UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-Q

ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Quarterly Period Ended June 30, 2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                to


Commission file number 0-27628



SUPERGEN, INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction
of incorporation or organization)

91-1841574(IRS Employer Identification Number)4140 Dublin Blvd, Suite 200, Dublin, California(Address of principal executive offices)

94568(Zip Code)


(925) 560 - 0100(Registrant's telephone number, including area code)

Not applicable(Former name, former address and former fiscal year, if changed since last report)



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files). Yes o    No o

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
See definition of "large accelerated filer," "accelerated filer "and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (do not check if a smaller reporting company)

Smaller Reporting Company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

The number of shares of the registrant's Common Stock, $.001 par value, outstanding as of August 3, 2009 was 59,151,406.



---



Table of Contents

TABLE OF CONTENTS



Page
No.PART I    FINANCIAL INFORMATIONItem 1Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of June 30, 2009 and December 31,
2008

3Condensed Consolidated Statements of Operations for the three and six month periods ended June 30,
2009 and 2008

4Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2009 and
2008

5Notes to Condensed Consolidated Financial
Statements

6Item 2Management's Discussion and Analysis of Financial Condition and Results of
Operations

17Item 3Quantitative and Qualitative Disclosures About Market Risk

25Item 4Controls and Procedures

25PART II  OTHER INFORMATIONItem 1ARisk Factors

27Item 4Submission of Matters to a Vote of Security Holders

38Item 6Exhibits

38SIGNATURES

39


2

---





Table of Contents



SUPERGEN, INC.        CONDENSED CONSOLIDATED BALANCE SHEETS        (In thousands, except share and per share amounts)

June 30,
2009

December 31,
2008(Unaudited)

(Note 1)ASSETSCurrent assets:Cash and cash equivalents

$
23,088

$
48,908Marketable securities


64,150


37,787Prepaid expenses and other current assets


1,408


1,307Total current assets


88,646


88,002Marketable securities, non-current


3,893


1,617Property, plant and equipment, net


4,652


4,437Goodwill


731


731Other intangibles, net





106Restricted cash


2,268


2,367Other assets


505


505Total assets

$
100,695

$
97,765LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

$
1,775

$
2,614Accrued liabilities


357


422Payable to AVI BioPharma


565


565Deferred gain on sale of products to Hospira, Inc.


125


125Deferred rent


332


287Accrued payroll and employee benefits


2,065


2,903Total current liabilities


5,219


6,916Deferred rent, non-current


176


358Total liabilities


5,395


7,274Commitments and contingenciesStockholders' equity:Preferred stock, $.001 par value; 2,000,000 shares authorized; none outstanding





Common stock, $.001 par value; 150,000,000 shares authorized; 59,124,322 and 59,082,009 shares issued and outstanding at June 30, 2009 and
December 31, 2008, respectively


59


59Additional paid in capital


453,687


452,524Accumulated other comprehensive gain (loss)


1,308


(770
)Accumulated deficit


(359,754
)

(361,322
)Total stockholders' equity


95,300


90,491Total liabilities and stockholders' equity

$
100,695

$
97,765


See
accompanying notes to condensed consolidated financial statements

3

---





Table of Contents



SUPERGEN, INC.        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        (In thousands, except per share amounts)        (Unaudited)

Three months ended
June 30,

Six months ended
June 30,2009

2008

2009

2008Revenues:Royalty revenue

$
6,011

$
8,133

$
18,925

$
16,271Total revenues


6,011


8,133


18,925


16,271Operating expenses:Research and development


6,756


7,740


14,091


15,687General and administrative


1,984


3,273


4,209


6,350Gain on sale of products





(560
)

(500
)

(1,560
)Total operating expenses


8,740


10,453


17,800


20,477Income (loss) from operations


(2,729
)

(2,320
)

1,125


(4,206
)Interest income


187


497


458


1,303Other than temporary decline in value of investments





(3,052
)




(3,055
)Other income (expense)





(4
)




9Income (loss) before income tax benefit (provision)


(2,542
)

(4,879
)

1,583


(5,949
)Income tax benefit (provision)


115





(15
)

Net income (loss)

$
(2,427
)
$
(4,879
)
$
1,568

$
(5,949
)Net income (loss) per common share:Basic

$
(0.04
)
$
(0.08
)
$
0.03

$
(0.10
)Diluted

$
(0.04
)
$
(0.08
)
$
0.03

$
(0.10
)Weighted average shares outstanding:Basic


59,106


57,542


59,095


57,531Diluted


59,106


57,542


59,102


57,531


See
accompanying notes to condensed consolidated financial statements

4

---





Table of Contents



SUPERGEN, INC.        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (In thousands)        (Unaudited)

Six months ended June 30,2009

2008Operating activities:Net income (loss)

$
1,568

$
(5,949
)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Depreciation


616


542Amortization of intangibles


106


213Other than temporary decline in value of investments





3,055Stock-based compensation expense


1,104


1,417Recognition of gain on sale of products


(500
)

(1,400
)Changes in operating assets and liabilities:Accounts receivable and development revenue receivable





115Prepaid expenses and other assets


(101
)

(560
)Restricted cash


99


(56
)Accounts payable and other liabilities


(1,879
)

(673
)Net cash provided by (used in) operating activities


1,013


(3,296
)Investing activities:Purchases of marketable securities


(46,095
)

(8,500
)Maturities of marketable securities


19,534


9,354Purchases of property and equipment


(831
)

(759
)Proceeds from sale of products


500


1,400Net cash provided by (used in) investing activities


(26,892
)

1,495Financing activities:Proceeds from issuance of common stock, net of issuance costs


59


90Net cash provided by financing activities


59


90Net decrease in cash and cash equivalents


(25,820
)

(1,711
)Cash and cash equivalents at beginning of period


48,908


78,055Cash and cash equivalents at end of period

$
23,088

$
76,344


See
accompanying notes to condensed consolidated financial statements

5

---





Table of Contents

SUPERGEN, INC.        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        JUNE 30, 2009        (Unaudited)

NOTE 1. BASIS OF PRESENTATION

The accompanying condensed unaudited consolidated financial statements of SuperGen, Inc. ("we," "SuperGen" or the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2009 are not necessarily
indicative of results that may be expected for the year ending December 31, 2009.

The
balance sheet at December 31, 2008 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. We have reclassified $287,000 of the deferred rent balance
at December 31, 2008 to current liabilities to conform to the presentation reported at June 30, 2009. We evaluated all events or transactions that occurred after the balance sheet date
of June 30, 2009 through August 6, 2009, the date we issued these financial statements. During this period, we did not have any material recognizable or non-recognizable
subsequent events.

For
further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended
December 31, 2008.

NOTE 2. STOCK-BASED COMPENSATION

We account for stock-based compensation in accordance with the fair value recognition provisions of Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment"
("SFAS 123R").

Stock Option Plans.We have 14,263,000 shares of common stock authorized for issuance upon the grant of incentive stock options or
nonstatutory stock
options to employees, directors, and consultants under our 2003 Stock Plan. The number of shares to be purchased, their price, and the terms of payment are determined by our Board of Directors,
provided that the exercise price for incentive stock options cannot be less than the fair market value on the date of grant. The options granted generally expire ten years after the date of grant and
become exercisable at such times and under such conditions as determined by the Board of Directors (generally over a four or five year period). Options that have performance-based vesting criteria
become exercisable in accordance with the milestones determined by the Board of Directors.

Employee Stock Purchase Plan.We also have an employee stock purchase plan ("ESPP") that allows eligible employees to purchase common
stock at a
price per share equal to 85% of the lower of the fair market value of the common stock at the beginning or end of each six month period during the term of
the ESPP. The current offering period began May 15, 2009 and is scheduled to end on November 14, 2009.

We
recognized $505,000 and $670,000, respectively, in stock-based compensation expense for the three months ended June 30, 2009 and 2008. We recognized $1,104,000 and $1,417,000,
respectively, in stock-based compensation expense for the six months ended June 30, 2009 and 2008. These amounts

6

---



Table of Contents

SUPERGEN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2009

(Unaudited)

NOTE 2. STOCK-BASED COMPENSATION (Continued)

have
been recorded in research and development expenses or general and administrative expenses, based on the home department of our employees.

The
fair value of each stock award is estimated on the grant date using the Black-Scholes option-pricing model based on the weighted-average assumptions noted in the following table:

Three months
ended June 30,

Six months ended June 30,2009

2008

2009

2008Risk-free interest rate


2.22
%

3.30
%

2.24
%

3.23
%Dividend yield











Expected volatility


64.68
%

81.10
%

66.07
%

74.41
%Expected life (in years)


5.85


5.49


5.82


5.31


We
compute expected volatility using a blend of historical volatility and implied volatility of our common stock based on the period of time corresponding to the expected life of the
stock options. We do not rely exclusively on implied volatility because options on SuperGen stock with remaining terms of greater than one year are not regularly traded in the market. The expected
life of stock options granted is based exclusively on historical data and represents the weighted average period of time that stock options granted are expected to be outstanding. The expected life is
applied to one group as a whole as we do not expect substantially different exercise or post-vesting termination behavior among our employee and director population. The
risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected life assumption. The dividend yield is zero as we do not
expect to pay any dividends in the foreseeable future. We currently estimate when and if performance-based options will be earned. If the awards are not considered probable of achievement, no amount
of stock-based compensation is recognized. If we considered the award to be probable, expense is recorded over the estimated service period.

We
are using the straight-line attribution method to recognize stock-based compensation expense. The amount of stock-based compensation recognized during a period is based on
the value of the portion of the awards that are ultimately expected to vest. SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods
if actual forfeitures differ from those estimates. We used an estimated forfeiture rate of 6.91% and 7.40%, respectively, for the six months ended June 30, 2009 and 2008. The term "forfeitures"
is distinct from "cancellations" or "expirations" and represents only the unvested portion of the surrendered option. The forfeiture rate is re-evaluated annually and is adjusted as
necessary. Ultimately, the actual expense recognized over the vesting period will only be for those shares that vest.

