##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from      to
 Commission File Number: 001-33609
 SUCAMPO PHARMACEUTICALS, INC.
  Delaware
    
    30-0520478(State or other jurisdiction of
    
    (I.R.S. employerincorporation or organization)
    
    identification no.)4520 East-West Highway, Suite 300Bethesda, MD 20814
    
    (301) 961-3400(Address of principal executive offices,
    
    (Registrants telephone number,including zip code)
    
    including area code)
 þ o
 o þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o  No þ




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##### 



Sucampo Pharmaceuticals, Inc.
 Form 10-Q Index
 PagePart I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (unaudited)
    
    
    1Condensed Consolidated Balance Sheets as of March 31, 2010 and
December 31, 2009
    
    
    1Condensed Consolidated Statements of Operations and
Comprehensive Income (Loss) for the Three Months
Ended March 31, 2010 and 2009
    
    
    2Condensed Consolidated Statement of Changes in Stockholders
Equity for the Three Months Ended
March 31, 2010
    
    
    3Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2010 and 2009
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    27Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 3. Defaults Upon Senior Securities
    
    
    28Item 4. Reserved
    
    
    28Item 5. Other InformationItem 6. Exhibits
    
    
    29SIGNATURES
    
    
    30INDEX TO EXHIBITS
    
    
    31Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Condensed Consolidated Financial Statements (Unaudited)
 SUCAMPO PHARMACEUTICALS, INC. Condensed Consolidated

Balance Sheets

(Unaudited)
 March 31,
    
    
    December 31,2010
    
    
    2009ASSETS:Current assets:Cash and cash equivalents
    
    $
    31,185
    
    
    $
    26,714Investments, current
    
    
    60,631
    
    
    
    72,434Product royalties receivable
    
    
    9,773
    
    
    
    11,023Unbilled accounts receivable
    
    
    427
    
    
    
    644Accounts receivable, net
    
    
    117
    
    
    
    512Prepaid and income tax receivable
    
    
    86
    
    
    
    Deferred tax assets, net
    
    
    105
    
    
    
    315Prepaid expenses and other current assets
    
    
    2,513
    
    
    
    3,137Total current assets
    
    
    104,837
    
    
    
    114,779Investments, non-current
    
    
    25,093
    
    
    
    19,167Property and equipment, net
    
    
    2,191
    
    
    
    2,242Deferred tax assets, non-current
    
    
    4,078
    
    
    
    3,995Other assets
    
    
    4,702
    
    
    
    4,788Total assets
    
    $
    140,901
    
    
    $
    144,971LIABILITIES AND STOCKHOLDERS EQUITY:Current liabilities:Accounts payable
    
    $
    2,017
    
    
    $
    3,195Accrued expenses
    
    
    7,617
    
    
    
    6,545Deferred revenue, current
    
    
    7,325
    
    
    
    10,565Income taxes payable
    
    
    
    
    
    
    349Total current liabilities
    
    
    16,959
    
    
    
    20,654Deferred revenue, non-current
    
    
    8,427
    
    
    
    8,643Other liabilities
    
    
    2,109
    
    
    
    2,121Total liabilities
    
    
    27,495
    
    
    
    31,418Commitments (Note 7)Stockholders equity:Preferred stock, $0.01 par value; 5,000,000 shares authorized
at March 31, 2010 and December 31,
2009; no shares issued and outstanding
at March 31, 2010 and December 31, 2009
    
    
    
    
    
    
    Class A common stock, $0.01 par value; 270,000,000 shares
authorized at March 31, 2010 and
December 31, 2009; 15,657,059 and 15,655,730 shares issued
and outstanding at March 31, 2010 and
December 31, 2009 , respectively
    
    
    156
    
    
    
    156Class B common stock, $0.01 par value; 75,000,000 shares
authorized at March 31, 2010 and
December 31, 2009; 26,191,050 shares
issued and outstanding at March 31, 2010
and December 31, 2009
    
    
    262
    
    
    
    262Additional paid-in capital
    
    
    98,785
    
    
    
    98,636Accumulated other comprehensive income
    
    
    487
    
    
    
    484Retained earnings
    
    
    13,716
    
    
    
    14,015Total stockholders equity
    
    
    113,406
    
    
    
    113,553Total liabilities and stockholders equity
    
    $
    140,901
    
    
    $
    144,971
   1




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SUCAMPO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)


(Unaudited)
 Three Months EndedMarch 31,2010
    
    
    2009Revenues:Research and development revenue
    
    $
    4,057
    
    
    $
    5,526Product royalty revenue
    
    
    9,773
    
    
    
    8,946Co-promotion revenue
    
    
    855
    
    
    
