approximately $22.58 million and debt financing related costs of $3.1 million.  Adjusted EBITDA guidance excludes stock option related costs of $6.0 million.

Non-GAAP Financial Measures

This press release contains three financial metrics (Adjusted Net Income, EBITDA and Adjusted EBITA) that are considered “non-GAAP” financial metrics under applicable Securities and Exchange Commission rules and regulations. These non-GAAP financial metrics should be considered supplemental to and not a substitute for financial information prepared in accordance with generally accepted accounting principles. The company’s definition of these non-GAAP metrics may differ from similarly titled metrics used by others. Adjusted Net Income adjusts for specified items that can be highly variable or difficult to predict, and various non-cash items, which includes amortization of acquired intangibles, inventory step-up adjustment, R&D intangible asset impairment, restructuring costs, legal settlement, acquisition related expenses, amortization of debt financing costs, debt extinguishment, R&D license option expense, acquisition related acceleration of deferred revenue, foreign currency translations and the tax impact of these adjustments. EBITDA reflects net income excluding the impact of provision for income taxes, interest expense, interest income, depreciation, R&D intangible asset impairment, amortization of acquired intangibles, and inventory step-up adjustments. Adjusted EBITDA reflects EBITDA and adjusts for specified items that can be highly variable or difficult to predict, and various  non-cash items, which includes share based compensation expense, restructuring costs, acquisition related expenses, debt extinguishment, R&D license option, legal settlement, foreign currency translations and the acquisition related acceleration of deferred revenue. The company views these non-GAAP financial metrics as a means to facilitate management’s financial and operational decision-making, including evaluation of the company’s historical operating results and comparison to competitors’ operating results. These non-GAAP financial metrics reflect an additional way of viewing aspects of the company’s operations that, when viewed with GAAP results may provide a more complete understanding of factors and trends affecting the company’s business.

The determination of the amounts that are excluded from these non-GAAP financial metrics is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts. Because non-GAAP financial metrics exclude the effect of items that will increase or decrease the company’s reported results of operations, management strongly encourages investors to review the company’s consolidated financial statements and publicly-filed reports in their entirety.

Company to Host Conference Call Today

Sucampo will host a conference call and webcast today, Wednesday, March 8, 2017 at 8:30 am ET. Conference call and Webcast participation details are as follows:
Dial-in number: 888-636-8238 (domestic) or 484-747-6635 (international)
Passcode: 71158094
Webcast link: http://www.sucampo.com/investors/events-presentations/

Conference call replay:
Dates: Starting at 11:30 AM ET, March 8, 2017 a replay of the teleconference and webcast will be available
Dial-in number: 855-859-2056 (domestic) or 404-537-3406 (international)
Passcode: 71158094
Webcast link: http://www.sucampo.com/investors/events-presentations/; then click ‘Archived Events’

About AMITIZA® (lubiprostone)

AMITIZA (lubiprostone) is a chloride channel activator that acts locally in the small intestine. By increasing intestinal fluid secretion, lubiprostone increases motility in the intestine, thereby facilitating the passage of stool and alleviating symptoms associated with CIC. Lubiprostone, via activation of apical CIC-2 channels in intestinal epithelial cells, bypasses the antisecretory action of opiates that results from suppression of secretomotor neuron excitability. Activation of CIC-2 by lubiprostone has also been shown to stimulate recovery of mucosal barrier function and reduce intestinal permeability via the restoration of tight junction protein complexes in ex vivo studies of ischemic porcine intestine.

AMITIZA (24 mcg twice daily) is indicated in the U.S. and Israel for the treatment of adults with CIC and opioid-induced constipation (OIC) with chronic, non-cancer pain. AMITIZA (8 mcg twice daily) is also approved in the U.S. and Israel for irritable bowel syndrome with constipation (IBS-C) in women 18 years of age and older. In Japan, AMITIZA (24 mcg twice daily) is indicated for the treatment of chronic constipation (excluding constipation caused by organic diseases). In Canada, AMITIZA (24 mcg twice daily) is indicated for the treatment of CIC in adults. In the U.K., AMITIZA (24 mcg twice daily) is indicated for the treatment of CIC and associated symptoms in adults, when response to diet and other non-pharmacological measures (e.g. educational measures, physical activity) are inappropriate. In Switzerland, AMITIZA (24 mcg twice daily) is indicated for the treatment of CIC in adults and for the treatment of OIC and associated signs and symptoms such as stool consistency, straining, constipation severity, abdominal discomfort, and abdominal bloating in adults with chronic, non-cancer pain. The efficacy of AMITIZA for the treatment of OIC in patients taking opioids of the diphenylheptane class, such as methadone, has not been established.