7

---



Table of Contents

SUPERGEN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2009

(Unaudited)

NOTE 2. STOCK-BASED COMPENSATION (Continued)

A
summary of the Company's stock option activity as of June 30, 2009 and changes during the six months then ended is presented below:

Options
Outstanding

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
ValueBalance at January 1, 2009


8,004,976

$
6.74Granted


1,916,500


1.81Exercised


(4,971
)

1.72Forfeited


(316,048
)

3.45Expired


(173,365
)

7.30Balance at June 30, 2009


9,427,092

$
5.84


6.56

$
420,386Vested or expected to vest at June 30, 2009


8,860,408

$
5.90


6.48

$
379,500Exercisable at June 30, 2009


6,125,332

$
7.01


5.49

$
26,919


The
weighted-average grant-date fair value of options granted during the six months ended June 30, 2009, was $1.09. The total intrinsic value of options exercised
(i.e. the difference between the market price at exercise and the price paid to exercise the options) during the six months ended June 30, 2009 was $2,339 and the total amount of cash
received from exercise of these options was $8,533.

As
of June 30, 2009, there was $3,116,000 of total unrecognized compensation cost related to unvested stock-based awards. This cost is expected to be recognized over a weighted
average period of 1.92 years.

NOTE 3. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

Cash and cash equivalents include bank demand deposits, certificates of deposit, investments in debt securities with maturities of three months or less when purchased, and an interest in
money market funds which invest primarily in U.S. government obligations.

Investments
in marketable securities consist of equity securities and corporate or government debt securities that have a readily ascertainable market value and are readily marketable.
We report these investments at fair value. We designate all marketable securities as available-for-sale, with unrealized gains and losses included as a component of equity.

8

---



Table of Contents

SUPERGEN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2009

(Unaudited)

NOTE 3. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

The
following is a summary of available-for-sale securities (in thousands):

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Fair ValueAt June 30, 2009Money market funds

$
17,923

$


$


$
17,923U.S. corporate debt securities


11,991





(2
)

11,989Debt securities issued by U.S. government and U.S. government agencies


52,018


143





52,161Marketable equity securities


2,726


1,167





3,893Total

$
84,658

$
1,310

$
(2
)
$
85,966At December 31, 2008Money market funds

$
21,996

$


$


$
21,996U.S. corporate debt securities


25,776


13





25,789Debt securities issued by U.S. government agencies


34,858


326





35,184Marketable equity securities


2,726





(1,109
)

1,617Total

$
85,356

$
339

$
(1,109
)
$
84,586


We
evaluate investments with unrealized losses to determine if the losses are other than temporary. We have determined that the gross unrealized losses at June 30, 2009 are
temporary. In making this determination, we considered the financial condition and near-term prospects of the issuers, the magnitude of the losses compared to the investments' amortized
cost, the length of time the investments have been in an unrealized loss position, and our ability and intent to hold the investments for a reasonable period of time sufficient for a recovery of fair
value to the amortized cost. Investments with unrealized losses have been in an unrealized loss position for less than a year.

The
available-for-sale securities are classified on the balance sheet as follows (in thousands):

Fair ValueJune 30, 2009

December 31, 2008Amounts included in cash and cash equivalents

$
17,923

$
45,182Marketable securities, current


64,150


37,787Marketable securities, non-current


3,893


1,617Total

$
85,966

$
84,586


9

---



Table of Contents

SUPERGEN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2009

(Unaudited)

NOTE 3. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

Available-for-sale
securities by contractual maturity are shown below (in thousands):

Fair ValueJune 30, 2009

December 31, 2008Money market funds and debt securities due in one year or less

$
82,073

$
82,969Marketable equity securities, non-current


3,893


1,617Total

$
85,966

$
84,586


Equity Investments

Equity investments in securities without readily determinable fair value, which consist of investments in privately held companies, are
carried at cost. As of June 30, 2009 and December 31, 2008, we held one such investment with a carrying amount of $500,000. This investment is carried at cost because it is not
practicable to estimate the fair value of this investment. This investment is included in other assets on the consolidated balance sheets. We periodically review this investment carried at cost and
evaluate whether an impairment has occurred. We believe this equity investment continues to be realizable.

NOTE 4. FAIR VALUE MEASUREMENTS

On January 1, 2008, we adopted Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"), which clarifies the definition of fair
value, establishes a framework for measuring fair value, and expands the disclosures on fair value measurements. As allowed under FSP 157-2, we elected to defer our adoption of
SFAS 157 for non-financial assets and liabilities until January 1, 2009, and such adoption did not have any impact on our consolidated financial statements as of
June 30, 2009. SFAS 157 defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy and describes
three levels of inputs that may be used to measure fair value:



10

---



Table of Contents

SUPERGEN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2009

(Unaudited)

NOTE 4. FAIR VALUE MEASUREMENTS (Continued)



If
the inputs used to measure the financial assets and liabilities fall within more than one of the different levels described above, the categorization is based on the lowest level
input that is significant to the fair value measurement of the instrument.

As
of June 30, 2009, we held $85,966,000 of cash equivalents and marketable securities consisting of equity securities, high quality, marketable debt instruments of government
agencies, commercial paper, and a money market fund. We have adopted an investment policy and established guidelines relating to credit quality, diversification and maturities of our investments to
preserve principal and maintain liquidity. All investment securities are issued by or guaranteed by the U.S. government and its Federal Agencies or have a credit rating of at least
long-term of A or short-term of A1/P1 as determined by Moody's Investors Service and/or Standard & Poor's. We do not have any direct investments in
auction-rate securities or securities that are collateralized by assets that include mortgages or subprime debt. Our investment portfolio has not been adversely impacted by the recent
disruption in the credit markets. However, if there is continued and expanded disruption in the credit markets, there can be no assurance that our investment portfolio will not be adversely affected
in the future.

Our
cash equivalents and available-for-sale marketable securities are classified within Level 1 or Level 2 of the fair value hierarchy. These
investment securities are valued using quoted market prices, broker or dealer quotations, or other observable inputs. The fair value measurements of our cash

11

---



Table of Contents

SUPERGEN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2009

(Unaudited)

NOTE 4. FAIR VALUE MEASUREMENTS (Continued)

equivalents
and available-for-sale marketable securities are identified at the following levels within the fair value hierarchy as defined by SFAS 157 (in thousands):

Fair Value Measurements UsingQuoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

TotalAt June 30, 2009Money market funds

$


$
17,923




$
17,923Commercial paper





11,989





11,989U.S. government and U.S government agency notes





52,161





52,161Equity securities


3,893








3,893$
3,893

$
82,073




$
85,966At December 31, 2008Money market funds

$


$
21,996




$
21,996Commercial paper





25,789





25,789U.S. government agency notes





35,184





35,184Equity securities


1,617








1,617$
1,617

$
82,969




$
84,586


NOTE 5. LICENSE AGREEMENT WITH MGI PHARMA, INC./EISAI CORPORATION

In August 2004, we entered into a license agreement with MGI PHARMA, Inc., a Minnesota corporation ("MGI") relating to Dacogen® (decitabine) for Injection, an
anti-cancer therapeutic which has been approved by the United States Food and Drug Administration ("FDA") for the treatment of patients with myelodysplastic syndromes ("MDS"). Pursuant to
the terms of the license agreement, MGI received exclusive worldwide rights to the development, commercialization and distribution of Dacogen for all indications. We are entitled to royalties from MGI
on all sales of licensed product worldwide.

In
May 2006, the FDA approved Dacogen for the treatment of patients with MDS and MGI commenced commercial sales of Dacogen in the United States. In July 2006, MGI executed an agreement
to sublicense Dacogen to Janssen-Cilag, a Johnson & Johnson company, granting exclusive development and commercialization rights in all territories outside North America. MGI was acquired by
Eisai Corporation of North America ("Eisai") in January 2008.

MGI/Eisai
is required to pay us royalties starting at 20% and escalating to a maximum of 30% of net worldwide Dacogen sales within 45 days after the end of each calendar quarter.
We recognize royalty revenue when we receive the royalty statement from Eisai because we do not have sufficient ability to accurately estimate Dacogen sales. During the three months ended
June 30, 2009 and 2008,

12

---



Table of Contents

SUPERGEN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2009

(Unaudited)

NOTE 5. LICENSE AGREEMENT WITH MGI PHARMA, INC./EISAI CORPORATION (Continued)

we
recorded royalty revenue of $6,011,000 and $8,133,000, respectively. During the six months ended June 30, 2009 and 2008, we recorded royalty revenue of $18,925,000 and $16,271,000,
respectively.

NOTE 6. ACQUISITION OF MONTIGEN PHARMACEUTICALS, INC.

In April 2006, we acquired Montigen Pharmaceuticals, Inc. ("Montigen"), a privately-held oncology-focused drug discovery and development company headquartered in Salt
Lake City, Utah. Montigen's assets included its research and development team, a proprietary drug discovery technology platform and optimization process known as CLIMB, and
late-stage pre-clinical compounds targeting Aurora-A Kinase and members of the Tyrosine Kinase receptor family. The acquisition of Montigen was accounted for as an
acquisition of assets rather than as a business combination.

The
values assigned to the assembled workforce and the CLIMB technology platform were being amortized over three years, the estimated useful lives of the assets. The assembled workforce
and CLIMB technology were fully amortized at March 31, 2009.

The
acquisition agreement required us to pay the former Montigen stockholders an additional $22 million in shares of SuperGen common stock, contingent upon achievement of specific
regulatory milestones. In April 2007, the first Montigen compound received clearance from the FDA to begin Phase I clinical trials, triggering the first contingent milestone payment to the
former Montigen stockholders of $10 million, which we paid through the issuance of shares of our common stock and recorded as additional acquired in-process research and development
expense. In
November 2008, a second Montigen compound received clearance from the FDA to begin Phase I clinical trials, triggering a second contingent milestone payment to the former Montigen stockholders
of $5.2 million. This milestone was paid through the combination of cash and the issuance of shares of our common stock, and was also recorded as additional acquired in-process
research and development expense. The remaining $6.8 million future contingent regulatory milestone payment that may become payable to the former Montigen stockholders will also be recorded as
additional acquired in-process research and development expense when and if the related milestone is achieved.

NOTE 7. ASSET ACQUISITION AGREEMENTS WITH MAYNE PHARMA/HOSPIRA

In August 2006, we closed a transaction with Mayne Pharma (USA), Inc. ("Mayne"), pursuant to which Mayne acquired the North American rights to Nipent® and our
SurfaceSafe® cleaning system. We received cash proceeds of $13.4 million, which represented the purchase price per the asset acquisition agreement, reduced by a number of
adjustments and holdbacks. Mayne was acquired by Hospira, Inc. in February 2007.