    896Contract and collaboration revenue
    
    
    151
    
    
    
    146Total revenues
    
    
    14,836
    
    
    
    15,514Operating expenses:Research and development
    
    
    5,366
    
    
    
    9,965General and administrative
    
    
    5,759
    
    
    
    3,455Selling and marketing
    
    
    2,187
    
    
    
    2,512Milestone royalties  related parties
    
    
    
    
    
    
    500Product royalties  related parties
    
    
    1,737
    
    
    
    1,590Total operating expenses
    
    
    15,049
    
    
    
    18,022Loss from operations
    
    
    (213
    )
    
    
    (2,508
    )Non-operating income (expense):Interest income
    
    
    211
    
    
    
    312Other income (expense), net
    
    
    (92
    )
    
    
    822Total non-operating income, net
    
    
    119
    
    
    
    1,134Loss before income taxes
    
    
    (94
    )
    
    
    (1,374
    )Income tax provision
    
    
    (205
    )
    
    
    (401
    )Net loss
    
    $
    (299
    )
    
    $
    (1,775
    )Net loss per share:Basic net loss per share
    
    $
    (0.01
    )
    
    $
    (0.04
    )Diluted net loss per share
    
    $
    (0.01
    )
    
    $
    (0.04
    )Weighted average common shares outstanding  basic
    
    
    41,845
    
    
    
    41,844Weighted average common shares outstanding  diluted
    
    
    41,845
    
    
    
    41,844Comprehensive loss:Net loss
    
    $
    (299
    )
    
    $
    (1,775
    )Other comprehensive income loss:Unrealized loss on investments, net of tax effect
    
    
    (17
    )
    
    
    (65
    )Foreign currency translation
    
    
    20
    
    
    
    (203
    )Comprehensive loss
    
    $
    (296
    )
    
    $
    (2,043
    )
   2




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SUCAMPO PHARMACEUTICALS, INC.

Condensed Consolidated Statement of Changes in Stockholders Equity


(Unaudited)
 AccumulatedClass A
    
    
    Class B
    
    
    Additional
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Retained
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Income
    
    
    Earnings
    
    
    EquityBalance at December 31, 2009
    
    
    15,655,730
    
    
    $
    156
    
    
    
    26,191,050
    
    
    $
    262
    
    
    $
    98,636
    
    
    $
    484
    
    
    $
    14,015
    
    
    $
    113,553Employee stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145
    
    
    
    
    
    
    
    
    
    
    
    145Stock issued under employee
stock purchase plan
    
    
    1,329
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    20Unrealized loss on
investments, net of tax
effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    (17
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (299
    )
    
    
    (299
    )Balance at March 31, 2010
    
    
    15,657,059
    
    
    $
    156
    
    
    
    26,191,050
    
    
    $
    262
    
    
    $
    98,785
    
    
    $
    487
    
    
    $
    13,716
    
    
    $
    113,406
   3




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SUCAMPO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows


(Unaudited)
 Three Months EndedMarch 31,2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (299
    )
    
    $
    (1,775
    )Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    228
    
    
    
    122Deferred tax provision
    
    
    138
    
    
    
    394Stock-based compensation
    
    
    145
    
    
    
    111Amortization of premiums on investments
    
    
    461
    
    
    
    Unrealized gain on trading securities
    
    
    
    
    
    
    (2,672
    )Unrealized
loss on settlement rights on auction rate securities
    
    
    
    
    
    
    2,423Changes in operating assets and liabilities:Accounts receivable
    
    
    395
    
    
    
    617Unbilled accounts receivable
    
    
    217
    
    
    
    547Product royalties receivable
    
    
    1,250
    
    
    
    780Prepaid and income taxes receivable and payable, net
    
    
    (436
    )
    
    
    (1,406
    )Accounts payable
    
    
    (1,178
    )
    
    
    1,382Accrued expenses
    
    
    1,078
    
    
    
    (811
    )Deferred revenue
    
    
    (3,461
    )
    
    
    7,245Other assets and liabilities, net
    
    
    607
    
    
    
    348Net cash provided by (used in) operating activities
    
    
    (855
    )
    
    
    7,305Cash flows from investing activities:Purchases of investments
    
    
    (21,028
    )
    
    
    (47,202
    )Proceeds from sales of investments
    
    
    1,500
    
    
    
    Maturities of investments
    
    
    24,917
    
    
    
    29,504Purchases of property and equipment
    
    
    (94
    )
    
    
    (127
    )Net cash
provided by (used in) investing activities
    
    
    5,295
    
    
    
    (17,825
    )Cash flows from financing activities:Proceeds from employee stock purchase plan
    
    
    4
    
    
    
