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 June 30, 2008
 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.
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction of 
incorporation or organization)
    
    13-3929237(I.R.S. employer
identification no.)4520 East-West Highway, Suite 300
Bethesda, MD 20814(Address of principal executive offices, 
including zip code)
    
    (301) 961-3400(Registrants telephone number,
including area code)
 þ o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
Smaller reporting company o o 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 June 30, 2008 and December 31, 2007
    
    
    1Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended June 30, 2008 and 2007
    
    
    2Condensed Consolidated Statement of Changes in Stockholders Equity for the Six Months Ended June 30, 2008
    
    
    3Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4.
    
    Controls and Procedures
    
    
    29Part II.  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    29Item 1A.
    
    Risk Factors
    
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    31Item 6.
    
    Exhibits
    
    
    32SIGNATURES
    
    
    
    
    33INDEX TO EXHIBITS
    
    
    34




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##### 



PART I  FINANCIAL INFORMATION
 Item 1. Condensed Consolidated Financial Statements (Unaudited)
 SUCAMPO PHARMACEUTICALS, INC.
Condensed Consolidated Balance Sheets (Unaudited)
 June 30,
    
    
    December 31,2008
    
    
    2007ASSETS:Current assets:Cash and cash equivalents
    
    $
    26,483
    
    
    $
    25,559Investments, current
    
    
    87,615
    
    
    
    51,552Product royalties receivable
    
    
    10,283
    
    
    
    8,667Unbilled accounts receivable
    
    
    5,679
    
    
    
    5,883Accounts receivable
    
    
    2,910
    
    
    
    1,525Prepaid and income taxes receivable
    
    
    119
    
    
    
    1,922Deferred tax assets, net
    
    
    1,394
    
    
    
    88Prepaid expenses and other current assets
    
    
    1,811
    
    
    
    2,222Total current assets
    
    
    136,294
    
    
    
    97,418Investments, non-current
    
    
    20,932
    
    
    
    9,400Property and equipment, net
    
    
    2,355
    
    
    
    2,265Deferred tax assets  noncurrent, net
    
    
    4,713
    
    
    
    551Other assets
    
    
    401
    
    
    
    393Total assets
    
    $
    164,695
    
    
    $
    110,027LIABILITIES AND STOCKHOLDERS EQUITY:Current liabilities:Accounts payable
    
    $
    3,524
    
    
    $
    3,313Accrued expenses
    
    
    10,404
    
    
    
    8,730Deferred revenue  current
    
    
    10,867
    
    
    
    1,062Income taxes payable
    
    
    13,409
    
    
    
    Total current liabilities
    
    
    38,204
    
    
    
    13,105Deferred revenue, net of current portion
    
    
    8,344
    
    
    
    8,626Other liabilities
    
    
    1,774
    
    
    
    1,768Total liabilities
    
    
    48,322
    
    
    
    23,499Commitments (Note 7)Stockholders equity:Preferred stock, $0.01 par value; 5,000,000
shares authorized at June 30, 2008 and
December 31, 2007; no shares issued and
outstanding at June 30, 2008 and December
31, 2007
    
    
    
    
    
    
    Class A common stock, $0.01 par value;
270,000,000 shares authorized at June 30,
2008 and December 31, 2007; 15,595,518 and
15,538,518 shares issued and outstanding at
June 30, 2008 and December 31, 2007,
respectively
    
    
    156
    
    
    
    155Class B common stock, $0.01 par value;
75,000,000 shares authorized at June 30,
2008 and December 31, 2007; 26,191,050
shares issued and outstanding at June 30,
2008 and
December 31, 2007
    
    
    262
    
    
    
    262Additional paid-in capital
    
    
    97,594
    
    
    
    96,680Accumulated other comprehensive loss
    
    
    (1,844
    )
    
    
    (393
    )Retained earnings (accumulated deficit)
    
    
    20,205
    
    
    
    (10,176
    )Total stockholders equity
    
    
    116,373
    
    
    