In
April 2007, we closed another transaction with Mayne/Hospira completing the sale of the remaining worldwide rights for Nipent for total consideration of up to $8.3 million. We
received an initial up-front payment of $3.75 million, and the balance of the purchase price is guaranteed and payable in five installments over a five year period on the
anniversary of the closing date.

Due
to the Company's determination that the Nipent operations sold to Mayne/Hospira did not represent a separate component of the Company and the Company's continuing involvement with
the

13

---



Table of Contents

SUPERGEN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2009

(Unaudited)

NOTE 7. ASSET ACQUISITION AGREEMENTS WITH MAYNE PHARMA/HOSPIRA (Continued)

Nipent
operations, resulting from entering into related agreements and the related additional obligations, the Company has reflected activities related to the Nipent and SurfaceSafe businesses in
operating activities for all periods presented.

Under
the agreements with Mayne/Hospira, we are obligated to reimburse Mayne/Hospira for three years for amounts paid to a new supplier of Nipent in excess of the amounts referenced in
the supply agreement. Mayne/Hospira has negotiated a manufacturing supply agreement with an FDA approved manufacturing site, and based on historical sales trends and manufacturing yields and forecasts
of future sales and manufacturing yields, we have estimated our price protection exposure over the remaining 11/2 year period to be $125,000, although no maximum amount is specified in
the agreement. This amount comprises the deferred gain in the accompanying balance sheet at June 30, 2009. Payments will be made to Mayne/Hospira when qualified claims are submitted and the
amounts become due.

During
the six months ended June 30, 2009, we received $500,000, representing the second installment payment from Mayne/Hospira related to the sale of the remaining worldwide
Nipent rights, which was recorded as gain on sale of products. During the six months ended June 30, 2008, we recorded gain on sale of products of $1,560,000, which was comprised of the
following: (i) a $400,000 annual installment payment relating to the sale of the remaining worldwide rights, (ii) a $1 million indemnification holdback from the sale of the North
American rights that was held by Mayne/Hospira for 18 months to cover any potential claims, and (iii) $160,000 relating to the reversal of a residual products return reserve for Nipent
as the reserve was no longer required due to the expiration of the contractual return period.

NOTE 8. COMPREHENSIVE INCOME/LOSS

The following table is a reconciliation of our net income (loss) to comprehensive income (loss) (in thousands):

Three months ended
June 30,

Six months ended
June 30,2009

2008

2009

2008Net income (loss)

$
(2,427
)
$
(4,879
)
$
1,568

$
(5,949
)Other than temporary decline in value of investments





3,052





3,055Other comprehensive gain (loss)Change in unrealized gain (loss) on investments


2,228


(1,746
)

2,078


(724
)Comprehensive income (loss)

$
(199
)
$
(3,573
)
$
3,646

$
(3,618
)


NOTE 9. BASIC AND DILUTED NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of common shares outstanding for the period, without consideration of
potential common shares. Diluted net income (loss) per share is computed by dividing the net income (loss) by

14

---



Table of Contents

SUPERGEN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2009

(Unaudited)

NOTE 9. BASIC AND DILUTED NET INCOME (LOSS) PER SHARE (Continued)

the
weighted-average number of common shares outstanding for the period and dilutive potential common shares for the period determined using the treasury-stock method. For purposes of this
calculation, options to purchase stock and warrants are considered to be potential common shares and are only included in the calculation of diluted net income (loss) per share when their effect is
dilutive.

The
following table is a reconciliation of the denominator used in the calculation of basic and diluted earnings per share (in thousands):

Three months ended
June 30,

Six months ended
June 30,2009

2008

2009

2008Weighted-average common shares outstanding used in calculation of basic earnings per share


59,106


57,542


59,095


57,531Dilutive stock options and warrants








7


Weighted-average common shares outstanding used in calculation of diluted earnings per share


59,106


57,542


59,102


57,531Outstanding stock options and warrants not included in net income (loss) per share calculation as they had an antidilutive effect


9,827


9,383


9,225


9,383


NOTE 10. INCOME TAXES

We recorded a tax benefit of $115,000 for the three months ended June 30, 2009 and a tax provision of $15,000 for the six months ended June 30, 2009, based on the Company's
estimated effective tax rate for the year, taking into account estimated refundable research and development tax credits under the Housing Rescue bill passed in 2008.

We
have no unrecognized tax benefits, as described in Financial Accounting Standards Board ('FASB") Interpretation No. 48, "Accounting for Uncertainty in Income Taxes"
("FIN 48"), as of June 30, 2009. Also, there are no accrued amounts for interest and penalties.

Our
policy is to recognize interest and penalties related to income taxes as a component of income tax expense and there have been no such interest and penalties for any of the periods
presented. We are subject to income tax examinations for U.S. Federal income taxes and state income taxes from 1994 forward due to net operating losses in tax years 1994 through 2005. We are subject
to tax examinations in the United Kingdom from 2001 forward. We do not anticipate that our total unrecognized tax benefits will significantly change prior to June 30, 2010.

NOTE 11. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007), "Business Combinations" ("SFAS 141R"). SFAS 141R establishes
principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in an acquired

15

---



Table of Contents

SUPERGEN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JUNE 30, 2009

(Unaudited)

NOTE 11. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

business.
SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is effective for business combinations in fiscal years beginning on or after
December 15, 2008. We have adopted SFAS 141R beginning January 1, 2009, as required. The adoption of SFAS 141R did not have a material impact on our consolidated financial
statements but it will impact any future business combinations.

In
May 2009, the FASB issued Statement No. 165, "Subsequent Events" ("SFAS 165"), which establishes general standards of accounting for, and requires disclosure of, events
that occur after the balance sheet date but before financial statements are issued or are available to be issued. We adopted the provisions of SFAS 165 for the quarter ended June 30,
2009 and evaluated our subsequent events
through August 6, 2009, the date the condensed consolidated financial statements were issued. The adoption of SFAS 165 did not have a material effect on our consolidated financial
statements.

In
June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles" (SFAS 168).
SFAS 168 establishes the "FASB Accounting Standard Codification" as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with generally accepted accounting principles in the United States. All guidance contained in the Codification carries an equal level of authority. On
the effective date of SFAS 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered
non-SEC accounting literature not included in the Codification will become non-authoritative. SFAS 168 is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. We have evaluated this new statement, and have determined that it will not have a significant impact on the determination or reporting of our
financial results.

16

---





Table of Contents

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion together with our consolidated financial statements and related notes
included elsewhere in this report. The results discussed below are not necessarily indicative of the results to be expected in any future periods. Our disclosure and analysis in this section of the
report also contain forward-looking statements. When we use the words "anticipate," "estimate," "project," "intend," "expect," "plan," "believe," "should," "likely" and similar expressions, we are
making forward-looking statements. Forward-looking statements provide our current expectations or forecasts of future events. In particular, these statements include statements such as: our estimates
about becoming profitable; the percentage of royalties we expect to earn on Dacogen sales under our agreement with MGI/Eisai; our forecasts regarding our research and development expenses; and our
statements regarding the sufficiency of our cash to meet our operating needs. Our actual results could differ materially from those predicted in the forward-looking statements as a result of risks and
uncertainties including, but not limited to, delays and risks associated with conducting and managing our clinical trials; developing products and obtaining regulatory approval; ability to establish
and maintain collaborative relationships; competition; ability to obtain funding; ability to protect our intellectual property; our dependence on third party suppliers; risks associated with the
hiring and loss of key personnel; adverse changes in the specific markets for our products; and our ability to launch and commercialize our products. Certain unknown or
immaterial risks and uncertainties can also affect our forward-looking statements. Consequently, no forward-looking statement can be guaranteed and you should not rely on these forward-looking
statements. For a discussion of the known and material risks that could affect our actual results, please see the "Risk Factors" section of this report. We undertake no obligation to update any
forward-looking statements, whether as a result of new information, future events or otherwise. Readers should carefully review the Risk Factors section as well as other reports or documents we file
from time to time with the Securities and Exchange Commission.

Overview

We are a pharmaceutical company dedicated to the discovery, development, and commercialization of therapies to treat patients with
cancer. We have a number of Aurora-A and Tyrosine Kinase inhibitors and DNA methyltransferase clinical and pre-clinical products under development. In 2006, Dacogen received
approval for marketing in the United States, during 2006 and 2007 we sold the North American and remaining worldwide rights to Nipent to Mayne Pharma, and in 2006 we acquired a drug discovery and
development company to complement our ongoing licensing efforts. These changes were implemented to mitigate the ongoing risk of competitive in-licensing and to maximize the return on both
existing resources and our incoming royalty and milestone revenue.

Since
our incorporation in 1991 we have devoted substantially all of our resources to our product development efforts. Our past development efforts have been focused primarily on the key
compounds of Dacogen and Nipent.

Dacogen.Dacogen is approved by the FDA for the treatment of patients with MDS. In September 2004, we executed an agreement granting
MGI exclusive
worldwide rights to the development, manufacture, commercialization and distribution of Dacogen. MGI was acquired by Eisai in January 2008. Under the terms of the agreement, MGI/Eisai made a
$40 million equity investment in our company and will pay up to $45 million in specific regulatory and commercialization milestone payments. To date, we have received
$32.5 million of these milestone payments, including $20 million upon first commercial sale of Dacogen in the U.S. in May 2006. In accordance with our agreement with MGI/Eisai, we are
entitled to receive a royalty on worldwide net sales starting at 20% and escalating to a maximum of 30%. Because we do not have sufficient ability to accurately estimate Dacogen sales, we recognize
royalty revenue when the royalty statement is received from MGI/Eisai. We recorded royalty revenues of $18.9 million and $16.3 million, respectively, during the six months ended
June 30, 2009 and 2008.

17

---



Table of Contents

In
July 2006, MGI/Eisai executed an agreement to sublicense Dacogen to Janssen-Cilag, a Johnson & Johnson company, granting exclusive development and commercialization rights in
all territories outside North America. In accordance with our license agreement with MGI/Eisai, we are entitled to receive 50% of any payments MGI/Eisai receives as a result of any sublicenses. We
received $5 million, 50% of the $10 million upfront payment MGI received, and, as a result of both the original agreement with MGI and this sublicense with Janssen-Cilag, we may receive
up to $17.5 million in future milestone payments as they are achieved for Dacogen globally. Janssen-Cilag companies will be responsible for conducting regulatory and commercial activities
related to Dacogen in all territories outside North America, while MGI/Eisai retains all commercialization rights and responsibility for all activities in the United States, Canada and Mexico.