    5Net cash provided by financing activities
    
    
    4
    
    
    
    5Effect of exchange rates on cash and cash equivalents
    
    
    27
    
    
    
    (589
    )Net increase in cash and cash equivalents
    
    
    4,471
    
    
    
    (11,104
    )Cash and cash equivalents at beginning of period
    
    
    26,714
    
    
    
    62,562Cash and cash equivalents at end of period
    
    $
    31,185
    
    
    $
    51,458
   4




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SUCAMPO PHARMACEUTICALS, INC.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 1. Business Organization and Basis of Presentation
 Description of the Business
  ® ®
     Basis of Presentation
    5




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SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
 2. Summary of Significant Accounting Policies
 Cash and Cash Equivalents
  Current and Non-current Investments
  Fair Value
  Revenue Recognition
     6




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SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
       Contract Revenue
  Certain Risks, Concentrations and Uncertainties
    ®
  7




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SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
     Reclassifications
  Recent Accounting Pronouncements
    8




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SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
   3. Earnings per Share
   Three Months EndedMarch 31,(in thousands, except per share data)
    
    2010
    
    
    2009Basic net loss per share:Net loss
    
    $
    (299
    )
    
    $
    (1,775
    )Weighted average class A and B
common shares
outstanding
    
    
    41,845
    
    
    
    41,844Basic net loss per share
    
    $
    (0.01
    )
    
    $
    (0.04
    )Diluted net loss per share:Net loss
    
    $
    (299
    )
    
    $
    (1,775
    )Weighted average class A and B
common shares
outstanding for diluted net
income per share
    
    
    41,845
    
    
    
    41,844Diluted net loss per share
    
    $
    (0.01
    )
    
    $
    (0.04
    )
   9




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##### Table of Contents



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
  March 31,(In thousands)
    
    2010
    
    
    2009Employee stock options
    
    
    1,144
    
    
    
    694Non-employee stock options
    
    
    450
    
    
    
    450
 4. Current and Non-Current Investments
  March 31, 2010Unrealized
    
    
    Unrealized(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueCurrent:U.S. Treasury
bills and notes
    
    $
    2,000
    
    
    $
    
    
    
    $
    
    
    
    $
    2,000U.S. commercial
paper
    
    
    2,934
    
    
    
    3
    
    
    
    
    
    
    
    2,937U.S. government
securities
    
    
    19,592
    
    
    
    5
    
    
    
    (8
    )
    
    
    19,589Municipal
securities
    
    
    16,967
    
    
    
    1
    
    
    
    (11
    )
    
    
    16,957Certificates of
deposits
    
    
    1,500
    
    
    
    
    
    
    
    (1
    )
    
    
    1,499Corporate bonds
    
    
    17,610
    
    
    
    40
    
    
    
    (1
    )
    
    
    17,649Total
    
    $
    60,603
    
    
    $
    49
    
    
    $
    (21
    )
    
    $
    60,631Non-current:U.S. government
securities
    
    $
    8,597
    
    
    $
    8
    
    
    $
    (20
    )
    
    $
    8,585Municipal
securities
    
    
    3,270
    
    
    
    5
    
    
    
    (1
    )
    
    
    3,274Certificates of
deposits
    
    
    250
    
    
    
    
    
    
    
    (1
    )
    
    
    249Corporate bonds
    
    
    4,079
    
    
    
    
    
    
    
    (8
    )
    
    
    4,071Auction rate
securities
    
    
    10,000
    
    
    
    
    
    
    
    (1,086
    )
    
    
    8,914Total
    
    $
    26,196
    
    
    $
    13
    
    
    $
    (1,116
    )
    
    $
    25,093
 December 31, 2009Unrealized
    
    
    Unrealized(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueCurrent:U.S. Treasury
bills and notes
    
    $
    2,999
    
    
    $
    
    
    
    $
    
    
    
    $
    2,999U.S. commercial
paper
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    1,000U.S. government
securities
    
    
    26,020
    
    
    
    16
    
    
    
    (6
    )
    
    
    26,030Municipal
securities
    
    
    25,339
    
    
    
    4
    
    
    
    (7
    )
    
    
    25,336Certificates of
deposits
    
    
    1,250
    
    
    
    
    
    
    
    (1
    )
    
    
    1,249Corporate bonds
    
    
    15,782
    
    
    
    38
    
    
    
    
    
    
    
    15,820Total
    
    $
    72,390
    
    
    $
    58
    
    
    $
    (14
    )
    
    $
    72,434Non-current:U.S. government
securities
    
    $
    6,065
    
    
    $
    7
    
    
    $
    (12
    )
    
    $
    6,060Municipal
securities
    
    
    1,802
    
    
    