About RESCULA®

Unoprostone isopropyl 0.12% (trade named RESCULA) first received marketing authorization in 1994 in Japan for the treatment of glaucoma and ocular hypertension. RESCULA is marketed in Japan by Santen Pharmaceutical Co., Ltd. (Santen).  We acquired RESCULA as part of the acquisition of R-Tech Ueno in 2015.

About Sucampo Pharmaceuticals, Inc.

Sucampo Pharmaceuticals, Inc. is focused on the development and commercialization of medicines that meet major unmet medical needs of patients worldwide. Sucampo has two marketed products – AMITIZA, its lead product, and RESCULA. A global company, Sucampo is headquartered in Rockville, Maryland, and has operations in Japan, Switzerland and the U.K. For more information, please visit www.sucampo.com.

The Sucampo logo and the tagline, The Science of Innovation, are registered trademarks of Sucampo AG. AMITIZA is a registered trademark of Sucampo AG.

Follow us on Twitter (@Sucampo_Pharma). Follow us on LinkedIn (Sucampo Pharmaceuticals).

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Sucampo Forward-Looking Statement

This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include statements regarding financial results, product development, and other statements that are not historical facts. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the impact of pharmaceutical industry regulation and health care legislation; Sucampo's ability to accurately predict future market conditions; dependence on the effectiveness of Sucampo's patents and other protections for innovative products; the effects of competitive products on Sucampo’s products; and the exposure to litigation and/or regulatory actions.

No forward-looking statement can be guaranteed and actual results may differ materially from those projected. Sucampo undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this press release should be evaluated together with the many uncertainties that affect Sucampo's business, particularly those mentioned in the risk factors and cautionary statements in Sucampo's most recent Form 10-K as filed with the Securities and Exchange Commission on March 4, 2016 as amended, as well as its filings with the Securities and Exchange Commission on Forms 8-K and 10-Q since the filing of the Form 10-K, all of which Sucampo incorporates by reference.

    
Sucampo Pharmaceuticals, Inc.   
Consolidated Balance Sheets (unaudited)   
(in thousands, except share and per share data)   
      
    December 31, 
    2016   2015 
ASSETS:   
      
Current assets:   
 Cash and cash equivalents$198,308  $108,284 
 Product royalties receivable 26,261   22,792 
 Accounts receivable, net 42,998   22,759 
 Deferred charge, current 17   295 
 Restricted cash, current 213   55,218 
 Inventories, net 23,468   33,121 
 Prepaid expenses and other current assets 15,967   8,891 
  Total current assets 307,232   251,360 
      
Investments, non-current 5,495   - 
Property and equipment, net 6,216   6,393 
Intangible assets 128,134   130,315 
Goodwill 73,022   60,937 
In-process research & development -   6,171 
Deferred charge, non-current 62   1,400 
Other assets 690   605 
  Total assets$520,851  $457,181 
      
LIABILITIES AND STOCKHOLDERS' EQUITY:   
      
Current liabilities:   
 Accounts payable$9,190  $11,213 
 Accrued expenses 12,389   10,886 
 Deferred revenue, current 1,315   676 
 Collaboration obligation -   5,623 
 Income tax payable 7,153   6,507 
 Notes payable, current -   39,083 
 Other current liabilities 2,304   14,139 
  Total current liabilities 32,351   88,127 
      
Notes payable, non-current 290,516   213,277 
Deferred revenue, non-current 805   1,088 
Deferred tax liability, net 21,289   52,497 
Other liabilities 8,791   15,743 
 Total liabilities 353,752   370,732 
      
      
      
