Sucampo's Declaration Of Independence
By Wayne Koberstein, Executive Editor, Life Science Leader
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Scale-up continues long after start-up with this small but fully integrated company.
Signing a deal can seal your fate. An exit for your investors may mean the end of your dream. What if you decided to forego the exit route, leapfrog to an IPO, and use commercial partnerships to fuel your scale-up into a fully integrated biopharma company? For an example in progress, look at Sucampo — a still-small company with two FDAapproved products, many more in the pipeline, a healthy balance sheet, and a commitment to maintain its long-term independence.
Heading Sucampo is CEO Peter Greenleaf, a biopharma veteran previously featured in these pages when he was president of MedImmune. (See “Antibacterial Drug Discovery And Beyond,” July 2011.) Greenleaf left MedImmune in mid-2013 following a management restructuring by AstraZeneca and a tenure as head of Latin America. He says he wanted to reclaim the entrepreneurial spirit of leading a small company still in charge of its own fate. After a short stint helping the tiny start-up Histogenics, he went to a company where he saw the potential for growth with a go-it-alone strategy of full integration, joining Sucampo in March 2014.
At that time, Sucampo was already marketing the product Amitiza (lubiprostone) globally through partners. Amitiza is a chronic-care drug for chronic idiopathic constipation, irritable bowel syndrome with constipation (IBS-C), and noncancer opioid-induced constipation (OIC) in adult indications. The company was also developing other medicines in a potentially huge area of gastrointestinal (GI) therapeutics that could power its next stage of growth.
At the time, Sucampo also marketed Rescula (unoprostone isopropyl) for lowering intraocular pressure in patients with open-angle glaucoma or ocular hypertension. But under Greenleaf, the company has decided to terminate its promotion of Rescula in glaucoma, turning its attention to diversifying its pipeline into other high-value areas, starting with gastroenterology and ophthalmology, and to new modes of action that will move the company beyond its current prostone platform. Prostones are compounds derived from functional fatty acids that act as selective ion channel activators, according to the company.
Sucampo’s story of independence is also one of repeated scale-ups. It covers all stages and issues in company development, from basic start-up challenges such as funding and finances, to best practices in managing partnerships, running virtual operations, removing drains on resources, and applying business-wise leadership in a small-company, science-driven environment.
BACK TO BASIC FUN, ONWARD TO ACCOUNTABILITY
When MedImmune began to operate less independently, melding into the AZ corporation, it was the third such experience for Greenleaf. Prior to his nine years at MedImmune, he was leading a commercial team at Centocor when J&J acquired it and working at Boehringer Mannheim during its acquisition by Roche. He sees the mergers at least partly in a positive light; the new parents helped the acquired-company organizations scale up to commercial capacity. But for Greenleaf and others who helped build the formerly independent enterprises, life in a large corporation lacked the dynamism, sense of discovery, and sheer business joy of working in an entrepreneurial environment.
His move back to “little biopharma” was no simple replay of his previous career, however. In his past run with small-to-midsize companies, the pattern had been successful in moving pipeline products forward, making the company an attractive target for takeover, and terminating in an acquisition by some large company. The AZ/MedImmune merger awoke his determination to break out of the too-familiar cycle.
“I learned a lot in the transition process of MedImmune growing within AstraZeneca,” he says. “But on the day they decided to integrate MedImmune into the larger entity, I wanted to move on and go build another pharmaceutical company as the leader of that organization.”
Greenleaf had been observing Sucampo since his time at Centocor, with a special interest because of Sucampo’s base in Maryland where he has worked and lived for years. “Sucampo had a great foundation and a heritage built on strong scientific innovation,” he says. “I knew about the development of Amitiza, and I’d been following the science. I knew a lot about the founders, Dr. Ueno and Dr. Kuno, and their philanthropic work here locally. I also knew the company had received heavy investment during the eight years since going public, but had not done much of the work needed to take it into the broader sphere. So I joined the company to raise it from the classic stage of scientific founders doing a start-up to the next stages of scaling, growing, and building a basic company architecture strong enough to support further growth.”
Sucampo had already made some big strides from the start-up line. Greenleaf walked into a company with marketed products and a development pipeline. The company also had, and still has, exceptionally healthy financials for a development- stage company, he says. “We are bringing in around $100 million a year in revenue, and we carry very little debt. We have a very lean infrastructure. We still operate very much like a small startup environment here, with less than 100 employees globally. And we have a passionate and innovative culture, much like a start-up. Our people are entrepreneurial, wear many hats, and are close to the pulse of the organization.”
As the new leader, Greenleaf took hold of a company he saw as a basically sound ship and steered it in a new direction. He says some of the company’s advantages were also the source of its main challenges. For example, because it had marketed products, its pure R&D culture had given way to a more commercial perspective. Full integration into commercial activities, as well as prolonged IP litigation, had also spread the company’s resources thin.
