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PropThink: Approval of Amitiza For Constipation Improves SCMP Presence in Europe

September 13, 2012 -

Sucampo Pharmaceuticals (NASDAQ:SCMP) announced Wednesday that its lead drug, Amitiza, received approval for marketing in the U.K. for chronic idiopathic constipation (CIC). This marks the second approval for Amitiza in Europe, and new indications like Opioid Induced Constipation (OIC) are expected to follow, increasing the market opportunity in the region. Thus far, SCMP has not agreed on price reimbursement with authorities in Switzerland, where the drug is approved for Irritable Bowel Syndrome (IBS), but the company is planning to launch the drug in the U.K. once it is approved for both CIC and OIC. While we expect the news to be beneficial to SCMP in the long-term, particularly given SCMP's low relative valuation, the impact to the stock has been muted due to a lack of communication from the company on how the drug will be distributed and sold. 
Sucampo retains full rights to commercialize Amitiza in the EU; partner Takeda co-markets the drug domestically; while Abbot (NYSE:ABT) holds Japanese rights. With full European marketing rights for Amitiza, Sucampo has the potential to capture value across the Atlantic, although building a European sales force may create a financial hurdle in the process; SCMP out-licensed the drug in the U.S. to reduce internal expenses and allow a more robust sales force to handle marketing. While the European opportunity is currently small without more indications or sales regions, Sucampo plans to file for regulatory approval in other European countries through a Mutual Recognition Process, which may speed up the continent-wide approval.  Should SCMP successfully partner Amitiza for the EU territories, we believe the stock would react favorably. In Japan, Amitiza was approved in June, and Sucampo should see a $15M milestone payment from Abbot by the end of the year, triggered by Amitiza's subsequent Japanese launch. The EU approval of Amitiza is an incremental positive to the SCMP story, with the potential for the company to partner the drug for EU sale and bring in a healthy licensing fee and ultimately, royalties on sales.
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