    86,528Total liabilities and stockholders equity
    
    $
    164,695
    
    
    $
    110,027
  1




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##### 



SUCAMPO PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Research and development revenue
    
    $
    55,436
    
    
    $
    38,087
    
    
    $
    61,546
    
    
    $
    47,453Product royalty revenue
    
    
    10,901
    
    
    
    9,562
    
    
    
    16,981
    
    
    
    11,871Co-promotion revenue
    
    
    1,236
    
    
    
    1,134
    
    
    
    2,458
    
    
    
    2,267Contract and collaboration revenue
    
    
    141
    
    
    
    151
    
    
    
    283
    
    
    
    304Total revenues
    
    
    67,714
    
    
    
    48,934
    
    
    
    81,268
    
    
    
    61,895Operating expenses:Research and development
    
    
    12,931
    
    
    
    8,082
    
    
    
    24,147
    
    
    
    14,690General and administrative
    
    
    3,561
    
    
    
    13,017
    
    
    
    6,728
    
    
    
    15,170Selling and marketing
    
    
    2,870
    
    
    
    3,776
    
    
    
    5,718
    
    
    
    7,026Milestone royalties  related parties
    
    
    2,500
    
    
    
    1,500
    
    
    
    3,531
    
    
    
    1,500Product royalties  related parties
    
    
    1,951
    
    
    
    1,700
    
    
    
    3,032
    
    
    
    2,111Total operating expenses
    
    
    23,813
    
    
    
    28,075
    
    
    
    43,156
    
    
    
    40,497Income from operations
    
    
    43,901
    
    
    
    20,859
    
    
    
    38,112
    
    
    
    21,398Non-operating income (expense):Interest income
    
    
    565
    
    
    
    471
    
    
    
    1,207
    
    
    
    795Other (expense) income, net
    
    
    (13
    )
    
    
    42
    
    
    
    (1
    )
    
    
    36Total non-operating income, net
    
    
    552
    
    
    
    513
    
    
    
    1,206
    
    
    
    831Income before income taxes
    
    
    44,453
    
    
    
    21,372
    
    
    
    39,318
    
    
    
    22,229Income tax provision
    
    
    (14,577
    )
    
    
    (7,489
    )
    
    
    (8,937
    )
    
    
    (7,829
    )Net income
    
    $
    29,876
    
    
    $
    13,883
    
    
    $
    30,381
    
    
    $
    14,400Net income per share:Basic net income per share
    
    $
    0.72
    
    
    $
    0.40
    
    
    $
    0.73
    
    
    $
    0.41Diluted net income per share
    
    $
    0.71
    
    
    $
    0.39
    
    
    $
    0.72
    
    
    $
    0.41Weighted average common shares outstanding  basic
    
    
    41,757
    
    
    
    34,990
    
    
    
    41,745
    
    
    
    34,990Weighted average common shares outstanding  diluted
    
    
    42,038
    
    
    
    35,505
    
    
    
    42,026
    
    
    
    35,505Comprehensive income:Net income
    
    $
    29,876
    
    
    $
    13,883
    
    
    $
    30,381
    
    
    $
    14,400Other comprehensive (loss) income:Unrealized loss on investments, net of tax effect
    
    
    (616
    )
    
    
    
    
    
    
    (1,456
    )
    
    
    Foreign currency translation
    
    
    (325
    )
    
    
    (101
    )
    
    
    5
    
    
    
    (81
    )Comprehensive income
    
    $
    28,935
    
    
    $
    13,782
    
    
    $
    28,930
    
    
    $
    14,319
  2




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##### 



SUCAMPO PHARMACEUTICALS, INC.
Condensed Consolidated Statement of Changes in Stockholders Equity (Unaudited)
 Accumulated
    
    
    RetainedClass A
    
    
    Class B
    
    
    Additional
    
    
    Other
    
    
    Earnings
    
    
    TotalCommon Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Comprehensive
    
    
    (Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Loss
    
    
    Deficit)
    