Nipent.Nipent is approved by the FDA and European regulatory authorities for the treatment of hairy cell leukemia. Nipent was marketed
by us in the
United States until August 2006, and distributed in Europe through March 2007.

In
August 2006, we closed a transaction with Mayne Pharma (USA), Inc., whereby Mayne acquired the North American rights to Nipent and our SurfaceSafe cleaning system. Pursuant to
the Asset Acquisition Agreement, we received cash proceeds of $13.4 million upon closing of the transaction. In addition to the initial payment and holdbacks, we had the right to receive annual
deferred payments totaling $14.1 million over the following five years based on achievement of specific sales targets. These annual deferred payments might be accelerated under certain
circumstances, including a change of control of Mayne. Such a change of control occurred in February 2007 when Mayne was acquired by Hospira, Inc. and we received $10.3 million of the
deferred payments.

In
April 2007, we closed another transaction with Mayne/Hospira, completing the sale of the remaining worldwide rights for Nipent for total consideration of up to $8.3 million. We
received an initial up-front payment of $3.75 million as a condition of the closing, plus an additional $389,000 for the carrying value of the remaining Nipent inventory. The
balance of the purchase price is payable in five annual installments on the anniversary of the closing date.

In
February 2008, we received a $1 million indemnification holdback from Mayne/Hospira relating to the sale of the North American rights, and in May 2008, we received a $400,000
annual installment payment relating to the sale of the remaining worldwide rights. In March 2009, we received a $500,000 annual installment payment relating to the sale of the remaining worldwide
rights.

Montigen Acquisition.In April 2006, we acquired Montigen, a privately-held oncology-focused drug discovery and development company
headquartered in Salt Lake City, Utah. Montigen's assets included its research and development team, a proprietary drug discovery technology platform and optimization process known as CLIMB, and
late-stage pre-clinical compounds targeting Aurora-A Kinase and members of the Tyrosine Kinase receptor family.

Pursuant
to the terms of the merger agreement with Montigen, we paid the Montigen stockholders a total of $17.9 million upon the closing of the transaction in cash and shares of
SuperGen common stock. The merger agreement also specified an additional $22 million due to the Montigen stockholders, payable in shares of SuperGen common stock, contingent upon achievement of
specific regulatory milestones. The first Montigen compound was cleared in April 2007 by the FDA to begin Phase I clinical trials, which triggered the first milestone payment to the former
Montigen stockholders of approximately $10 million which we paid in shares of our common stock. A second Montigen compound was cleared in November 2008 by the FDA to begin Phase I
clinical trials, which triggered a milestone payment of $5.2 million, which we paid in a combination of cash and shares of our common stock.

All
of our current products are in the development or clinical trial stage and will require substantial additional investments in research and development, clinical trials, regulatory
and sales and

18

---



Table of Contents

marketing
activities to commercialize these product candidates. Conducting clinical trials is a lengthy, time-consuming, and expensive process involving inherent uncertainties and risks,
and our studies may be insufficient to demonstrate safety and efficacy to support FDA approval of any of our product candidates.

As
a result of our substantial research and development expenditures and minimal product revenues, we have incurred cumulative losses of $359.8 million through June 30,
2009, and have never generated enough funds through our operations to support our business. We expect to continue to incur operating losses over the next few years.

Ultimately,
our ability to become profitable will depend upon a variety of factors, including regulatory approvals of our products, the timing of the introduction and market acceptance
of our products and competing products, MGI/Eisai's success in selling Dacogen, the launch of new products and our ability to control our ongoing costs and operating expenses. If our drug discovery
and research efforts are not successful, or if the results from our clinical trials are not positive, we may not be able to get sufficient funding to continue our trials or conduct new trials, and we
would be forced to scale down or cease our business operations. Moreover, if our products are not approved or commercially accepted we will remain unprofitable for longer than we currently anticipate.
Additionally, we might be forced to
substantially scale down our operations or sell certain of our assets, and it is likely the price of our stock would decline precipitously.

Critical Accounting Policies

Our management discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated
financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and reported disclosures. On an on-going basis, we evaluate our estimates, including
those related to revenue recognition, intangible assets, valuation of investments and stock-based compensation. We base our estimates on historical experience and on various other assumptions that we
believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different assumptions or conditions.

Our
significant accounting policies are more fully disclosed in Note 1 to our consolidated financial statements included in our 2008 Annual Report on Form 10-K.
However, some of our accounting policies are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by our
management. We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial
statements.



We account for stock-based compensation in accordance with the fair value recognition provisions of SFAS 123R. The fair value of
each stock award is estimated on the grant date using the Black-Scholes option-pricing model based on assumptions for volatility, risk-free interest rates, expected life of the option, and
dividends (if any). Expected volatility is determined based on a blend of historical volatility and implied volatility of our common stock based on the period of time corresponding to the expected
life of the stock options. The expected life of our stock options is based on our historical data and represents the period of time that stock options granted are expected to be outstanding. The
risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected life assumption.

19

---



Table of Contents

We
are using the straight-line attribution method to recognize stock-based compensation expense. The amount of stock-based compensation recognized during a period is based on
the value of the portion of the awards that are ultimately expected to vest, including awards that vest based on certain performance criteria. SFAS 123R requires forfeitures to be estimated at
the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term "forfeitures" is distinct from "cancellations" or "expirations" and
represents only the unvested portion of the surrendered option. This analysis is re-evaluated quarterly and the forfeiture rate is adjusted as necessary. Ultimately, the actual expense
recognized over the vesting period will only be for those shares that vest.

As
of June 30, 2009, there was $3.1 million of total unrecognized compensation cost related to unvested stock-based awards. This cost is expected to be recognized over a
weighted average period of 1.92 years.



MGI/Eisai is required to pay us royalties starting at 20% and escalating to a maximum of 30% of net worldwide Dacogen sales within
45 days after the end of each calendar quarter. During the six month period ended June 30, 2009, we recorded royalty revenue of $18.9 million. Because we do not have sufficient
ability to accurately estimate Dacogen sales, we recognize royalty revenue when we receive the royalty statement from MGI/Eisai. In accordance with our license agreement with MGI/Eisai, we are
entitled to receive 50% of any payments MGI/Eisai receives as a result of any sublicenses.

We
received initial cash proceeds from the North American transaction with Mayne Pharma of $13.4 million. From the initial cash proceeds from the agreement, we deferred an amount
for price protection exposure. The remaining balance of the deferred gain on sale of products of $125,000 at June 30, 2009 consists solely of the estimated price protection exposure for the
remaining period stipulated in the agreement and is subject to management estimates and assumptions based on all available information.

During
the six months ended June 30, 2009, we received a $500,000 annual installment payment from Mayne/Hospira related to the sale of the worldwide Nipent rights. As we have
determined that the Nipent operations sold to Mayne/Hospira did not represent a separate component of our business, we have reflected activities related to the Nipent business in operating activities
for all periods presented.



As of June 30, 2009, we have intangible assets related to goodwill. The determination of whether or not this asset is impaired
involves significant judgment. We review intangible assets, as well as other long-lived assets, for impairment whenever events or circumstances indicate that the carrying amount may not be
fully recoverable. Additionally, we review goodwill for impairment annually in accordance with FASB Statement No. 142, "Goodwill and Other Intangible Assets."



Investments in financial instruments are carried at fair value with unrealized gains and losses included in Accumulated other
comprehensive income or loss in stockholders' equity. Our investment portfolio includes equity securities that could subject us to material market risk and corporate and U.S. government (or U.S.
governmental agency) obligations that subject us to varying levels of credit risk. If the fair value of a financial instrument has declined below its carrying value for a period in excess of six
consecutive months or if the decline is due to a significant adverse event, such that the carrying amount of these investments may not be fully recoverable, the impairment is considered to be other
than temporary. An other than temporary decline in fair value of a financial instrument may be subject

20

---



Table of Contents

to
a write-down resulting in a charge against earnings. The determination of whether a decline in fair value is other than temporary requires significant judgment, and could have a
material impact on our balance sheet and results of operations. Our management reviews the securities within our portfolio for other than temporary declines in value on a regular basis. The prices of
some of our marketable securities are subject to considerable volatility. Decreases in the fair value of these securities may significantly impact our results of operations.

Investments
in equity securities without readily determinable fair value are carried at cost. We periodically review those carried costs and evaluate whether an impairment has occurred.
The determination of whether an impairment has occurred requires significant judgment, as each investment has unique market and development opportunities.

On
January 1, 2008, we adopted Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"), which clarifies the definition of fair
value, establishes a framework for measuring fair value, and expands the disclosures of fair value measurements. As allowed under FSP 157-2, we elected to defer our adoption of
SFAS 157 for non-financial assets and liabilities until January 1, 2009, and such adoption did not have any impact on our consolidated financial statements as of
June 30, 2009. SFAS 157 defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy and describes
three levels of inputs that may be used to measure fair value:



If
the inputs used to measure the financial assets and liabilities fall within more than one of the different levels described above, the categorization is based on the lowest level
input that is significant to the fair value measurement of the instrument.

Recent Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007), "Business Combinations"
("SFAS 141R"). SFAS 141R establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired,
the liabilities assumed, and any
non-controlling interest in an acquired business. SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines
what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is effective for business
combinations in fiscal years beginning on or after December 15, 2008. We have adopted SFAS 141R beginning January 1, 2009, as required. The adoption of SFAS 141R did not
have a material impact on our consolidated financial statements but it will impact any future business combinations.

21

---



Table of Contents

In
May 2009, the FASB issued Statement No. 165, "Subsequent Events" ("SFAS 165"), which establishes general standards of accounting for, and requires disclosure of, events
that occur after the balance sheet date but before financial statements are issued or are available to be issued. We adopted the provisions of SFAS 165 for the quarter ended June 30,
2009 and evaluated our subsequent events through August 6, 2009, the date the condensed consolidated financial statements were issued. The adoption of SFAS 165 did not have a material
effect on our consolidated financial statements.