Stockholders' equity:   
Preferred stock, $0.01 par value; 5,000,000 shares authorized at December 31, 2016 and 2015;   
 no shares issued and outstanding at December 31, 2016 and 2015, respectively -   - 
Class A common stock, $0.01 par value; 270,000,000 shares authorized at December 31, 2016 and  
 2015; 46,415,749 and 45,509,150 shares issued and outstanding at December 31, 2016 and 2015, respectively 464   455 
Class B common stock, $0.01 par value; 75,000,000 shares authorized at December 31, 2016 and   
 2015;  no shares issued and outstanding at December 31, 2016 and 2015 -   - 
Additional paid-in capital 120,251   99,212 
Accumulated other comprehensive income 54,527   13,412 
Treasury stock, at cost; 3,009,942 shares at December 31, 2016 and 2015 (46,269)  (46,269)
Retained earnings 38,126   19,639 
  Total stockholders' equity 167,099   86,449 
Total liabilities and stockholders' equity$520,851  $457,181 
      

 

Sucampo Pharmaceuticals, Inc.        
Consolidated Statements of Operations and Comprehensive Income  (unaudited)   
(in thousands, except per share data)        
           
   Three Months Ended December 31, Year Ended December 31, 
    2016   2015   2016   2015  
           
Revenues:         
 Product royalty revenue$26,258  $22,929  $82,480  $74,138  
 Product sales revenue 42,258   29,598   128,796   66,276  
 Research and development revenue 2,868   2,731   12,839   10,199  
 Contract and collaboration revenue 1,640   110   5,941   2,567  
 Co-promotion revenue -   -   -   -  
  Total revenues 73,024   55,368   230,056   153,180  
           
Costs and expenses:        
 Costs of goods sold 16,725   18,075   76,003   36,731  
 Impairment of in-process research & development 0   -   7,286   -  
 Research and development 11,035   11,346   46,615   33,631  
 General and administrative 11,387   13,154   43,798   35,517  
 Selling and marketing 384   1,225   2,478   2,842  
  Total costs and expenses 39,531   43,800   176,180   108,721  
           
Income from operations 33,493   11,568   53,876   44,459  
Non-operating income (expense):        
 Interest income 5   26   72   181  
 Interest expense (5,620)  (6,070)  (23,761)  (6,854) 
 Loss on debt extinguishment (14,047)  -   (14,047)  -  
 Other income (expense), net (6,981)  3,942   (1,765)  5,889  
  Total non-operating expense, net (26,643)  (2,102)  (39,501)  (784) 
           
Income before income taxes 6,850   9,466   14,375   43,675  
Income tax benefit (provision) 8,433   685   4,112   (10,304) 
Net income $15,283  $10,151  $18,487  $33,371  
           
Net income per share:        
 Basic $0.36  $0.24  $0.43  $0.76  
 Diluted$0.34  $0.23  $0.42  $0.73  
Weighted average common shares outstanding:        
 Basic  43,049   42,885   42,791   44,150  
 Diluted 44,910   44,338   43,749   45,680  


Contact:
Sucampo Pharmaceuticals, Inc.
Silvia Taylor
Senior Vice President, Investor Relations and Corporate Affairs
1-240-223-3718
staylor@sucampo.com

EXHIBIT 99.2

 

 

March 8, 2017 Fourth Quarter 2016 Corporate Update and Financial Results

 

Introductions and Forward - Looking Statements Silvia Taylor, SVP Investor Relations & Corporate Affairs

 

Agenda Introductions and Forward - Looking Statements Silvia Taylor Corporate Update Peter Greenleaf Pipeline Update Peter Kiener , D. Phil Financial Update Andrew Smith Closing Remarks Peter Greenleaf 3

 