    4
    
    
    
    
    
    
    
    1,806Certificates of
deposits
    
    
    500
    
    
    
    
    
    
    
    (2
    )
    
    
    498Corporate bonds
    
    
    1,891
    
    
    
    1
    
    
    
    (3
    )
    
    
    1,889Auction rate
securities
    
    
    10,000
    
    
    
    
    
    
    
    (1,086
    )
    
    
    8,914Total
    
    $
    20,258
    
    
    $
    12
    
    
    $
    (1,103
    )
    
    $
    19,167
  10




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SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
   Level 1
 Level 2
 Level 3
  Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor identical
    
    
    Observable
    
    
    UnobservableMarch 31, 2010
    
    Assets
    
    
    Inputs
    
    
    Inputs(In thousands)
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalU.S. Treasury bills and
notes
    
    $
    2,000
    
    
    $
    
    
    
    $
    
    
    
    $
    2,000U.S. government
securities
    
    
    28,174
    
    
    
    
    
    
    
    
    
    
    
    28,174U.S. commercial paper
    
    
    
    
    
    
    2,937
    
    
    
    
    
    
    
    2,937Corporate bonds
    
    
    21,720
    
    
    
    
    
    
    
    
    
    
    
    21,720Municipal securities
    
    
    20,231
    
    
    
    
    
    
    
    
    
    
    
    20,231Auction rate securities
    
    
    
    
    
    
    
    
    
    
    8,914
    
    
    
    8,914Settlement rights for
auction rate
securities*
    
    
    
    
    
    
    
    
    
    
    1,086
    
    
    
    1,086Certificates of deposits
    
    
    
    
    
    
    1,748
    
    
    
    
    
    
    
    1,748Total assets measured
at fair value
    
    $
    72,125
    
    
    $
    4,685
    
    
    $
    10,000
    
    
    $
    86,810
  11




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SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
 Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor identical
    
    
    Observable
    
    
    UnobservableDecember 31, 2009
    
    Assets
    
    
    Inputs
    
    
    Inputs(In thousands)
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalU.S. Treasury bills and
notes
    
    $
    2,999
    
    
    $
    
    
    
    $
    
    
    
    $
    2,999U.S. government
securities
    
    
    32,090
    
    
    
    
    
    
    
    
    
    
    
    32,090U.S. commercial paper
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    1,000Corporate bonds
    
    
    17,709
    
    
    
    
    
    
    
    
    
    
    
    17,709Municipal securities
    
    
    27,142
    
    
    
    
    
    
    
    
    
    
    
    27,142Auction rate securities
    
    
    
    
    
    
    
    
    
    
    8,914
    
    
    
    8,914Settlement rights for
auction rate
securities*
    
    
    
    
    
    
    
    
    
    
    1,086
    
    
    
    1,086Certificates of deposits
    
    
    
    
    
    
    1,747
    
    
    
    
    
    
    
    1,747Total assets measured
at fair value
    
    $
    79,940
    
    
    $
    2,747
    
    
    $
    10,000
    
    
    $
    92,687
 *
    
    included in non-current other assets in the accompanying condensed consolidated balance sheets.   5. Intangible Assets
    12




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SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
 6. Accrued Expenses
  March 31,
    
    
    December 31,(In thousands)
    
    2010
    
    
    2009Research and development costs
    
    $
    2,602
    
    
    $
    3,624Employee compensation
    
    
    1,001
    
    
    
    879Selling and marketing costs
    
    
    102
    
    
    
    731Other accrued expenses
    
    
    3,912
    
    
    
    1,311Total
    
    $
    7,617
    
    
    $
    6,545
 7. Commitments
 Operating Leases
  (In thousands)2010 (April  December)
    
    $
    1,0352011
    
    
    1,0672012
    
    
    9662013
    
    
    9942014
    
    
    1,0242015 and thereafter
    
    
    2,275Total minimum lease payments
    
    $
    7,361
  Research and Development Costs
  8. Related Party Transactions
 R-Tech Ueno, Ltd.
   13




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##### Table of Contents



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
  Three Months EndedMarch 31,(In thousands)
    
    2010
    
    
    2009Clinical supplies
    
    $
    112
    
    
    $
    1,044Other research and development services
    
    
    63
    
    
    
    5$
    175
    
    
    $
    1,049
  March 31,
    
    
    December 31,(In thousands)
    
    2010
    
    
    2009Deferred revenue, current
    
    $
    431
    
    
    $
    431Deferred revenue, non-current
    
    
    6,133
    
    
    
    6,256$
    6,564
    
    
    $
    6,687
  Sucampo AG License Agreements
   9. Collaboration and License Agreements
 Abbott license and commercialization and supply agreement
    14