In
June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles" (SFAS 168).
SFAS 168 establishes the "FASB Accounting Standard Codification" as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with generally accepted accounting principles in the United States. All guidance contained in the Codification carries an equal level of authority. On
the effective date of SFAS 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered
non-SEC accounting literature not included in the Codification will become non-authoritative. SFAS 168 is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. We have evaluated this new statement, and have determined that it will not have a significant impact on the determination or reporting of our
financial results.

Results of Operations

Three months ended June 30, 2009 compared to three months ended June 30, 2008:

Three months ended
June 30,

ChangeRevenues

2009

2008

Dollar

Percent(Dollars in thousands)Royalty revenue

$
6,011

$
8,133

$
(2,122
)

(26.1
)%


The
decrease in royalty revenue from 2008 to 2009 is due to lower Dacogen product sales by MGI/Eisai, resulting from certain third party wholesalers adjusting their near-term
inventory purchases. MGI/Eisai is required to pay us royalties starting at 20% and escalating to a maximum of 30% of net worldwide Dacogen sales within 45 days after the end of each calendar
quarter. Because we do not have sufficient ability to accurately estimate Dacogen sales, we recognize royalty revenue when we receive the royalty statements from MGI/Eisai. Royalty revenues recognized
in the second quarters of 2009 and 2008 relate to worldwide Dacogen sales for the first quarters of 2009 and 2008, respectively.

Three months ended
June 30,

ChangeOperating expenses

2009

2008

Dollar

Percent(Dollars in thousands)Research and development

$
6,756

$
7,740

$
(984
)

(12.7
)%General and administrative


1,984


3,273


(1,289
)

(39.4
)Gain on sale of products





(560
)

(560
)

(100.0
)


The
decrease in research and development expenses was primarily due to lower contracted outside research and development services for our various drug candidates and lower clinical trial
costs related to our Phase I and Phase Ib clinical trials for MP-470. We expect these costs to increase as we enroll additional patients in Phase I clinical trials for
SGI-1776.

The
decrease in general and administrative expenses relates primarily to lower stock-based compensation and legal expenses, as well as the elimination of administrative costs related to
our European operations, which were liquidated in October 2008.

22

---



Table of Contents

The
gain on sale of products recorded in the three months ended June 30, 2008 represented the receipt of a $400,000 annual installment payment relating to the sale of Nipent to
Mayne/Hospira, and $160,000 relating to the reversal of a residual products return reserve for Nipent as the reserve was no longer required due to the expiration of the contractual return period. We
had no similar items during the three months ended June 30, 2009.

Three months ended
June 30,

ChangeOther income (expense)

2009

2008

Dollar

Percent(Dollars in thousands)Interest income

$
187

$
497

$
(310
)

(62.4
)%Other than temporary decline in value of investments





(3,052
)

(3,052
)

(100.0
)Other income (expense)





(4
)

(4
)

(100.0
)Income tax benefit (provision)


115





(115
)




The
decrease in interest income was due primarily to significantly lower interest rates for the three months ended June 30, 2009 compared to the same period in 2008.

During
the three months ended June 30, 2008 we recorded an other than temporary decline in value of our investment in AVI BioPharma. We had no similar transaction in the
comparable period in 2009.

We
recorded a tax benefit of $115,000 for the three months ended June 30, 2009, based on the Company's estimated effective tax rate for the year, taking into account estimated
refundable research and development tax credits under the Housing Rescue bill passed in 2008.

Six months ended June 30, 2009 compared to six months ended June 30, 2008:

Six months ended June 30,

ChangeRevenues

2009

2008

Dollar

Percent(Dollars in thousands)Royalty revenue

$
18,925

$
16,271

$
2,654


16.3
%


The
increase in royalty revenue from 2008 to 2009 is due to higher Dacogen sales by MGI/Eisai.            MGI/Eisai is required to pay us royalties starting at 20% and escalating to
a maximum of 30% of net worldwide Dacogen sales within 45 days after the end of each calendar quarter. Because we do not have sufficient ability to accurately estimate Dacogen sales, we
recognize royalty revenue when we receive the royalty statements from MGI/Eisai.

Six months ended June 30,

ChangeOperating expenses

2009

2008

Dollar

Percent(Dollars in thousands)Research and development

$
14,091

$
15,687

$
(1,596
)

(10.2
)%General and administrative


4,209


6,350


(2,141
)

(33.7
)Gain on sale of products


(500
)

(1,560
)

(1,060
)

(67.9
)


The
decrease in research and development expenses was primarily due to lower contracted outside research and development services for our various drug candidates and lower clinical trial
costs related to our Phase I and Phase Ib clinical trials for MP-470. We expect these costs to increase as we enroll additional patients in Phase I clinical trials for
SGI-1776.

23

---



Table of Contents

The
decrease in general and administrative expenses relates primarily to lower stock-based compensation and legal expenses, as well as the elimination of administrative costs related to
our European operations, which were liquidated in October 2008.

Gain
on sale of products for the six months ended June 30, 2009 related to the receipt of a $500,000 annual milestone payment from Mayne/Hospira relating to the sale of the
worldwide rights for Nipent. The gain on sale of products recorded in the six months ended June 30, 2008 represented the receipt of a $1 million indemnification holdback and the receipt
of a $400,000 annual installment payment relating to the sale of Nipent to Mayne/Hospira, and $160,000 relating to the reversal of a residual products return reserve for Nipent as the reserve was no
longer required due to the expiration of the contractual return period.

Six months ended
June 30,

ChangeOther income (expense)

2009

2008

Dollar

Percent(Dollars in thousands)Interest income

$
458

$
1,303

$
(845
)

(64.9
)%Other than temporary decline in value of investments





(3,055
)

(3,055
)

(100.0
)Other income (expense)





9


(9
)

(100.0
)Income tax benefit (provision)


(15
)




15





The
decrease in interest income was due primarily to significantly lower interest rates for the six months ended June 30, 2009 compared to the same period in 2008.

The
other than temporary decline in value recorded in the six months ended June 30, 2008 relates primarily to our investment in AVI BioPharma. We had no similar transaction in the
comparable period in 2009.

We
recorded a tax provision of $15,000 for the six months ended June 30, 2009, based on the Company's estimated effective tax rate for the year, taking into account estimated
refundable research and development tax credits under the Housing Rescue bill passed in 2008.

Liquidity and Capital Resources

Our cash, cash equivalents, and marketable securities totaled $91,131,000 at June 30, 2009 compared to $88,312,000 at
December 31, 2008.

Net
cash provided by operating activities was $1,013,000 in the six months ended June 30, 2009, and consisted primarily of the net income of $1,568,000 plus depreciation of
$616,000 and stock based compensation of $1,104,000, partially offset by a decline in accounts payable and other liabilities of $1,879,000. Net cash used in operating activities was $3,296,000 in the
six months ended June 30, 2008, and consisted primarily of the net loss of $5,949,000 plus recognition of the gain on sale of products of $1,400,000, partially offset by non-cash
stock based compensation expense of $1,417,000 and an other than temporary decline in the value of investments of $3,055,000.

Net
cash used in investing activities was $26,892,000 for the six months ended June 30, 2009, and consisted primarily of $46,095,000 for purchases of marketable securities,
partially offset by $19,534,000 in proceeds from maturities of marketable securities. Net cash provided by investing activities was $1,495,000 in the six months ended June 30, 2008, and
consisted primarily of $9,354,000 in proceeds from maturities of marketable securities and $1,400,000 in milestone and installment payments received from Mayne Pharma, partially offset by $8,500,000
for purchases of marketable securities.

24

---



Table of Contents

Net
cash provided by financing activities was $59,000 and $90,000 in the six months ended June 30, 2009 and 2008, respectively, and consisted in both periods of proceeds from the
exercise of stock options.

We
have financed our operations primarily through the issuance of equity and debt securities and the receipt of royalties, payments in connection with collaborative agreements, and the
sale of products. We believe that our current cash, cash equivalents, and short-term marketable securities will satisfy our cash requirements through 2010. However, it is our intention to
consider additional financing options, including the selling of additional shares of stock in a public or private offering and/or exploring marketing partnership opportunities for existing or newly
acquired licensed products and development activities.

In
addition to the contractual obligations disclosed in Management's Discussion and Analysis included in our annual report on Form 10-K for the year ended
December 31, 2008, we have
$6.8 million in future contingent regulatory milestone payments due to the former Montigen stockholders, which we are contractually obligated to pay in shares of our common stock, but may pay
partially in cash.

We
believe that our need for additional funding will increase in the future and that our continued ability to raise funds from external sources will be critical to our success. We
continue to actively consider future contractual arrangements that would require significant financial commitments. If we experience currently unanticipated cash requirements, we could require
additional capital much sooner than presently anticipated. We may raise money by the sale of our equity securities or debt. However, given uncertain market conditions and the volatility of our stock
price, we may not be able to sell our securities in public offerings or private placements at prices and on terms that are favorable to us, if at all. We may also choose to obtain funding through
licensing and other contractual agreements. Such arrangements may require us to relinquish rights to our technologies, products or marketing territories, or to grant licenses on terms that are not
favorable to us. If we fail to obtain adequate funding in a timely manner, or at all, we will be forced to scale back our product development activities or our operations in a manner that will ensure
we can discharge our obligations as they come due in the ordinary course of business.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Due to the short-term nature of our interest bearing assets, which consist primarily of certificates of deposit, United
States corporate obligations, and United States government obligations, we believe that our exposure to interest rate market risk would not significantly affect our operations.

Our
investment policy is to manage our marketable debt securities portfolio to preserve principal and liquidity while maximizing the return on the investment portfolio. Our marketable
securities portfolio is primarily invested in corporate debt securities with maturities of under one year and a minimum investment grade rating of A or A-1 or better to minimize credit
risk. Although changes in interest rates may affect the fair value of the marketable securities portfolio and cause unrealized gains or losses, such gains or losses would not be realized unless the
investments were to be sold prior to maturity.

Item 4.    Controls And Procedures

As
of June 30, 2009, our management evaluated, with the participation of our chief executive officer and our chief financial officer, the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our

25

---



Table of Contents

chief
executive officer and our chief financial officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that
we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

There
were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

26

---





Table of Contents

SUPERGEN, INC.    PART IIOTHER INFORMATION

Item 1A.    Risk Factors

The following section lists some, but not all, of the risks and uncertainties that may have a material adverse
effect on our business, financial condition and results of operations. You should carefully consider these risks in evaluating our company and business. Our business operations may be impaired if any
of the following risks actually occur, and by additional risks and uncertainties that we do not know of or that we currently consider immaterial. In such case, the trading price of our common stock
could decline.