Forward Looking Statement This presentation contains "forward - looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward - looking statements may include statements regarding produc t development, and other statements that are not historical facts. The following factors, among others, could cause actual resu lts to differ from those set forth in the forward - looking statements: the impact of pharmaceutical industry regulation and health care legisla tion; Sucampo's ability to accurately predict future market conditions; dependence on the effectiveness of Sucampo's patents and ot her protections for innovative products; the effects of competitive products on Sucampo’s products; and the exposure to litigatio n a nd/or regulatory actions. No forward - looking statement can be guaranteed and actual results may differ materially from those projected. Sucampo undertakes no obligation to publicly update any forward - looking statement, whether as a result of new information, future events, or otherwise . Forward - looking statements in this press release should be evaluated together with the many uncertainties that affect Sucampo's business, particularly those mentioned in the risk factors and cautionary statements in Sucampo's most recent Form 10 - K as filed with the Securities and Exchange Commission on March 11, 2016, as amended, as well as its filings with the Securities and Exchange Commission on Forms 8 - K and 10 - Q since the filing of the Form 10 - K, all of which Sucampo incorporates by reference. 4

 

Non - GAAP Metrics This presentation contains three financial metrics (Adjusted Net Income, EBITDA and Adjusted EBITA) that are considered “non - GAAP” financial metrics under applicable Securities and Exchange Commission rules and regulations. These non - GAAP financial metr ics should be considered supplemental to and not a substitute for financial information prepared in accordance with generally acc ept ed accounting principles. The company’s definition of these non - GAAP metrics may differ from similarly titled metrics used by other s. Adjusted Net Income adjusts for specified items that can be highly variable or difficult to predict, and various non - cash items, which includes amortization of acquired intangibles, inventory step - up adjustment, R&D intangible asset impairment, restructuring cost s, legal settlement, acquisition related expenses, amortization of debt financing costs, debt extinguishment, R&D license option expen se, acquisition related acceleration of deferred revenue, foreign currency translations and the tax impact of these adjustments. EBI TDA reflects net income excluding the impact of provision for income taxes, interest expense, interest income, depreciation, R&D int angible asset impairment, amortization of acquired intangibles, and inventory step - up adjustments. Adjusted EBITDA reflects EBITDA and a djusts for specified items that can be highly variable or difficult to predict, and various non - cash items, which includes share based compensation expense, restructuring costs, acquisition related expenses, debt extinguishment, R&D license option, legal settl eme nt, foreign currency translations and the acquisition related acceleration of deferred revenue. The company views these non - GAAP fin ancial metrics as a means to facilitate management’s financial and operational decision - making, including evaluation of the company’s h istorical operating results and comparison to competitors’ operating results. These non - GAAP financial metrics reflect an additional way o f viewing aspects of the company’s operations that, when viewed with GAAP results may provide a more complete understanding of factors and trends affecting the company’s business. The determination of the amounts that are excluded from these non - GAAP financial metrics is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts. Because non - GAAP financial metrics exclude the effect of items that will increase or decrease the company’s reported results of operations, management strongly enc ourages investors to review the company’s consolidated financial statements and publicly - filed reports in their entirety. 5

 

Q4 and FY 2016 Corporate Update Peter Greenleaf, Chairman and CEO

 

Continued Financial and Operational Performance 4Q REVENUE • Overall revenue grew 32% YoY to $73M • Product sales grew 43% to $42M • Product royalty revenue grew 15% to $26M EARNINGS* * Adjusted figures exclude non - cash , one time items, and items associated with RTU acquisition ** Adjusted EBITDA includes stock - based compensation expenses and other one time items 7 Summary of Results Q4 - 16 % Increase / (Decrease) over Q3 - 15 Net Income GAAP $15.3M 51% EPS GAAP – diluted $0.34 49% EBITDA $19.4M (23%) Adjusted Net Income* $30.7 60% Adjusted EPS – diluted* $0.68 58% Adjusted EBITDA** $42.8 54%

 

Pipeline Progress • Significant changes to pipeline completed • Two key programs remaining: – Life - cycle management of AMITIZA – Phase 3 partnership with CPP in FAP 8

 

Positioning Sucampo for Mid to Long - Term Growth • Significant progress in integration of RTU following late 2015 acquisition – Including manufacturing of AMITIZA and RESCULA • Collaboration and option agreement with CPP completed in 2016 • Settlement and license agreement with Dr. Reddy’s regarding lubiprostone – Provides additional clarity on future value of AMITIZA franchise • Paragraph IV certification notice letter received on March 2 regarding ANDA submitted to US FDA by Amneal Pharmaceuticals requesting approval to market, sell and use a generic version of 8 mcg and 24 mcg AMITIZA for OIC – Sucampo intends to file a patent infringement lawsuit within 45 days of notice date 9

