Here's Why Sucampo Pharmaceuticals Rose as Much as 13.3% Today

What happened

Shares of Sucampo Pharmaceuticals (NASDAQ: SCMP) rose over 13% today after the company announced fourth-quarter and full-year 2016 earnings and reiterated 2017 guidance. Investors are cheering the continued growth demonstrated by its lead drug AMITIZA, a treatment for constipation in individuals with certain conditions, and the expectations for continued growth in the year ahead. But there could also be warning signs in 2017 guidance.

So what

The year-over-year growth is great, but investors are also applauding the ramp-up of sales activities. That's because in 2015 Sucampo Pharmaceuticals actually earned more revenue from royalties on AMITIZA sales in the United States, handled by Mylan for certain indications, than it did from direct sales. While both categories grew handsomely in 2016, the company's investment in sales and marketing appear to be paying off as direct sales are now the dominant revenue contributor.

Image source: Getty Images.

The ramp-up of sales activities came at the expense of net income, but the company is still churning out a healthy amount of profits. It should be able to grow EPS if AMITIZA product sales increase and new indications gain approval in the years ahead.

Here are the important financial metrics for the full-year 2016 compared to 2015:

Data source: Sucampo Pharmaceuticals.

Management also reiterated full-year 2017 guidance, which remains as follows:

Data source: Sucampo Pharmaceuticals.

The table above clearly demonstrates that management expects growth to slow significantly in the year ahead. Revenue growth will be in the single digits in a best-case scenario, compared to 50% in the prior year-over-year comparison. And while some non-GAAP metrics (all numbers that are adjusted) will improve, investors should focus on GAAP metrics, for which there is no guidance.

Now what

Sucampo Pharmaceuticals achieved significant growth in 2016 by investing in its direct sales capabilities. That should continue to pay off in the years ahead, although management's guidance for a drastic reduction in growth in 2017 probably shouldn't be overlooked.While growth looks likely to continue, investors may need to keep their expectations in check.

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Maxx Chatsko has no position in any stocks mentioned. The Motley Fool recommends Mylan. The Motley Fool has a disclosure policy.