This report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from
those anticipated in the forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this report.

Risks Related to Our Financial Condition and Common Stock

If Dacogen is not commercially successful, our future revenues would be limited and our business would be harmed.

Dacogen is approved in the United States, but there is no guarantee that patients and physicians here will adopt it for use, or
continue to use it for the treatment of MDS. If MGI/Eisai's sales of Dacogen decrease, as they did in the first quarter of 2009 as reported to us in the second quarter of 2009, our royalty revenue
will decrease commensurately, and we cannot be assured that MGI/Eisai will expend the resources to expand sales of Dacogen. Currently, the royalty revenue we receive from MGI/Eisai is our sole source
of revenue. In the past, our primary source of revenue was from sales of our product Nipent. The North American rights to Nipent were sold to Mayne/Hospira in August 2006, and the remaining worldwide
rights were sold to Mayne/Hospira in April 2007. Accordingly, we are dependent on Dacogen royalty revenue to fund our operations.

Dacogen
is not yet approved in Europe or Asia. In July 2006, MGI/Eisai sublicensed Dacogen to Janssen-Cilag GmbH, a Johnson & Johnson company, giving Janssen-Cilag
responsibility for conducting regulatory activities related to Dacogen and granting it exclusive development and commercialization rights in Europe and all territories outside North America. We
received 50% of the $10 million upfront payment and, as a result of both the original agreement with MGI/Eisai and this sublicense with Janssen-Cilag GmbH, may receive up to
$17.5 million in future milestone payments upon achievement of global regulatory and sales targets. However, if Dacogen is never approved in Europe or Asia, we will not receive any royalty
payments for commercial sales by Janssen-Cilag and our future revenues and business will be harmed.

Our collaborative relationship with Eisai may not produce the financial benefits that we are anticipating, which could cause our business to suffer.

We expect to record development and license revenue from payments made to us by MGI/Eisai upon the achievement of regulatory and
commercialization milestones. However, we may never receive such payments because the milestones may never be achieved, either because of failure to secure regulatory approval of Dacogen in Europe or
Asia or due to MGI/Eisai's or Janssen-Cilag's inability to expend the resources to grow or commence sales of Dacogen as prescribed by the license agreement. In addition, the license agreement provides
that MGI/Eisai will pay us (i) a certain portion of revenues payable to MGI/Eisai as a result of MGI/Eisai sublicensing the rights to market, sell and/or distribute Dacogen, to the extent such
revenues are in excess of the milestone payments, and (ii) a 20% royalty increasing to a maximum of 30% on annual worldwide net sales of Dacogen. We cannot guarantee that we will receive these
payments, and we cannot be assured that MGI/Eisai will expend the resources to expand sales of Dacogen in North America, or that Janssen-Cilag will expend the resources to sell it in

27

---



Table of Contents

Europe
and elsewhere, or that either company will be successful in doing so. Because we are heavily reliant on royalties and milestone payments relating to Dacogen to fund our operations, the failure
to achieve the milestones and/or receive license revenue from sales of Dacogen would cause our business to suffer.

We have a history of operating losses and we expect to continue to incur losses for the foreseeable future.

Since inception, we have funded our research and development activities primarily from private placements and public offerings of our
securities, milestone payments, sales of our products, royalty revenue, and product revenues primarily from sales of Nipent. The North American rights to Nipent were sold to Mayne in August 2006 and
we sold the remaining worldwide rights to Nipent to Mayne in April 2007. Our substantial research and development expenditures and limited revenues have resulted in significant net losses. We have
incurred cumulative losses of $359.8 million from inception through June 30, 2009, and our products have not generated sufficient revenues to support our business during that time. We
expect to continue to incur substantial operating losses over the next few years and may never achieve profitability.

Whether
we achieve profitability depends primarily on the following factors:



Our
products and product candidates, even if successfully developed and approved, may not generate sufficient or sustainable revenues to enable us to achieve or sustain profitability.

We will require additional funding to expand our product pipeline and commercialize new drugs, and if we are unable to raise the necessary capital or to do so on acceptable
terms, our planned expansion and continued chances of survival could be harmed.

We will continue to spend substantial resources on expanding our product pipeline, developing future products, and conducting research
and development, including clinical trials for our product candidates. Based on our currently forecasted product development activities, we anticipate that our capital resources will be adequate to
fund operations and capital expenditures at least through 2010. However, if we experience unanticipated cash requirements during this period, we could require additional funds much sooner. In February
2009 we filed a $100 million shelf registration statement on Form S-3 with the SEC, which gives us the flexibility to raise funds through the sale of a variety of securities.
We may raise money by the sale of our equity securities or debt, or the exercise of outstanding warrants and stock options by the holders of such warrants and options. However, given uncertain market
conditions and the volatility of our stock price, we may not be able to sell our

28

---



Table of Contents

securities
in public offerings or private placements at prices and/or on terms that are favorable to us, if at all. Also, the dilutive effect of additional financings could adversely affect our per
share results. We may also choose to obtain funding through licensing and other contractual agreements. For example, we licensed the worldwide rights to the development, commercialization and
distribution of Dacogen to MGI/Eisai. Such arrangements may require us to relinquish our rights to our technologies, products or marketing territories, or to grant licenses on terms that are not
favorable to us. If we fail to obtain adequate funding in a timely manner, or at all, we will be forced to scale back our product development activities, or be forced to cease our operations.

Our equity investment in AVI exposes us to equity price risk and any impairment charge would affect our results of operations.

Our investments in marketable securities are carried at fair value with unrealized gains and losses included in accumulated other
comprehensive income or loss in stockholders' equity. However, we are exposed to equity price risk on our equity investment in AVI. The public trading prices of the AVI shares have fluctuated
significantly since we purchased them and could continue to do so. If the public trading prices of these shares trade below their adjusted cost basis in future periods, we may incur additional
impairment charges relating to this investment, which in turn will affect our results of operations.

Currently
we own 2,384,211 shares of AVI and recorded an other than temporary decline in value of $3.1 million related to this investment during the year ended December 31,
2008. We evaluate investments with unrealized losses to determine if the losses are other than temporary. In making these
determinations, we consider the financial condition and near-term prospects of the issuers, the magnitude of the losses compared to the investments' cost, the length of time the
investments have been in an unrealized loss position, and our ability and intent to hold the investments for a reasonable period of time sufficient for a recovery of fair value. Under our accounting
policy, marketable equity securities are presumed to be impaired if their fair value is less than their cost basis for more than six months, absent compelling evidence to the contrary. It is possible
that we may record another other than temporary decline in value related to AVI in the future.

Product Development and Regulatory Risks

Our product candidates will require significant additional development.

Most of our product candidates, including MP-529, SGI-110 and SGI-1252, are in the development,
rather than the clinical trial stage. However, we must significantly develop all of our product candidates before we can market them, or before they will become desirable for licensing. Although we
believe that our preclinical and pilot clinical studies support further development of these product candidates, the results we have obtained to date do not necessarily indicate what results of
further testing would be, including controlled human clinical testing. All of the product candidates that we are currently developing will require extensive clinical testing before we can submit any
regulatory application for their commercial use.

Our product development efforts may ultimately fail.

Our
product candidates are subject to the risks of failure inherent in the development of pharmaceutical products. These risks include the
following:



29

---



Table of Contents



As
a result, we cannot be certain that any of our products will be successfully developed, receive required governmental approvals on a timely basis, become commercially viable or achieve market
acceptance.

Before we can seek regulatory approval of any of our product candidates, we must complete clinical trials, which are expensive and have uncertain outcomes.

All of our product candidates will require the commitment of substantial resources and regulatory approval. Before obtaining regulatory
approvals for the commercial sale of any of our product candidates, we must demonstrate through non-clinical testing and clinical trials that our product candidates are safe and effective
for use in humans.

We
have a portfolio of cancer drugs in various stages of development. We are currently conducting clinical trials on our products MP-470 and SGI-1776, and we
expect to commence new clinical trials from time to time in the course of our business as our product development work continues. Conducting clinical trials is a lengthy, time consuming and expensive
process and the results are inherently uncertain. We have incurred and will continue to incur substantial expense for, and we have devoted and expect to continue to devote a significant amount of time
to, non-clinical testing and clinical trials. However, regulatory authorities may not permit us to undertake any additional clinical trials for our product candidates. If we are unable to
complete our clinical trials, our business will be severely harmed and the price of our stock will likely decline.

We
also have ongoing research and non-clinical projects that may lead to product candidates, but we have not begun clinical trials for these projects. If we do not
successfully complete our non-clinical trials, we might not be able to commence clinical trials as planned.

Our clinical trials may be delayed or terminated, which would prevent us from seeking necessary regulatory approvals.

Completion of clinical trials may take several years or more. The length of a clinical trial varies substantially according to the
type, complexity, novelty and intended use of the product candidate. The length of time and complexity of these studies make statistical analysis difficult and regulatory approval unpredictable. The
commencement and rate of completion of our clinical trials may be delayed by many factors, including:



30

---



Table of Contents



If
we are unable to achieve a satisfactory rate of completion of our clinical trials, our business will be significantly harmed.

We may be required to suspend, repeat or terminate our clinical trials if they are not conducted in compliance with regulatory requirements.

Our clinical trials must be conducted in accordance with the requirements of the FDA and other regulatory authorities, and are subject
to continuous oversight by these authorities, and institutional review boards and ethical committees. We outsource certain aspects of our research and development activities to contract research
organizations ("CROs"). We have agreements with these CROs for certain of our clinical programs. We and our CROs are required to comply with good clinical practice ("GCP") regulations and guidelines
for all of our products in clinical development. GCPs are enforced through periodic inspections of study sponsors, principal investigators, and study sites. If our CROs or we fail to comply with
applicable GCPs, the clinical data generated in our studies may be deemed unreliable and regulatory authorities may require us to perform additional studies before approving our applications. Our
non-clinical safety studies must be conducted according to the principles of Good Laboratory Practices. In addition, our clinical trials must be conducted with product candidates produced
under current good manufacturing practices, and may
require a large number of test subjects. Our failure to comply with these regulations may require us to repeat clinical studies, which would delay the regulatory approval process.