“Over time, the company had taken on many battles across multiple fronts,” he explains. “So establishing a central focus was absolutely crucial for the organization. In examining our strategy, it became clear that we needed to rebuild many areas of the company with new capabilities and world-class scientific leaders and to secure some of the basic fundamentals in our financials.” (See “Sucampo’s Industry Brain Trust” on page 36.)
As Sucampo gathered management expertise, it dealt with IP and generic challenges to Amitiza by resolving lawsuits with Par and commercial partner Takeda — although, as partners, Sucampo and Takeda filed a patent infringement lawsuit against Dr. Reddy’s late in 2014. Having passed one major IP hurdle, Sucampo entered 2015 with good revenue growth from Amitiza and a new deal in which Takeda will market the product globally.
Sucampo had thus exited “dilutive” activities, offloading its commercial work in sales and marketing through the partnerships, and focused on strengthening its pipeline. Greenleaf says his company also found ways to increase its margins on Amitiza not only through better financial management, but also through some key manufacturing and supply agreements for a lower cost of goods.
With a more-efficient and less-troublesome commercial setup in place, he says the company could then put more attention back into its drug-development function. “We wanted to ensure our development programs are not just carried forward, but also pressure-tested — with clear deliverables communicated externally in a very transparent way and for which we hold ourselves accountable. We will buffer, augment, and build up the pipeline with new science, bringing in a diversified approach to different therapeutic areas. Then, as our revenues grow and the pipeline becomes richer, hopefully investors can see the benefit of our efforts, the company’s market cap will increase, and we can do even more transformative deals.”
FROM COMPETITION TO COLLABORATION
A basic lesson in partnership lies beneath Sucampo’s resolution of litigation filed by the company’s former management against partner Takeda. In Greenleaf’s view, ending the conflict over Takeda’s commercial efforts for Amitiza was essential.
Partnerships are pervasive in the pharma/ biotech space; we live and die by our partnerships, and when you sign up with a partner, you make a long-term commitment. The goal should always be to make your partnerships work. In the rare occasion one is not working — and during the 20-plus years I’ve been in the industry, I’ve not yet experienced it — you end up sitting across the table from lawyers. It’s better to try to drive your partnerships through alignment, by working together toward common goals.”
Greenleaf put the Takeda alliance at the top of his agenda for his first 30 days in office. “I told the team that Takeda was critical to our current and future success, and we’re going to make the relationship work.” By the end of the first two weeks, he was on a plane to Japan to meet with CEO Yasuchika Hasegawa. “Since then, we have rebuilt our relationship from the bottom up and the top down, and I do not think we would have been successful in signing the multiple agreements we did with Takeda without having done that basic building-block work.”
One of the basic building blocks was simple trust, says Greenleaf. “Takeda is a global pharma company with presence in countries around the world. I believe that they have done a good job with the product Amitiza in the United States. They know the product inside and out, and our partnership has never been better. Takeda is the right company to take a product like Amitiza forward in the global markets, and we are excited not only about the extension and the expansion of our agreement, but also about how our relationship evolves in the future.”
THE FOCUS INTERNAL
In addition to the changes with Amitiza, Greenleaf and his team saw other opportunities to shed resource-draining activities, such as the direct selling of Rescula in the United States, which Sucampo made the decision to terminate in the third quarter of 2014. The move reflected an overall strategy to focus more resources in development on the highest contributing areas, but Greenleaf says it also just made sense based on the “pure math” of cost versus revenue.
“Rescula was late in its life cycle. The market had significantly moved beyond the treatment of IOP associated with glaucoma. Most of the leading brands are either used in combination or are generic, and we had tried our best to sell the product through the infrastructure we built around it. But in the end, we were not able to sell enough product to make a decent return on investment, so we decided to try to find a partner who could leverage Rescula along with other products in its portfolio. It doesn’t mean we will partner all future products, but right now it is better to use those resources to focus on maturing our pipeline.”
Some advantages of being a commercial company with the sales burden largely partnered are obvious: positive revenue, ROI, and R&D resources. Of course, all of them are rare among small companies at the development stage, for whom operating at a loss is the normal mode. Greenleaf observes how investors have different sets of criteria for commercial and development-stage companies.
“A commercial company is examined for revenue, cash flow, profit, sales trends, and other objective factors. But investors look at a development-stage company by such terms as its product’s market size, impact on the competitive set, and options for acquisition, as well as how to develop the company’s valuation. Sucampo has the best of both worlds: inflow of resources to fund the pipeline without doing multiple dilutive rounds through investors to raise capital, and leveraging of resources through partnerships.”
Greenleaf defines his main goal as leading the company and its investors toward large-scale growth and full integration. “We will have multiple products available in multiple therapeutic areas, significantly solving unmet medical needs and giving back significantly to our shareholders. As we evolve and revenue grows, we will always invest in the pipeline, but when we get a product that gives us a high enough rate of return, we will consider moving back into the commercial space.”