---



##### Table of Contents



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
  RevenueCash Received
    
    
    Recognized for
    
    
    Foreign CurrencyAmount
    
    
    for the Three
    
    
    the Three
    
    
    Effects for the
    
    
    AmountDeferred at
    
    
    Months Ended
    
    
    Months Ended
    
    
    Three Months
    
    
    Deferred atDecember 31,
    
    
    March 31,
    
    
    March 31,
    
    
    Ended March 31,
    
    
    March 31,(In thousands)
    
    2009
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2010Collaboration revenue:Up-front payment
associated with the
Companys
obligation to
participate in
joint committees
    
    $
    812
    
    
    $
    
    
    
    $
    10
    
    
    $
    (4
    )
    
    $
    798Research and
development revenue:Up-front payment
    
    $
    3,991
    
    
    $
    
    
    
    $
    1,497
    
    
    $
    19
    
    
    $
    2,513Development milestone
payment
    
    $
    3,366
    
    
    
    
    
    
    
    1,256
    
    
    
    10
    
    
    $
    2,120Total
    
    $
    7,357
    
    
    $
    
    
    
    $
    2,753
    
    
    $
    29
    
    
    $
    4,633
 Takeda commercialization and license agreement
     15




---



##### Table of Contents



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
  RevenueCash Received
    
    
    Recognized for
    
    
    Change in AccountsAmount
    
    
    for the Three
    
    
    the Three
    
    
    Receivable for the
    
    
    AmountDeferred at
    
    
    Months Ended
    
    
    Months Ended
    
    
    Three Months
    
    
    Deferred atDecember 31,
    
    
    March 31,
    
    
    March 31,
    
    
    Ended March 31,
    
    
    March 31,(In thousands)
    
    2009
    
    
    2010
    
    
    2010
    
    
    2010*
    
    
    2010Collaboration revenue:Up-front payment
associated with the
Companys
obligation to
participate in
joint committees
    
    $
    1,617
    
    
    $
    
    
    
    $
    37
    
    
    $
    
    
    
    $
    1,580Research and
development revenue:Reimbursement of
research and
development expenses
    
    $
    2,734
    
    
    $
    965
    
    
    $
    1,304
    
    
    $
    (216
    )
    
    $
    2,179Product royalty revenue
    
    $
    
    
    
    $
    11,023
    
    
    $
    9,773
    
    
    $
    (1,250
    )
    
    $
    Co-promotion revenue
    
    $
    
    
    
    $
    1,157
    
    
    $
    855
    
    
    $
    (302
    )
    
    $
    
 
 *
    
    Includes billed and unbilled accounts receivable. 10. Stock Option Plans
  Weighted AverageWeighted Average
    
    
    RemainingExercise Price Per
    
    
    Contractual Term
    
    
    AggregateShares
    
    
    Share
    
    
    (Years)
    
    
    Intrinsic ValueOptions
outstanding,
December 31, 2009
    
    
    358,700
    
    
    $
    10.43Options expired
    
    
    (13,600
    )
    
    
    10.00Options
outstanding, March
31, 2010
    
    
    345,100
    
    
    
    10.44
    
    
    
    3.87
    
    
    $
    Options
exercisable, March
31, 2010
    
    
    345,100
    
    
    
    10.44
    
    
    
    3.87
    
    
    $
    
  Weighted AverageWeighted Average
    
    
    RemainingExercise Price Per
    
    
    Contractual Term
    
    
    AggregateShares
    
    
    Share
    
    
    (Years)
    
    
    Intrinsic ValueOptions
outstanding,
December 31, 2009
    
    
    509,800
    
    
    $
    8.58Options granted
    
    
    289,000
    
    
    
    3.79Options
outstanding, March
31, 2010
    
    
    798,800
    
    
    
    6.84
    
    
    
    8.33
    
    
    $
    Options
exercisable, March
31, 2010
    
    
    132,375
    
    
    
    14.35
    
    
    
    3.88
    
    
    $
    
   16




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##### Table of Contents



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
  Employee Stock Purchase Plan
  11. Income Taxes
   Uncertain Tax Positions
    12. Segment Reporting
   17




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##### Table of Contents



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
 Intercompany(In thousands)
    
    Americas
    
    
    Europe
    
    
    Asia
    
    
    Eliminations
    
    
    ConsolidatedThree Months Ended March 31, 2010Research and
development revenue
    
    $
    1,304
    
    
    $
    
    
    
    $
    2,753
    
    
    $
    
    
    
    $
    4,057Product royalty
revenue
    
    
    9,773
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,773Co-promotion revenue
    
    
    855
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    855Contract and
collaboration
revenue
    
    
    141
    
    
    