    
    EquityBalance at December 31, 2007
    
    
    15,538,518
    
    
    $
    155
    
    
    
    26,191,050
    
    
    $
    262
    
    
    $
    96,680
    
    
    $
    (393
    )
    
    $
    (10,176
    )
    
    $
    86,528Stock issued upon exercise of stock options
    
    
    57,000
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    403
    
    
    
    
    
    
    
    
    
    
    
    404Employee stock option expense, net of tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    511
    
    
    
    
    
    
    
    
    
    
    
    511Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Unrealized loss on investments, net of tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,456
    )
    
    
    
    
    
    
    (1,456
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,381
    
    
    
    30,381Balance at June 30, 2008
    
    
    15,595,518
    
    
    $
    156
    
    
    
    26,191,050
    
    
    $
    262
    
    
    $
    97,594
    
    
    $
    (1,844
    )
    
    $
    20,205
    
    
    $
    116,373
  3




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##### 



SUCAMPO PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
 Six Months Ended June 30,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    30,381
    
    
    $
    14,400Adjustments to reconcile net income to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    212
    
    
    
    60Deferred tax (benefit) provision
    
    
    (4,543
    )
    
    
    4,367Stock-based compensation
    
    
    440
    
    
    
    6,071Accretion of discounts on investments
    
    
    (122
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,336
    )
    
    
    (31,379
    )Unbilled accounts receivable
    
    
    204
    
    
    
    Product royalties receivable
    
    
    (1,616
    )
    
    
    (7,532
    )Prepaid and income taxes receivable and payable, net
    
    
    15,213
    
    
    
    3,454Accounts payable
    
    
    53
    
    
    
    659Accrued expenses
    
    
    1,732
    
    
    
    4,321Deferred revenue
    
    
    9,521
    
    
    
    (11,234
    )Other assets and liabilities, net
    
    
    462
    
    
    
    3,989Net cash provided by (used in) operating activities
    
    
    50,601
    
    
    
    (12,824
    )Cash flows from investing activities:Purchases of investments
    
    
    (111,304
    )
    
    
    Proceeds from the sales of investments
    
    
    38,950
    
    
    
    24Maturities of investments
    
    
    22,500
    
    
    
    Purchases of property and equipment
    
    
    (302
    )
    
    
    (1,340
    )Excess tax benefits from share-based payments
    
    
    71
    
    
    
    Net cash used in investing activities
    
    
    (50,085
    )
    
    
    (1,316
    )Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    404
    
    
    
    Payments of initial public offering costs
    
    
    
    
    
    
    (632
    )Net cash provided by (used in) financing activities
    
    
    404
    
    
    
    (632
    )Effect of exchange rates on cash and cash equivalents
    
    
    4
    
    
    
    (69
    )Net increase (decrease) in cash and cash equivalents
    
    
    924
    
    
    
    (14,841
    )Cash and cash equivalents at beginning of period
    
    
    25,559
    
    
    
    22,481Cash and cash equivalents at end of period
    
    $
    26,483
    
    
    $
    7,640
  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
   2. Summary of Significant Accounting Policies
 Current and Non-Current Investments
 Accounting for Certain Investments in Debt and Equity Securities
 5




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##### 



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
 Fair Value Measurements
   The Fair Value Option for Financial Assets and
Financial Liabilities, Including an Amendment of FASB Statement No. 115
 Certain Risks, Concentrations and Uncertainties
   6




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##### 



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
       Deferred Revenue
  Cumulative Out-of-Period Adjustment
  7




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##### 



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
 Reclassifications
  Change in Estimate
 Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB
Statement No. 3
 (In thousands, except per share data)Decrease in revenue and income before income taxes
    