PIPELINE EXPANSION
The next challenge for Sucampo is delivering on its pipeline-development strategy. Greenleaf is confident the company will succeed in maintaining the flow of new products in a timely way, following a practical strategy of short-term product acquisition and longer-term pipeline development.
He elaborates: “Securing Amitiza and its revenue, while ensuring it grows several million dollars during the next five to ten years, is critical. Most of our pipeline is about three to five years out, so any external deals we do will probably fall within that same window. Our hope is to have multiple shots on goal — and to produce new products over the next three to five years that replace the current and growth revenue of Amitiza.”
Two other key parts of expanding Sucampo’s product portfolio are widening its therapeutic focus and moving beyond its hitherto exclusive reliance on prostones. Both are essentially further steps in scale-up, requiring new investment and resource management as have other pivotal points of growth in the company’s past.
“When we stopped doing Rescula’s marketing, we did not simply take all of those freed-up resources and drop them to the bottom line,” says Greenleaf. “We shifted resources from commercial activities to development capabilities, using them to build a strong clinical operation and medical organization and to establish internal processes that prosecute, monitor, measure, and manage the pipeline through the entire development process.”
For the four prostones in the pipeline, mostly designated for indications in the company’s core areas of gastroenterology and ophthalmology, the company also has earlier programs in supportivecare oncology and lumbar spinal stenosis. The supportive-care indication is oral mucositis caused by radiation and chemotherapy in patients with neck cancer. The lumbar indication is to alleviate the pain and disability of stenosis with a “proprietary ion channel activator.” Sucampo has also stated its readiness to bring nonprostone drugs into the pipeline, which will take the company out of its comfort zone, into new MOAs (mechanism of action) — yet another way to scale up.
INTO EMPTY SPACE
Besides bulking up its product portfolio, Sucampo also plans to grow through expansion of its main commercial product into the huge unoccupied spaces of the GI market. New geographic markets, new indications, and new formulations will continue to unfurl for Amitiza.
Competition in such a large potential market for Amitiza in constipation also accelerates rather than impedes expansion of development, adoption, and use of the product, in Greenleaf’s view. “The space in constipation is really wide open and undeveloped, and the majority of solutions are either over-the-counter, acute-use treatments or prescription-based generic acute-use treatments, for which tens of billions of prescriptions are written every year. Right now, innovative new products only account for a single-digit percentage of that market.”
Sucampo and its competitors with innovative constipation therapies, such as Forest/Actavis and Ironwood with Linzess (linaclotide), have used patient and doctor education to create a rising tide that lifts all boats, he says, and adoption of the newer drugs is on the rise. “It would be wrong for us as innovative companies at this stage to focus on fighting each other when we are the minority of the market, and I believe all of the companies coming into this space with new solutions recognize that. A product that provides a more consistent solution and one that’s been studied as a chronic solution, though it will take time to turn a market, is a better solution for patients.”
THE FOCUS EXTERNAL
Greenleaf says the big picture of the market and the small-frame view of Sucampo and its products overlap. As competition drives market expansion for Amitiza, for instance, it will eventually put pressure on companies in multiple ways. More price competition will force more price-matching, negotiation with payers and managed care organizations, and adjustments in the product’s cost structure. “We will be forced to continue to look at better ways to modify cost of goods and operations and how we bring new products to market through our manufacturing processes,” he says.
Sucampo, its partners, and its competitors will also need to influence perceptions in the market about the disease and its treatment. “We need to continue to build awareness of the disease burden around constipation in general and make sure it is no longer qualified as a lifestyle problem, but truly as a problem with associated challenges. Patients miss work, live their lives in pain, and bear other consequences of constipation.”
Like many start-up and scaling-up life sciences companies, Sucampo is challenging its own market with innovation. Perhaps its greatest advantage in developing further innovative treatments is its disruptive presence in the marketplace. Many small companies are now learning the benefits of venturing out early in development to visit their wouldbe customers. Sucampo already now occupies a space reserved for players, and according to Greenleaf, it will hold onto that space and continue to scale up its business — as an independent and free agent.
SUCAMPO’S INDUSTRY BRAIN TRUST
When Peter Greenleaf joined Sucampo as CEO in the spring of 2014, one of his top priorities was to beef up the small, mainly virtual company’s management team with industry-experienced leaders. By fall of the same year, he had hired Peter Kiener, D.Phil., as its CSO and two other new executives for the management team, Matthias Alder to head business development and licensing and Steven Caffé, M.D., to run regulatory affairs. Another past MedImmune alum, Kiener came to Sucampo from his CSO position at Ambrx and had been president and cofounder of start-up Zyngenia. Alder hails from numerous small biotechs, and Caffé has a Big- Pharma and specialty-pharma background, having held key positions at MedImmune, Baxter, Sanofi, and Merck, as well as AMAG Pharmaceuticals.