    
    
    
    
    285
    
    
    
    (275
    )
    
    
    151Total revenues
    
    
    12,073
    
    
    
    
    
    
    
    3,038
    
    
    
    (275
    )
    
    
    14,836Research and
development
expenses
    
    
    2,373
    
    
    
    219
    
    
    
    3,049
    
    
    
    (275
    )
    
    
    5,366Depreciation and
amortization
    
    
    218
    
    
    
    3
    
    
    
    7
    
    
    
    
    
    
    
    228Other operating
expenses
    
    
    9,005
    
    
    
    252
    
    
    
    198
    
    
    
    
    
    
    
    9,455Income (loss)
from operations
    
    
    477
    
    
    
    (474
    )
    
    
    (216
    )
    
    
    
    
    
    
    (213
    )Interest income
    
    
    273
    
    
    
    
    
    
    
    1
    
    
    
    (63
    )
    
    
    211Other non-operating
income (expense),
net
    
    
    (36
    )
    
    
    (99
    )
    
    
    (20
    )
    
    
    63
    
    
    
    (92
    )Income (loss)
before income
taxes
    
    $
    714
    
    
    $
    (573
    )
    
    $
    (235
    )
    
    $
    
    
    
    $
    (94
    )Capital expenditures
    
    $
    91
    
    
    $
    
    
    
    $
    3
    
    
    $
    
    
    
    $
    94Three Months Ended
March 31, 2009Research and
development revenue
    
    $
    5,152
    
    
    $
    
    
    
    $
    374
    
    
    $
    
    
    
    $
    5,526Product royalty
revenue
    
    
    8,946
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,946Co-promotion revenue
    
    
    896
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    896Contract and
collaboration
revenue
    
    
    141
    
    
    
    
    
    
    
    215
    
    
    
    (210
    )
    
    
    146Total revenues
    
    
    15,135
    
    
    
    
    
    
    
    589
    
    
    
    (210
    )
    
    
    15,514Research and
development
expenses
    
    
    7,971
    
    
    
    152
    
    
    
    2,052
    
    
    
    (210
    )
    
    
    9,965Depreciation and
amortization
    
    
    117
    
    
    
    3
    
    
    
    2
    
    
    
    
    
    
    
    122Other operating
expenses
    
    
    6,487
    
    
    
    328
    
    
    
    1,120
    
    
    
    
    
    
    
    7,935Income (loss)
from operations
    
    
    560
    
    
    
    (483
    )
    
    
    (2,585
    )
    
    
    
    
    
    
    (2,508
    )Interest income
    
    
    359
    
    
    
    
    
    
    
    3
    
    
    
    (50
    )
    
    
    312Other non-operating
income (expense),
net
    
    
    244
    
    
    
    (36
    )
    
    
    564
    
    
    
    50
    
    
    
    822Income (loss)
before income
taxes
    
    $
    1,163
    
    
    $
    (519
    )
    
    $
    (2,018
    )
    
    $
    
    
    
    $
    (1,374
    )Capital expenditures
    
    $
    127
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    127As of March 31,
2010Property and
equipment, net
    
    $
    1,967
    
    
    $
    29
    
    
    $
    195
    
    
    $
    
    
    
    $
    2,191Identifiable
assets, net of
intercompany loans
and investments
    
    $
    134,669
    
    
    $
    2,167
    
    
    $
    6,489
    
    
    $
    (2,424
    )
    
    $
    140,901As of December 31,
2009Property and
equipment, net
    
    $
    2,008
    
    
    $
    34
    
    
    $
    200
    
    
    $
    
    
    
    $
    2,242Identifiable
assets, net of
intercompany loans
and investments
    
    $
    134,714
    
    
    $
    864
    
    
    $
    11,294
    
    
    $
    (1,901
    )
    
    $
    144,971
  18




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 This Quarterly Report on Form 10-Q contains forward-looking statements regarding Sucampo
Pharmaceuticals, Inc. (the Company, we, us, or our) and our business, financial condition,
results of operations and prospects within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements include those that express plans, anticipation,
intent, contingency, goals, targets or future development and/or otherwise are not statements of
historical fact. These forward-looking statements are based on our current expectations and
projections about future events and they are subject to risks and uncertainties known and unknown
that could cause actual results and developments to differ materially from those expressed or
implied in such statements. You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our consolidated financial statements as of
and for the year ended December 31, 2009 included in our Annual Report on Form 10-K .
 Overview
  ® ®
      19




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##### Table of Contents



Our Clinical Development Programs
 We are developing prostone compounds for the treatment of a broad range of diseases. The most
advanced of these programs are:
 Amitiza (lubiprostone) in the United States and Canada.
 Amitiza (lubiprostone) in Japan
 Amitiza (lubiprostone) in other countries
 Rescula
 Cobiprostone
  20