    $
    (1,693
    )Impact on basic net income per share
    
    
    (0.04
    )Impact on diluted net income per share
    
    
    (0.04
    )
 Recent Accounting Pronouncements
 Accounting
for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and
Development Activities
 Business Combinations Noncontrolling Interests in
Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51
 Accounting for Collaborative
Arrangements The Equity Method of
Accounting for Investments in Common Stock
 8




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##### 



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
   The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting Principles.
 3. Earnings per Share
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,(In thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Basic net income per share:Net income
    
    $
    29,876
    
    
    $
    13,883
    
    
    $
    30,381
    
    
    $
    14,400Weighted average class A and B
common shares outstanding
    
    
    41,757
    
    
    
    34,990
    
    
    
    41,745
    
    
    
    34,990Basic net income per share
    
    $
    0.72
    
    
    $
    0.40
    
    
    $
    0.73
    
    
    $
    0.41Diluted net income per share:Net income
    
    $
    29,876
    
    
    $
    13,883
    
    
    $
    30,381
    
    
    $
    14,400Weighted average class A and B
common shares outstanding for
diluted net income per share
    
    
    41,757
    
    
    
    34,990
    
    
    
    41,745
    
    
    
    34,990Assumed exercise of stock options
under the treasury stock method
    
    
    281
    
    
    
    515
    
    
    
    281
    
    
    
    51542,038
    
    
    
    35,505
    
    
    
    42,026
    
    
    
    35,505Diluted net income per share
    
    $
    0.71
    
    
    $
    0.39
    
    
    $
    0.72
    
    
    $
    0.41
  9




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##### 



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
 June 30,(In thousands)
    
    2008
    
    2007Employee stock options
    
    
    583
    
    
    
    641Non-employee stock options
    
    
    470
    
    
    
    510
  June 30,(In thousands)
    
    2008
    
    2007Employee stock options
    
    
    260
    
    
    
    
 4. Current and Non-Current Investments
  June 30, 2008Unrealized
    
    
    Unrealized(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueCurrent:U.S. Treasury bills and notes
    
    $
    83,826
    
    
    $
    3
    
    
    $
    (166
    )
    
    $
    83,663Auction rate securities
    
    
    3,900
    
    
    
    
    
    
    
    
    
    
    
    3,900Money market funds
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    52Total
    
    $
    87,778
    
    
    $
    3
    
    
    $
    (166
    )
    
    $
    87,615Non-current:Auction rate securities
    
    $
    23,150
    
    
    $
    
    
    
    $
    (2,218
    )
    
    $
    20,932
 December 31, 2007Unrealized
    
    
    Unrealized(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueCurrent:Auction rate securities
    
    $
    51,500
    
    
    $
    
    
    
    $
    
    
    
    $
    51,500Money market funds
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    52Total
    
    $
    51,552
    
    
    $
    
    
    
    $
    
    
    
    $
    51,552Non-current:Auction rate securities
    
    $
    9,400
    
    
    $
    
    
    
    $
    
    
    
    $
    9,400
  Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableIdentical Assets
    
    
    Observable Inputs
    
    
    Inputs
    
    
    Total as of(In thousands)
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    June 30, 2008U.S. Treasury bills and notes
    
    $
    83,663
    
    
    $
    
    
    
    $
    
    
    
    $
    83,663Auction rate securities
    
    
    
    
    
    
    3,900
    
    
    
    20,932
    
    
    
    24,832Other available-for-sale securities
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    52Total assets measured at fair value
    
    $
    83,715
    
    
    $
    3,900
    
    
    $
    20,932
    
    
    $
    108,547
 10




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##### 



SUCAMPO PHARMACEUTICALS, INC.
 Notes
to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
   Auction Rate(In thousands)
    
    SecuritiesBalance at January 1, 2008
    
    $
    9,400Transfers to Level 2
    
    
    3,900Transfers to Level 3
    
    
    51,500Total gains (losses) (realized or unrealized):Included in earnings
    
    
    Included in other comprehensive loss
    
    
    (2,218
    )Purchases
    
    
    5,100Settlements
    
    
    (38,950
    )Balance at June 30, 2008
    
    $
    24,832
 5. Accrued Expenses
  June 30,
    
    
    December 31,(In thousands)
    
