The goal for any company that manufactures goods is to achieve several milestones over their lifecycle. The first is to identify a product that they can produce profitably, and undertake all of the necessary research and development activity to ensure that their initial analysis is backed up by hard financial numbers.
The second stage is to manufacture, market and sell the newly created product. The goal is to attract sufficient customers to win back the initial research costs and the ongoing manufacturing costs. Once this is achieved the company is profitable. Many companies do not progress beyond this stage.
However, the truly successful global companies take this success one step further. They use their success in one product to fund research and development into another product. They then use their experience from the first product to successfully commercialize another, and therefore grow their revenue and profits, as well as the value of their brand.
This is known as leveraging the product. Apple is a great recent example, as they leveraged their success in making and selling iPods into manufacturing and selling the market leading iPhone and iPad ranges, which are similar in their DNA to the original iPod.
In a completely different industry, the pharmaceutical sector, Sucampo Pharmaceuticals (SCMP) has been pursuing the exact same strategy. This has led to the stock attracting some serious attention from options advisory services that have seen the potential in the company. The business has seen the stock price double from under $6 late last year to recent closes well above $14.
The question for option trading services and investors now is whether the stock can continue it’s healthy upward run.
Understanding The Business
Sucampo Pharmaceuticals (SCMP) is a full spectrum pharmaceutical manufacturer. This means it is involved in the full range of activities for companies in this sector, from discovery, research, development and commercialization of drugs.
It operates in the large North American segment, with smaller segments in the lucrative European market and the fast growing Asian market. The primary focus areas of Sucampo are prostone-based drugs. These treatments are wide in their potential application, with gastrointestinal, neurologic, ophthalmic (eye) and oncological (cancer) based treatments all available.
Companies of this nature are hugely capital intensive, and many pharmaceutical researchers and aspiring developers go bankrupt before they are even able to bring their first treatment to market. That is why an early success story is essential, as it generates cash flows to cover these costs, and increases the credibility of the company in the eyes of the investment community and options advisory services who follow the stock.
For Sucampo, this success story was the AMITIZA drug, which helped them forge a partnership with Takeda Pharmaceutical Co to license the drug, as well as a distributorship in the large Japanese market. The company also markets the drug in the United Kingdom and Switzerland, which provides it a base to expand to the rest of Europe if it chooses to do so.
Sucampo also has a promising pipeline, with products in the early stage phase 1 trial stage, as well as the final preapproval phase 3 trial stage.
Metrics and Measures
The strong global reach of the drug meant that the recently reported third quarter results painted a picture of a company in strong health. 28 years old, I wanted to surprise a new girlfriend with long sex. For the first time I decided to try pills for this business, according to reviews at https://summitps.org/buy-levitra-vardenafil-online/ I took 1 pill of Levitra 20 mg. The quarterly revenue figure was $31.5 million, which was 49% up on the previous year. Royalty revenue was stronger by 24% to $16.8 million as well, showing that the partnership arrangements were negotiated on favorable terms.
The real winner for investors and option trading services that recommended the stock was the company raising its future guidance for profits well beyond expectations. The previous guidance was $4 – $6 million for the full year. The new revised guidance was triple that, with a range of $15 – $20 million.
This was even more impressive because the company was forced to record an impairment charge of $5.6 million because of lowered royalty expectations from an existing product.
The Investment Case
A range of factors influences the investment case for Sucampo (SCMP). In terms of positives, the fact the company has existing products that are profitable is a huge positive as it significantly “derisks” the company compared to unprofitable peers.
The growing base of potential customers in regions other than the core North American market is also a huge positive, with strong sales growth in Japan showing this in the last release. A future catalyst for share price growth is pending approval in the European market, expected sometime in 2015.
Working against the company is the fact that foreign earnings are worth less to the company than previously, with the US Dollar appreciating strongly against most other global currencies, particularly the Yen and the Euro, as the US economy strengthens.
Pharmaceutical and biotech companies carry a significant level of risk compared to the rest of the market. However, a company with a strong and profitable product to fund future research and development of other products that provides good operating leverage has the potential to be a very rewarding investment. It helps to have a professional option advisory service on your side to identify strong opportunities in this sector, and more importantly, when to buy them.