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##### Table of Contents



SPI-017
 SPI-3608
 Results of Operations
 Comparison of three months ended March 31, 2010 and March 31, 2009
 Revenues
  Three Months EndedMarch 31,(In thousands)
    
    2010
    
    
    2009Research and development revenue
    
    $
    4,057
    
    
    $
    5,526Product royalty revenue
    
    
    9,773
    
    
    
    8,946Co-promotion revenue
    
    
    855
    
    
    
    896Contract and collaboration revenue
    
    
    151
    
    
    
    146Total
    
    $
    14,836
    
    
    $
    15,514
      21




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##### Table of Contents



Research and Development Expenses
  Three Months EndedMarch 31,(In thousands)
    
    2010
    
    
    2009Direct costs:Amitiza
    
    $
    3,774
    
    
    $
    6,771Cobiprostone
    
    
    145
    
    
    
    890SPI-017
    
    
    810
    
    
    
    1,637Rescula
    
    
    117
    
    
    
    Other
    
    
    61
    
    
    
    144Total
    
    
    4,907
    
    
    
    9,442Indirect costs
    
    
    459
    
    
    
    523Total
    
    $
    5,366
    
    
    $
    9,965
  General and Administrative Expenses
  Three Months EndedMarch 31,(In thousands)
    
    2010
    
    
    2009Salaries, benefits and related costs
    
    $
    1,245
    
    
    $
    1,159Legal, consulting and other professional expenses
    
    
    3,234
    
    
    
    1,077Other expenses
    
    
    1,280
    
    
    
    1,219Total
    
    $
    5,759
    
    
    $
    3,455
  Selling and Marketing Expenses
  Product Royalties - Related Parties
   22




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##### Table of Contents



Non-Operating Income and Expense
  Three Months EndedMarch 31,(In thousands)
    
    2010
    
    
    2009Interest income
    
    $
    211
    
    
    $
    312Other income (expense), net
    
    
    (92
    )
    
    
    822Total
    
    $
    119
    
    
    $
    1,134
  Income Taxes
  Reportable Geographic Segments
      23




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##### Table of Contents



Intercompany(In thousands)
    
    Americas
    
    
    Europe
    
    
    Asia
    
    
    Eliminations
    
    
    ConsolidatedThree Months Ended
March 31, 2010Total revenues
    
    $
    12,073
    
    
    $
    
    
    
    $
    3,038
    
    
    $
    (275
    )
    
    $
    14,836Income (loss)
before taxes
    
    
    714
    
    
    
    (573
    )
    
    
    (235
    )
    
    
    
    
    
    
    (94
    )Three Months Ended
March 31, 2009Total revenues
    
    $
    15,135
    
    
    $
    
    
    
    $
    589
    
    
    $
    (210
    )
    
    $
    15,514Income (loss)
before taxes
    
    
    1,163
    
    
    
    (519
    )
    
    
    (2,018
    )
    
    
    
    
    
    
    (1,374
    )Identifiable AssetsAs of March 31, 2010
    
    $
    134,669
    
    
    $
    2,167
    
    
    $
    6,489
    
    
    $
    (2,424
    )
    
    $
    140,901As of December 31,
2009
    
    
    134,714
    
    
    
    864
    
    
    
    11,294
    
    
    
    (1,901
    )
    
    
    144,971
 Liquidity and Capital Resources
 Sources of Liquidity
   March 31,
    
    
    December 31,(In thousands)
    
    2010
    
    
    2009Cash and cash equivalents
    
    $
    31,185
    
    
    $
    26,714Investments, current
    
    
    60,631
    
    
    
    72,434Investments, non-current
    
    
    25,093
    
    
    
    19,167Total
    
    $
    116,909
    
    
    $
    118,315
     24




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##### Table of Contents



Cash Flows
  Three Months EndedMarch 31,(In thousands)
    
    2010
    
    
    2009Cash provided by (used in):Operating activities
    
    $
    (855
    )
    
    $
    7,305Investing activities
    
    
    5,295
    
    
    
    (17,825
    )Financing activities
    
    
    4
    
    
    
    5Effect of exchange rates
    
    
    27
    
    
    