    2008
    
    
    2007Research and development costs
    
    $
    5,266
    
    
    $
    4,422Selling and marketing costs
    
    
    245
    
    
    
    384Employee compensation
    
    
    1,556
    
    
    
    1,867Legal service fees
    
    
    179
    
    
    
    226Product royalty liability  related party
    
    
    1,952
    
    
    
    1,536Other accrued expenses
    
    
    1,206
    
    
    
    295$
    10,404
    
    
    $
    8,730
 6. Deferred Revenue
   June 30,
    
    
    December 31,(In thousands)
    
    2008
    
    
    2007Deferred revenue  current
    
    $
    10,867
    
    
    $
    1,062Deferred revenue, net of current portion
    
    
    8,344
    
    
    
    8,626$
    19,211
    
    
    $
    9,688
  7. Commitments
 Operating Leases
  11




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##### 



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
 (In thousands)2008
    
    $
    7592009
    
    
    1,4212010
    
    
    9692011
    
    
    9382012
    
    
    9632013 and thereafter
    
    
    4,243Total minimum lease payments
    
    $
    9,293
  Research and Development Costs
  8. Related Party Transactions
 R-Tech Ueno, Ltd.
   June 30,
    
    
    December 31,(In thousands)
    
    2008
    
    
    2007Deferred revenue  current
    
    $
    419
    
    
    $
    419Deferred revenue, net of current portion
    
    
    6,653
    
    
    
    6,862$
    7,072
    
    
    $
    7,281
  Sucampo AG License Agreements
   12




---



##### 



SUCAMPO PHARMACEUTICALS, INC.
 Notes
to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
 9. Collaboration and License Agreements with Takeda
      Revenue
    
    
    Change inCash Received
    
    
    Recognized
    
    
    Accountsfor the
    
    
    for the
    
    
    ReceivableAmount
    
    
    Six Months
    
    
    Six Months
    
    
    for the Six
    
    
    AmountDeferred at
    
    
    Ended
    
    
    Ended
    
    
    Months Ended
    
    
    Deferred atDecember 31,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,(In thousands)
    
    2007
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    2008Collaboration revenue:Up-front payment associated with the Companys
obligation to participate in joint committees
with Takeda
    
    $
    1,911
    
    
    $
    
    
    
    $
    74
    
    
    $
    
    
    
    $
    1,837Research and development revenue:Development milestones
    
    $
    
    
    
    $
    50,000
    
    
    $
    50,000
    
    
    $
    
    
    
    $
    Reimbursement of research and development expenses
    
    
    
    
    
    
    20,545
    
    
    
    11,546
    
    
    
    (881
    )
    
    
    8,118Total
    
    $
    
    
    
    $
    70,545
    
    
    $
    61,546
    
    
    $
    (881
    )
    
    $
    8,118Product royalty revenue
    
    $
    
    
    
    $
    15,471
    
    
    $
    16,981
    
    
    $
    1,616
    
    
    $
    106
 13




---



##### 



SUCAMPO PHARMACEUTICALS, INC.
 Notes
to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
 RevenueCash Received
    
    
    Recognizedfor the
    
    
    for theAccounts
    
    
    Six Months
    
    
    Six Months
    
    
    Accounts
    
    
    AmountReceivable at
    
    
    Ended
    
    
    Ended
    
    
    Receivable at
    
    
    Deferred atDecember 31,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,(In thousands)
    
    2007*
    
    
    2008
    
    
    2008
    
    
    2008*
    
    
    2008Research and development revenue:Development milestones
    
    $
    
    
    
    $
    50,000
    
    
    $
    50,000
    
    
    $
    
    
    