We may be required to suspend, repeat or terminate our clinical trials if later trial results fail to demonstrate safety and efficacy, or if the results are negative or
inconclusive.

Our clinical trials may be suspended at any time if we or the FDA believe the patients participating in our studies are exposed to
unacceptable health risks or if we or the FDA find deficiencies in the conduct of these trials. Adverse medical events during a clinical trial could cause us to terminate or repeat a clinical trial.

We
may encounter other problems and failures in our studies that would cause us or the FDA to delay or suspend the studies. Even if we achieve positive interim results in clinical
trials, these results do not necessarily predict final results, and acceptable results in early trials may not be repeated in later trials. A number of companies in the pharmaceutical industry have
suffered significant setbacks in advanced clinical trials, even after achieving promising results in earlier trials.

Negative
or inconclusive results during a clinical trial could cause us to terminate or repeat a clinical trial. The potential failures would delay development of our product candidates,
hinder our ability to conduct related non-clinical testing and clinical trials and further delay the commencement of the regulatory approval process. Further, the failures or perceived
failures in our clinical trials would delay our product development and the regulatory approval process, damage our business prospects, make it difficult for us to establish collaboration and
partnership relationships and negatively affect our reputation and competitive position in the pharmaceutical industry. Finally, if we are required to conduct other clinical trials for the product
candidates, the additional trials would require substantial funding and time, and we may be unable to obtain funding to conduct such clinical trials.

Our failure to obtain regulatory approvals to market our product candidates in foreign countries and delays caused by government regulation would adversely affect our
anticipated revenues.

Sales of our products in foreign jurisdictions will be subject to separate regulatory requirements and marketing approvals. Approval in
the United States, or in any one foreign jurisdiction, does not ensure approval in any other jurisdiction. The process of obtaining foreign approvals may result in significant delays, difficulties and
expenses for us, and may require additional clinical trials. Although many of the regulations applicable to our products in these foreign countries are similar to those promulgated by the FDA, many of
these requirements also vary widely from country to country, which could delay the introduction of our products in those countries. Failure to
comply with these regulatory requirements or to obtain required approvals would impair our ability to commercialize our products in foreign markets.

31

---





Table of Contents

Even if regulatory approval of our products is obtained, later discovery of previously unknown problems may result in restrictions of a product, including
withdrawal of that product from the market. Further, governmental approval may subject us to ongoing requirements for post-marketing studies. For example, despite receipt of governmental
approval, the facilities of our third-party manufacturers are still subject to unannounced inspections by the FDA and must continue to comply with GMPs and other regulations. These regulations govern
all areas of production, record keeping, personnel and quality control. If we or our third-party manufacturers fail to comply with any of the manufacturing regulations, we may be subject to, among
other things, product seizures, recalls, fines, injunctions, suspensions or revocations of marketing licenses, operating restrictions and criminal prosecution.

If we are unable to comply with environmental laws and regulations, our business may be harmed.

We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of
hazardous materials and waste products. We currently maintain a supply of biohazardous materials at some of our facilities. We believe our safety procedures for these materials comply with all
applicable environmental laws and regulations, and we carry insurance coverage we believe is adequate for the size of our business. However, we cannot entirely eliminate the risk of accidental
contamination or injury from these materials. If an accident or
environmental discharge occurs, we could be held liable for any resulting damages, which could exceed our insurance coverage and financial resources.

We
currently outsource certain of our research and development programs involving the controlled use of biohazardous materials. We believe our collaborators have in place safety
procedures for these materials that comply with governmental standards. Nevertheless, if an accident does occur, our research and product development will be negatively affected.

Additional Risks Associated with Our Business

If the third-party manufacturers upon whom we rely fail to produce our products in the volumes that we require on a timely basis, or fail to comply with stringent
regulations applicable to pharmaceutical drug manufacturers, we may face delays in the delivery of, or be unable to meet demand for, our products.

Because we have no manufacturing facilities, we rely on third parties for manufacturing activities related to all of our product
candidates. As we develop new products, we must establish and maintain relationships with manufacturers to produce and package sufficient supplies of our finished pharmaceutical products. Reliance on
third party manufacturing presents the following risks:



Any
of these factors could delay clinical trials or commercialization of our product candidates under development, and entail higher costs.

32

---



Table of Contents

Our business may be harmed if the manufacture of our products is interrupted or discontinued.

We may be unable to maintain our relationships with our third-party manufacturers. If we need to replace or seek new manufacturing
arrangements, we may have difficulty locating and entering into arrangements with qualified contract manufacturers on acceptable terms, if at all. We are aware of only a limited number of companies on
a worldwide basis who operate manufacturing facilities in which our products can be manufactured to our specifications and in compliance with GMPs. It could take several months, or significantly
longer, for a new contract manufacturing facility to obtain FDA approval and to develop substantially equivalent processes for the production of our product candidates. We may not be able to contract
with any of these companies on acceptable terms, if at all.

If our suppliers cannot provide the components we require, our future product sales and revenue could be harmed.

We rely on third-party suppliers to provide us with numerous components used in our products under development. Relying on third-party
suppliers makes us vulnerable to component failures and interruptions in supply, either of which could impair our ability to conduct clinical trials on a timely basis. Using third-party suppliers
makes it difficult and sometimes impossible for us to maintain quality control, manage inventory and production schedules and control production costs. Vendor lead times to supply us with ordered
components vary significantly and can exceed six months or more. Both now and as we expand our need for manufacturing capacity, we cannot be sure that our suppliers will furnish us with required
components when we need them. These factors could make it difficult for us to effectively and efficiently manufacture our products, and could adversely impact our clinical trials, product development
and future sales of our products.

Some
suppliers are our only source for a particular component, which makes us vulnerable to cost increases and supply interruptions. We generally rely on one manufacturer for each
product.

Vendors
may decide to limit or eliminate sales of certain products to the medical industry due to product liability or other concerns. In the event one of our sole source suppliers
decides not to manufacture the component, goes out of business, or decides to cut off our supply, we may be unable to locate replacement supply sources, or the sources that we may locate may not
provide us with similar reliability or pricing and our business could suffer. If we cannot obtain a necessary component, we may need to find, test and obtain regulatory approval for a replacement
component, produce the component or redesign the related product, which would cause significant delay and could increase our manufacturing costs. Any of these events could adversely impact our future
sales and results of operations.

If we are not able to maintain and successfully establish new collaborative and licensing arrangements with third parties, our product development and business will be
harmed.

Our business model is based on establishing collaborative relationships with other parties both to license compounds upon which our
products and technologies are based and to manufacture our products or our collaborators' products. It is critical that we gain access to compounds and technologies to license for further development.
Due to the expense of the drug approval process we must have relationships with established pharmaceutical companies to offset some of our development costs in exchange for a combination of
development, marketing and distribution rights.

From
time to time we enter into discussions with various companies regarding the establishment of new collaborations. If we are not successful in establishing new partners for our
product candidates, we may not be able to pursue further development of such product candidates and/or may have to reduce or cease our current development programs, which would materially harm our
business. Even if we are

33

---



Table of Contents

successful
in establishing new collaborations, they are subject to numerous risks and uncertainties including:



In
addition, our collaborators may undergo business combinations, which could have the effect of making the collaboration with us less attractive to them for a number of reasons. For
example, if an existing collaborator purchases a company that is one of our competitors, that company may be less willing to continue its collaboration with us. A company that has a strategy of
purchasing companies with attractive technologies might have less incentive to enter into a collaboration agreement with us. Moreover, disputes may arise with respect to the ownership of rights to any
technology or products developed with any current or future collaborator. Lengthy negotiations with potential collaborators or disagreements between us and our collaborators may lead to delays in or
termination of the research, development or commercialization of product candidates or result in time consuming and expensive litigation or arbitration.

Our collaborative relationships with third parties could cause us to expend significant funds on development costs with no assurance of financial return.

From time to time we enter into collaborative relationships with third parties to co-develop and market products. These
relationships require substantial financial commitments from us, and at the same time the product developments are subject to the same regulatory requirements, risks and uncertainties associated with
the development of our other product candidates. The compounds that are the subject of these collaborative agreements may prove to be ineffective, may fail to receive regulatory approvals, may be
unprotectable by patents or other intellectual property rights, or may not be otherwise commercially viable. If these collaborative
relationships are not successful, our product developments will be adversely affected, and our investments and efforts devoted to the product developments will be wasted.

Our ability to protect our intellectual property rights will be critically important to the success of our business, and we may not be able to protect these rights in the
United States or abroad.

The success of our operations depends in part on our ability to obtain patents, protect trade secrets, operate without infringing the
proprietary rights of others and enforce our proprietary rights against accused infringers.

We
actively pursue a policy of seeking patent protection when applicable for our proprietary products and technologies, whether they are developed in-house or acquired from
third parties. We attempt to protect our intellectual property position by filing United States and foreign patent applications related to our proprietary technology, inventions and improvements that
are important to the development of our business. To date, we have ownership of or acquired licenses to numerous patents covering various aspects of our proprietary drugs and technologies. In
addition, we are prosecuting a number of patent applications for new drug candidates that we are actively developing at this time.

34

---



Table of Contents

We
also have patents, licenses to patents, and pending patent applications in Europe, Australia, Japan, Canada, China and Israel among other countries. Limitations on patent protection,
and the differences in what constitutes patentable subject matter, may limit the protection we have on patents issued or licensed to us in these countries. In addition, laws of foreign countries may
not protect our intellectual property to the same extent as would laws in the United States. In determining whether or not to seek patent protection or to license any patent in a foreign country, we
weigh the relevant costs and benefits, and consider, among other things, the market potential and profitability, the scope of patent protection afforded by the law of the jurisdiction and its
enforceability, and the nature of terms with any potential licensees. Failure to obtain adequate patent protection for our proprietary drugs and technology would impair our ability to be commercially
competitive in these markets.

The
pharmaceutical industry is characterized by a large number of patent filings involving complex legal and factual questions, and therefore we cannot predict with certainty whether our
patents will be enforced effectively. Competitors may have filed applications for, or been issued patents on, products or processes that compete with or are similar to ours. We may not be aware of all
of the patents potentially adverse to our interests which may have been issued to others. In addition, third parties may
challenge, invalidate or circumvent any of our patents. Thus, any patents that we own or license from third parties may not provide adequate protection against competitors, if at all. Our pending
patent applications and those we may file in the future, or those we may license from third parties, may not result in patents being issued with adequate claim scope, if at all.