 

Strong Balance Sheet • Completed a $300M convertible senior notes offering in late 2016 in private placement to qualified institutional buyers • Proceeds used to pay off $250M credit facility • Use of proceeds includes completing additional transactions 10

 

Strong Q4 2016 U.S. AMITIZA Performance • Takeda’s AMITIZA net sales for royalty calculation purposes – Q4 grew 11% YoY to $114M • Royalty revenue grew 15% YoY to $26M – Driven by price increase in January 2016 and volume • U.S. AMITIZA product sales to Takeda of $13M • Total U.S. revenue of $39M • AMITIZA TRx – Q4 IMS: ~384,000 TRx, decrease of approximately 2% YoY – 12 months of 2016 IMS: TRx growth of approximately 1% YOY 11

 

Expected AMITIZA U.S. Growth Drivers • Competitive positioning in commercial and Part D payer plans – CVS Caremark preferred formulary • Highly - targeted DTC television campaign in select key markets • Encouraging growth trends for AMITIZA early in 2017 • Takeda took 6% price increase in January of 2017 12

 

Japan AMITIZA Performance • Sucampo Q4 revenue: $26.2M, growth of 46% YoY – Includes $10M milestone related to achievement of certain revenue targets • Excluding milestone payments, Q4 revenue grew 25% YoY • Driven by volume – Increased 41% YoY for the full year of 2016 • Growth drivers: – Strong market growth – Only branded constipation prescription medicine – Broad label of constipation 13

 

2017 Guidance Reiterated • Total revenue: $220 million to $230 million • Adjusted net income: $80 million to $90 million • Adjusted EPS: $1.35 to $1.50 • Adjusted EBITDA: $145 million to $155 million • Revenue does not include any milestone payments Adjusted net income guidance excludes amortization of acquired intangibles of approximately $22.58 million, debt financing related costs of $3.1 million. Adjusted EBITDA guidance excludes stock option related costs of $6.0 million. 14

 

Senior Management Transitions • Andrew Smith transitioning out of CFO role to move back to Europe with family to purse professional opportunities there – Effective March 20 – Will assist with transition • Peter Pfreundschuh , CPA, appointed CFO effective March 20 – Experienced CFO – Immunomedics , CircuLite , AstraZeneca, J&J, Alimenterics • Dr. Woody Bryan appointed Senior Vice President of Business Development & Licensing effective March 20 – Expertise in BD and Licensing – Lupin , Supernus , Shire, Applied Analytical Industries, Schering - Plough 15

 

Pipeline Update Peter Kiener , D. Phil, CSO

 

Pediatric Phase 3 Results with Current Formulation • Phase 3 trial of AMITIZA vs. placebo in children 6 to 17 years of age • Evaluated doses of 12 and 24 mcg over 12 weeks • Primary endpoint of overall spontaneous bowel movement (SBM) response • Did not achieve primary endpoint of overall SBM response • Did show trend in favor of efficacy • Achieved statistical significance for key secondary endpoints – Overall SBM frequency – Straining – Stool consistency • Well - tolerated 17

 

FDA Feedback • FDA to review complement of data from AMITIZA phase 3 pediatric program – Including final long term safety and efficacy data from 9 - month extension • FDA confirmed aggregate data will be sufficient to submit sNDA for pediatric indication • Expect to file sNDA in 2H 2017 • Phase 3 study of pediatric sprinkle formulation to begin in 1H 2018 18

 

19 Product Pipeline Sucampo Program Option Program Target First Indication Development Stage (s)NDA / MAA Filing Approval GI/Metabolic/ Inflamation AMITIZA CIC2 Pediatric functional constipation (6 - 17 yrs.) P3 2017 2018 Lubiprostone Sprinkle Formulation CIC2 Pediatric functional constipation 6 mos - 5 yrs (1); adult CIC (2) P3 2018(1); 2017 (2) 2019 (1); 2018 (2) CPP - 1X/sulindac combination product Polyamines Familial Adeneomatous Polyposis P3 2018 2019

 

Financial Update Andrew Smith, CFO

 