    $
    Reimbursement of research and development expenses
    
    $
    6,887
    
    
    $
    20,545
    
    
    $
    11,546
    
    
    $
    6,006
    
    
    $
    8,118Product royalty revenue
    
    $
    8,667
    
    
    $
    15,471
    
    
    $
    16,981
    
    
    $
    10,283
    
    
    $
    106Co-promotion revenue
    
    $
    360
    
    
    $
    2,442
    
    
    $
    2,458
    
    
    $
    376
    
    
    $
    
 
 *
    
    Includes billed and unbilled accounts receivable.  10. Stock Option Plan
  WeightedWeightedAverage
    
    
    Average Remaining
    
    
    AggregateExercise Price
    
    
    Contractual
    
    
    Intrinsic(In thousands, except share and per share data)
    
    Shares
    
    
    Per Share
    
    
    Term (Years)
    
    
    ValueOptions outstanding, December 31, 2007
    
    
    640,900
    
    
    $
    10.24Options exercised
    
    
    (17,000
    )
    
    
    10.00Options forfeited
    
    
    (34,850
    )
    
    
    10.00Options expired
    
    
    (21,250
    )
    
    
    10.00Options outstanding, June 30, 2008
    
    
    567,800
    
    
    
    10.27
    
    
    
    6.49
    
    
    $
    261Options exercisable, June 30, 2008
    
    
    552,925
    
    
    
    10.28
    
    
    
    6.45
    
    
    $
    251
  WeightedWeightedAverage
    
    
    Average Remaining
    
    
    AggregateExercise Price
    
    
    Contractual
    
    
    Intrinsic(In thousands, except share and per share data)
    
    Shares
    
    
    Per Share
    
    
    Term (Years)
    
    
    ValueOptions outstanding, December 31, 2007
    
    
    267,500
    
    
    $
    14.44Options granted
    
    
    30,000
    
    
    
    12.25Options forfeited
    
    
    (12,750
    )
    
    
    14.12Options expired
    
    
    (10,000
    )
    
    
    14.12Options outstanding, June 30, 2008
    
    
    274,750
    
    
    
    14.09
    
    
    
    8.47
    
    
    $
    Options exercisable, June 30, 2008
    
    
    62,500
    
    
    
    14.46
    
    
    
    8.25
    
    
    $
    
  14




---



##### 



SUCAMPO PHARMACEUTICALS, INC.
 Notes
to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
  WeightedWeightedAverage
    
    
    Average Remaining
    
    
    AggregateExercise Price
    
    
    Contractual
    
    
    Intrinsic(In thousands, except share and per share data)
    
    Shares
    
    
    Per Share
    
    
    Term (Years)
    
    
    ValueOptions outstanding, December 31, 2007
    
    
    510,000
    
    
    $
    5.85Options exercised
    
    
    (40,000
    )
    
    
    5.85Options outstanding, June 30, 2008
    
    
    470,000
    
    
    
    5.85
    
    
    
    6.83
    
    
    $
    2,294Options exercisable, June 30, 2008
    
    
    470,000
    
    
    
    5.85
    
    
    
    6.83
    
    
    $
    2,294
 11. Income Taxes
 Accounting for
Uncertainty in Income Taxes
  Interim Financial Reporting
 12. Uncommitted Line of Credit
  15




---



##### 



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
 13. Segment Reporting
  Intercompany(In thousands)
    
    United States
    
    
    Europe
    
    
    Japan
    
    
    Eliminations
    
    
    ConsolidatedThree Months Ended June 30, 2008Research and development revenue
    
    $
    55,436
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    55,436Product royalty revenue
    
    
    10,901
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,901Co-promotion revenue
    
    
    1,236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,236Contract and collaboration revenue
    
    
    141
    
    
    
    
    
    
    
    210
    
    
    
    (210
    )
    
    
    141Total revenues
    
    
    67,714
    
    
    
    
    
    
    
    210
    
    
    
    (210
    )
    
    
    67,714Depreciation and amortization
    
    
    108
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    110Other operating expenses
    