    (589
    )Net increase in cash and cash equivalents
    
    $
    4,471
    
    
    $
    (11,104
    )
 Three Months Ended March 31, 2010
    Three Months Ended March 31, 2009
    Off-Balance Sheet Arrangements
  Funding Requirements
  
    
    fund our share of the ongoing development program of Amitiza in the U.S.;
    
    fund development and regulatory efforts in Europe and Asia for lubiprostone;
    
    fund development and regulatory activities for Rescula in the U.S. and Canada;
    
    fund research and development activities for other prostone compounds,
including cobiprostone and SPI-017;
    
    fund the expansion of our commercialization activities in the U.S. and the
initiation of commercialization efforts in non-
U.S. markets;
    
    fund capital expenditures to support the growth of our business; and
    
    fund the purchase of shares of our class A common stock up to $10.0 million, if
we elect to do so, pursuant to our board-
approved stock repurchase program.
  25




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##### Table of Contents




    
    the revenue from Amitiza and Rescula;
    
    the future expenditures we may incur to increase revenue from Amitiza or in our disputes with Takeda;
    
    the cost and time involved to pursue our research and development programs;
    
    our ability to establish collaborative arrangements and to enter into licensing agreements and contractual arrangements
with others; and
    
    any future change in our business strategy.
   Effects of Foreign Currency
  Recent Accounting Pronouncements
  
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
 Foreign Exchange Risk
  Interest Rate Risk
    26




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##### Table of Contents



Credit Risk
   
 Item 4.
    
    Controls and Procedures
 a) Evaluation of Disclosure Controls and Procedures
  b) Changes in Internal Controls
   27




---



##### Table of Contents



Part II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities.
  
 Item 4.
    
    RESERVED
  28




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##### Table of Contents



Item 6.
    
    Exhibits
 (a) Exhibits
 ExhibitNumber
    
    Description
    
    Reference3.1
    
    Certificate of Incorporation
    
    Exhibit 3.1 to the
Companys Current
Report on Form 8-K
(filed December 29,
2008)3.2
    
    Certificate of Amendment
    
    Exhibit 3.2 to the
Companys Current
Report on Form 8-K
(filed December 29,
2008)3.3
    
    Restated Bylaws
    
    Exhibit 3.3 to the
Companys Current
Report on Form 8-K
(filed December 29,
2008)4.1
    
    Specimen Stock Certificate
evidencing the shares of class
A common stock
    
    Exhibit 4.1 to
Registration Statement
No. 333-135133,
Amendment No. 5 (filed
February 1, 2007)31.1
    
    Certification of the Principal
Executive Officer, as required
by Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Included herewith31.2
    
    Certification of the Principal
Financial Officer, as required
by Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Included herewith32.1
    
    Certification of the Principal
Executive Officer pursuant to
18 U.S.C. Section 1350, as
adopted pursuant to Section 906
of the Sarbanes-Oxley Act of
2002
    
    Included herewith32.2
    
    Certification of the Principal
Financial Officer pursuant to
18 U.S.C. Section 1350, as
adopted pursuant to Section 906
of the Sarbanes-Oxley Act of
2002
    
    Included herewith
  29




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##### Table of Contents



SIGNATURES
  Sucampo Pharmaceuticals, Inc.May 10, 2010
    By:
    /s/ RYUJI UENORyuji Ueno, M.D., Ph.D., Ph.D.Chief Executive Officer, Chief Scientific Officer
 and
Chairman of the Board of Directors
(Principal Executive Officer)May 10, 2010
    By:
    /s/ JAN SMILEKJan SmilekChief Financial Officer

(Principal Financial and Accounting Officer)  30




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##### Table of Contents



Sucampo Pharmaceuticals, Inc.
 
 Exhibit Index
 ExhibitNumber
    
    Description
    
    Reference3.1
    
    Certificate of Incorporation
    
    Exhibit 3.1 to the
Companys Current
Report on Form 8-K
(filed December 29,
2008)3.2
    
    Certificate of Amendment
    
    Exhibit 3.2 to the
Companys Current
Report on Form 8-K
(filed December 29,
2008)3.3
    
    Restated Bylaws
    
    Exhibit 3.3 to the
Companys Current
Report on Form 8-K
(filed December 29,
2008)4.1
    
    Specimen Stock Certificate
evidencing the shares of class
A common stock
    
    Exhibit 4.1 to
Registration Statement
No. 333-135133,
Amendment No. 5 (filed
February 1, 2007)31.1
    
    Certification of the Principal
Executive Officer, as required
by Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Included herewith31.2
    
    Certification of the Principal
Financial Officer, as required
by Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Included herewith32.1
    
    Certification of the Principal
Executive Officer pursuant to
18 U.S.C. Section 1350, as
adopted pursuant to Section 906
of the Sarbanes-Oxley Act of
2002
    
    Included herewith32.2
    
    Certification of the Principal
Financial Officer pursuant to
18 U.S.C. Section 1350, as
adopted pursuant to Section 906
of the Sarbanes-Oxley Act of
2002
    
    Included herewith