Q4 Revenue 21 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 Q4 2015 Amitiza US royalty Amitiza US product sales Amitiza Japan product sales Amitiza Japan milestone R&D Revenue Q4 2016 $ Million

 

Q4 Adjusted Net Income 22 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 Q4 2015 Gross margin Op Ex Acquisition related exp Tax rate Non-operating exp Q4 2016 $ Million

 

Q4 Adjusted EBITDA 23 0.0 10.0 20.0 30.0 40.0 50.0 Q4 2015 Gross margin Operating expense Exchange loss Q4 2016 $ Million

 

Key Balance Sheet Items Item As of 12 /31/16 Change As of 12/31/15 Cash, Cash Equivalents and Restricted Cash $198.5M $35.0M $163.5M Notes Payable $290.5M ($38.1M) $252.4M Net Debt $92.0M ($3.1M) $88.9M 24

 

Closing Remarks Peter Greenleaf, Chairman and CEO

 

2017 Areas of Focus 1. Deliver outstanding financial performance, both top and bottom line 2. Progress pipeline programs 3. Evaluate and execute on additional opportunities for growth 26

 

Q&A Session

 

Reconciliation of GAAP Net Loss to Non - GAAP Net Income 28 RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME (in thousands, except per share amounts) Three Months Ended Three Months Ended For the Year Ended For the Year Ended December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 Adjusted Non-GAAP Net Income: GAAP Net Income 15,283 10,151 18,487 33,371 Non-GAAP Adjustments: Amortization of Acquired Intangibles 6,748 3,732 25,655 3,732 Inventory Step Up Adjustment - 5,645 15,236 5,645 R&D Intangible Asset Impairment - - 7,286 - Restructuring Costs 455 958 2,350 958 Legal Settlement - - -9,515 - Acquisition Related Expenses - 3,914 2,173 5,135 Amortization of Debt Financing Costs 841 870 3,526 870 Loss on Debt Extinguishment 14,047 - 14,047 - R&D License Option - - 3,000 Acceleration of Deferred Revenue - -4,079 - -4,079 Foreign Currency Translation 7,070 123 11,280 178 Tax Effect of Adjustments -13,762 -2,119 -27,313 -2,119 Total Non-GAAP Adjustments 15,399 9,044 47,725 10,320 Adjusted Non-GAAP Net Income 30,682 19,195 66,212 43,691 Weighted Average Shares - Dilutive Adjusted Non-GAAP Net Income Per Share - Diluted 44,910 44,338 43,749 45,680 GAAP Net Income per Share - Diluted 0.34 0.23 0.42 0.73 Non-GAAP Adjustments 0.34 0.20 1.09 0.23 Adjusted Non-GAAP Net Income per Share - Diluted 0.68 0.43 1.51 0.96

 

Reconciliation of Income from Operations to Adjusted EBITDA 29 RECONCILIATION OF INCOME FROM OPERATIONS TO ADJUSTED EBITDA (in thousands, except per share amounts) Three Months Ended Three Months Ended For the Year Ended For the Year Ended December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 GAAP Net Income 15,283 10,151 18,487 33,371 Adjustments: Taxes -8,433 -684 -4,112 10,304 Interest expense 5,620 6,070 23,761 6,854 Interest Income -5 -27 -72 -181 Depreciation 217 221 904 623 R&D Intangible Asset Impairment - 7,286 - Amortization of Acquired Intangibles 6,748 3,732 25,655 3,732 Inventory Step Up Adjustment 5,645 15,236 5,645 EBITDA 19,430 25,108 87,145 60,348 Non-GAAP Adjustments: Share Based Compensation Expense 1,838 1,742 7,258 7,349 Restructuring Costs 455 958 2,350 958 Acquisition Related Expenses - 3,914 2,173 5,135 Loss on Debt Extinguishment 14,047 14,047 - R&D License Option 3,000 Legal Settlement - - -9,515 - Foreign Currency Translation 7,070 123 11,280 178 Acceleration of Deferred Revenue - -4,079 -4,079 Total Non-GAAP Adjustments 23,410 2,658 30,593 9,541 Adjusted EBITDA 42,840 27,766 117,738 69,889