    
    20,561
    
    
    
    584
    
    
    
    2,768
    
    
    
    (210
    )
    
    
    23,703Income (loss) from operations
    
    
    47,045
    
    
    
    (584
    )
    
    
    (2,560
    )
    
    
    
    
    
    
    43,901Interest income
    
    
    590
    
    
    
    1
    
    
    
    
    
    
    
    (26
    )
    
    
    565Other non-operating expense, net
    
    
    (6
    )
    
    
    (32
    )
    
    
    (1
    )
    
    
    26
    
    
    
    (13
    )Income (loss) before income taxes
    
    $
    47,629
    
    
    $
    (615
    )
    
    $
    (2,561
    )
    
    $
    
    
    
    $
    44,453Capital expenditures
    
    $
    128
    
    
    $
    
    
    
    $
    3
    
    
    $
    
    
    
    $
    131Three Months Ended June 30, 2007Research and development revenue
    
    $
    38,087
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    38,087Product royalty revenue
    
    
    9,562
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,562Co-promotion revenue
    
    
    1,134
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,134Contract and collaboration revenue
    
    
    141
    
    
    
    
    
    
    
    220
    
    
    
    (210
    )
    
    
    151Total revenues
    
    
    48,924
    
    
    
    
    
    
    
    220
    
    
    
    (210
    )
    
    
    48,934Depreciation and amortization
    
    
    37
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    36Other operating expenses
    
    
    27,409
    
    
    
    144
    
    
    
    696
    
    
    
    (210
    )
    
    
    28,039Income (loss) from operations
    
    
    21,478
    
    
    
    (144
    )
    
    
    (475
    )
    
    
    
    
    
    
    20,859Interest income
    
    
    471
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    471Other non-operating income (expense), net
    
    
    8
    
    
    
    (5
    )
    
    
    39
    
    
    
    
    
    
    
    42Income (loss) before income taxes
    
    $
    21,957
    
    
    $
    (149
    )
    
    $
    (436
    )
    
    $
    
    
    
    $
    21,372Capital expenditures
    
    $
    1,244
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,244
 16




---



##### 



SUCAMPO PHARMACEUTICALS, INC.
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (Continued)
 Intercompany(In thousands)
    
    United States
    
    
    Europe
    
    
    Japan
    
    
    Eliminations
    
    
    ConsolidatedSix Months Ended June 30, 2008Research and development revenue
    
    $
    61,546
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    61,546Product royalty revenue
    
    
    16,981
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,981Co-promotion revenue
    
    
    2,458
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,458Contract and collaboration revenue
    
    
    283
    
    
    
    
    
    
    
    417
    
    
    
    (417
    )
    
    
    283Total revenues
    
    
    81,268
    
    
    
    
    
    
    
    417
    
    
    
    (417
    )
    
    
    81,268Depreciation and amortization
    
    
    208
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    212Other operating expenses
    
    
    37,505
    
    
    
    2,422
    
    
    
    3,437
    
    
    
    (420
    )
    
    
    42,944Income (loss) from operations
    
    
    43,555
    
    
    
    (2,422
    )
    
    
    (3,024
    )
    
    
    3
    
    
    
    38,112Interest income
    
    
    1,246
    
    
    
    5
    
    
    
    3
    
    
    
    (47
    )
    
    
    1,207Other non-operating (expense) income, net
    
    
    (33
    )
    
    
    (13
    )
    
    
    1
    
    
    
    44
    
    
    
    (1
    )Income (loss) before income taxes
    
    $
    44,768
    
    
    $
    (2,430
    )
    
    $
    (3,020
    )
    
    $
    
    
    
    $
    39,318Capital expenditures
    
    $
    299
    
    
    $
    
    
    
    $
    3
    
    
    $
    
    
    
    $
    302Six Months Ended June 30, 2007Research and development revenue
    
    $
    47,453
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    47,453Product royalty revenue
    
    
    11,871
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,871Co-promotion revenue
    