In
addition to pursuing patent protection in appropriate instances, we also rely on trade secret protection or regulatory marketing exclusivity for unpatented proprietary technology.
However, trade secrets are difficult to protect. Our trade secrets or those of our collaborators may become known or may be independently discovered by others. Furthermore, regulatory marketing
exclusivity is for a limited time period, which may not be an adequate period for our business interests.

In
the pharmaceutical industry there has been, and we believe that there will continue to be, significant litigation regarding patent and other intellectual property rights. Claims may
be brought against us in the future based on patents held by others. These persons could bring legal actions against us claiming damages and seeking to enjoin clinical testing, manufacturing and
marketing of the affected product. If we become involved in litigation, it could consume a substantial portion of our resources, regardless of the outcome of the litigation. If a lawsuit against us is
successful, in addition to any potential liability for damages, we could be required to obtain a license to continue to manufacture or market the affected product. We cannot assure you that we would
prevail in a lawsuit filed against us or that we could obtain any licenses required under any patents on acceptable terms, if at all.

Our
proprietary products are dependent upon compliance with numerous licenses and agreements. These licenses and agreements require us to make royalty and other payments, reasonably
exploit the underlying technology of the applicable patents, and comply with regulatory filings. If we fail to comply with these licenses and agreements, we could lose the underlying rights to one or
more of these potential products, which would adversely affect our product development and harm our business.

If we fail to compete effectively against other pharmaceutical companies, our business will suffer.

The pharmaceutical industry in general and the oncology sector in particular is highly competitive and subject to significant and rapid
technological change. There are many companies, both public and private, including well-known pharmaceutical companies that are engaged in the discovery and development of products for
some of the applications that we are pursuing. Some of our competitors and probable competitors include ArQule, Array BioPharma, Astex Tx, Avalon, Crystal Genomics, Exelixis, Infinity, SGX,
Millennium, Sanofi-Aventis, Bristol-Myers Squibb Company, Celgene, Eli Lilly & Co., GlaxoSmithKline, Novartis AG, Pfizer, and others.

Many
of our competitors have substantially greater financial, research and development and manufacturing resources than we do and may represent substantial long-term
competition for us. Some

35

---



Table of Contents

of
our competitors have received regulatory approval for products or are developing or testing product candidates that compete directly with our product candidates. For example, MP-470
faces competition from a multitude of other investigational drugs which are multi-targeted tyrosine kinase inhibitors and inhibitors of the DNA repair pathway. There are a number of investigational
drugs that are inhibitors of aurora kinases which are direct competitors of MP-529. We also expect that there will be other inhibitors of Pim kinases that will emerge as competition for
SGI-1776 as well as other investigational drugs progressing through our discovery pipeline. In addition, Dacogen faces competition from 5-aza-cytidine as well as
oral formulations of 5-aza-cytidine and other drugs in development to treat MDS.

Many
of these competitors, either alone or together with their customers and partners, have significantly greater experience than we do in discovering products, undertaking
non-clinical testing and clinical trials, obtaining FDA and other regulatory approvals, and manufacturing and marketing products. Accordingly, our competitors may succeed in obtaining
patent protection, receiving FDA or foreign marketing approval or commercializing products before we do. If we elect to commence commercial product sales of our product candidates, we could be at a
disadvantage relative to many companies with greater marketing and manufacturing capabilities, areas in which we have limited or no experience.

Factors
affecting competition in the pharmaceutical industry vary depending on the extent to which competitors are able to achieve an advantage based on superior differentiation of their
products' greater institutional knowledge or depth of resources. If we are able to establish and maintain a competitive advantage based on the ability of CLIMB to discover new drug candidates more
quickly and against targets not accessible by many competitors, our advantage will likely depend primarily on the ability of our CLIMB technology to make accurate predictions about the effectiveness
and safety of our drug candidates as well as our ability to effectively and rapidly develop investigational drugs.

Extensive
research and development efforts and rapid technological progress characterize the industry in which we compete. Although we believe that our proprietary drug discovery
capabilities afford us a competitive advantage relative to other discovery and development companies competing in oncology, we expect competitive intensity in this pharmaceutical segment to continue.
Discoveries by others may render CLIMB and our current and potential products noncompetitive. Our competitive position also depends on our ability to attract and retain qualified scientific and other
personnel, develop effective proprietary products, implement development plans, obtain patent protection and secure adequate capital resources.

The pharmaceutical industry in general and the oncology sector in particular is subject to significant and rapid technological change. Developments by competitors may render
our product candidates or technologies obsolete or non-competitive.

Our competitors may succeed in developing technologies or products that are more effective than ours. Additionally, our products that
are under patent protection face intense competition from competitors' proprietary products. This competition may increase as new products enter the market.

A
number of our competitors have substantially more capital, research and development, regulatory, manufacturing, marketing, human and other resources and experience than we have. As a
result, our competitors may:



36

---



Table of Contents



We
will also face increasing competition from lower-cost generic products after patents on our proprietary products expire. Loss of patent protection typically leads to a
rapid decline in sales for that product and could affect our future results. As new products enter the market, our products may become obsolete or our competitors' products may be more effective or
more effectively marketed and sold than our products. Technological advances, competitive forces and loss of intellectual property protection rights for our products may render our products obsolete.

We may be subject to product liability lawsuits and our insurance may be inadequate to cover damages.

Clinical trials and commercial use of our current and potential products may expose us to liability claims from the use or sale of
these products. Consumers, healthcare providers, pharmaceutical companies and others selling such products might make claims of this kind. We may experience financial losses in the future due to
product liability claims. We have obtained limited product liability insurance coverage for our products and clinical trials, under which the coverage limits are $10 million per occurrence and
$10 million in the aggregate. We do not know whether this coverage will be adequate to protect us in the event of a claim. We may not be able to obtain or maintain insurance coverage in the
future at a reasonable cost or in sufficient amounts to protect us against losses. If third parties bring a successful product liability claim or series of claims against us for uninsured liabilities
or in excess of insured liabilities, we may not have sufficient financial resources to complete development or commercialization of any of our product candidates and our business and results of
operations will be adversely affected.

If we are unable to attract and retain additional, highly skilled personnel required for the expansion of our activities, our business will suffer.

Our success is dependent on key personnel, including members of our senior management and scientific staff. If any of our executive
officers decides to leave and we cannot locate a qualified replacement in time to allow a smooth transition, our business may be adversely affected. To successfully expand our operations, we will need
to attract and retain additional highly skilled individuals, particularly in the areas of clinical administration, non-clinical and development research, manufacturing and finance. We
compete with other companies for the services of existing and potential employees, however to the extent these employees favor larger, more established employers, we may be at a disadvantage.

Earthquake or other natural or man-made disasters and business interruptions could adversely affect our business.

Our operations are vulnerable to interruption by fire, power loss, floods, telecommunications failure and other events beyond our
control. In addition, our operations are susceptible to disruption as a result of natural disasters such as earthquakes. So far we have never experienced any significant disruption of our operations
as a result of earthquakes or other natural disasters. Although we have a contingency recovery plan, any significant business interruption could cause delays in our drug development and future sales
and harm our business.

Provisions in our certificate of incorporation, bylaws and applicable Delaware law may prevent or discourage third parties or stockholders from attempting to replace our
management.

Anti-takeover provisions of our certificate of incorporation and bylaws make it more difficult for a third party to acquire
us, even if doing so would be beneficial to our stockholders. These provisions include:



37

---



Table of Contents



Our
bylaws establish procedures, including notice procedures, with regard to the nomination, other than by or at the direction of our board of directors, of candidates for election as
directors or for stockholder proposals to be submitted at stockholder meetings.

We
are also subject to Section 203 of the Delaware General Corporation Law, an anti-takeover provision. In general, Section 203 of the Delaware General
Corporation Law prevents a stockholder owning 15% or more of a corporation's outstanding voting stock from engaging in business combinations with a Delaware corporation for three years following the
date the stockholder acquired 15% or more of a corporation's outstanding voting stock. This restriction is subject to exceptions, including the approval of the board of directors and of the holders of
at least two-thirds of the outstanding shares of voting stock not owned by the interested stockholder.

We
believe that the benefits of increased protection of our potential ability to negotiate with the proponents of unfriendly or unsolicited proposals to acquire or restructure us
outweigh the disadvantages of discouraging those proposals because, among other things, negotiation of those proposals could result in an improvement of their terms. Nevertheless, these provisions are
expected to discourage different types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of our company to first negotiate with us, and
may have the effect of preventing or discouraging third parties or stockholders from attempting to replace our management.

Item 4.    Submission of Matters to a Vote of Security Holders

The Company's Annual Meeting of Stockholders was held on June 11, 2009. The results of the voting were as follows:

Proposal
1: Election of the Board of Directors of the Company.

Nominee

Votes For

Votes
WithheldJames S.J. Manuso


36,037,747


8,917,528Charles J. Casamento


43,495,614


1,459,661Thomas V. Girardi


43,528,950


1,426,325Allan R. Goldberg


35,395,352


9,559,923Walter J. Lack


42,238,187


2,717,088Michael D. Young


35,630,148


9,325,127


Proposal
2: Ratification of Ernst & Young LLP as independent registered public accounting firm for the year ending December 31, 2009.

Votes For:


44,305,904Votes Against:


462,123Votes Abstaining:


187,248


Item 6.    Exhibits

|     |  |                                                                                                                                                                               
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|31.1 |  | Certification of Chief Executive Officer under Section 302(a) of the Sarbanes-Oxley Act of 2002                                                                               
|31.2 |  | Certification of Chief Financial Officer under Section 302(a) of the Sarbanes-Oxley Act of 2002                                                                               
|32.1 |  | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002

38

---





Table of Contents

SIGNATURES

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 thereunto duly authorized.

SUPERGEN, INC.Date:    August 6, 2009

By:

/s/ JAMES S.J. MANUSO James S.J. Manuso, Ph.D. President and Chief Executive Officer
(Principal Executive Officer)By:

/s/ MICHAEL MOLKENTIN Michael Molkentin Chief Financial Officer
(Principal Financial and Accounting Officer)


39

---