    
    2,267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,267Contract and collaboration revenue
    
    
    283
    
    
    
    
    
    
    
    441
    
    
    
    (420
    )
    
    
    304Total revenues
    
    
    61,874
    
    
    
    
    
    
    
    441
    
    
    
    (420
    )
    
    
    61,895Depreciation and amortization
    
    
    58
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    60Other operating expenses
    
    
    39,614
    
    
    
    309
    
    
    
    934
    
    
    
    (420
    )
    
    
    40,437Income (loss) from operations
    
    
    22,202
    
    
    
    (309
    )
    
    
    (495
    )
    
    
    
    
    
    
    21,398Interest income
    
    
    791
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    795Other non-operating income (expense), net
    
    
    5
    
    
    
    (8
    )
    
    
    39
    
    
    
    
    
    
    
    36Income (loss) before income taxes
    
    $
    22,998
    
    
    $
    (317
    )
    
    $
    (452
    )
    
    $
    
    
    
    $
    22,229Capital expenditures
    
    $
    1,340
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,340As of June 30, 2008Property and equipment, net
    
    $
    2,268
    
    
    $
    
    
    
    $
    87
    
    
    $
    
    
    
    $
    2,355Identifiable assets
    
    $
    173,195
    
    
    $
    471
    
    
    $
    3,070
    
    
    $
    (12,041
    )
    
    $
    164,695As of December 31, 2007Property and equipment, net
    
    $
    2,182
    
    
    $
    
    
    
    $
    83
    
    
    $
    
    
    
    $
    2,265Identifiable assets
    
    $
    114,490
    
    
    $
    2,381
    
    
    $
    1,987
    
    
    $
    (8,831
    )
    
    $
    110,027
 14. Subsequent Events
   17




---



##### 



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. (Sucampo, 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, 2007 included in our Annual Report on Form
10-K.
 Overview
      18




---



##### 



Our Clinical Development Programs
  
    
    AMITIZA (lubiprostone).In connection with our marketing approval for AMITIZA for the
treatment of chronic idiopathic constipation in adults, we committed to the FDA to conduct
post-marketing studies to evaluate the safety of the product in pediatric patients, in
patients with renal impairment and in patients with hepatic impairment, which were
initiated in January 2007. In connection with our marketing approval for AMITIZA for the
treatment of irritable bowel syndrome with constipation in adult women, we committed to the
FDA to conduct a post-marketing study to evaluate the safety and efficacy for the treatment
of irritable bowel syndrome in pediatric patients ages 6 to 17 and we plan to initiate this
study in the first quarter of 2009. In addition, we committed to conduct a post-marketing
study in male and female patients with irritable bowel syndrome with constipation utilizing
a higher dose than currently recommended for this indication and we plan to initiate this
study in the second quarter of 2009. We are also developing AMITIZA to treat opioid-induced
bowel dysfunction. We commenced Phase III pivotal clinical trials of AMITIZA for the
treatment of opioid-induced bowel dysfunction in September 2007 and we expect to complete
these trials by the end of 2009. Our collaboration and co-promotion arrangement with Takeda
also covers these additional indications for AMITIZA.In February 2008, we submitted a Marketing Approval Application, or MAA, for lubiprostone, 24
micrograms, or mcg, for the indication of chronic idiopathic constipation in adults in the
United Kingdom. The MAA was submitted using the decentralized procedure with the United
Kingdom, through its Medicines and Healthcare Products Regulatory Agency, serving as the
reference member state, with additional applications subsequently submitted to the member
states of Belgium, Denmark, France, Germany, Ireland, the Netherlands, Spain and Sweden. In
May 2008, we received notification that all of the MAAs have been received and validated by
the individual regulatory agencies. In June 2008, we submitted a MAA for lubiprostone, 24
micrograms, for the indication of chronic idiopathic constipation in adults in Switzerland.In November 2007, we initiated a multi-center Phase 2b dose-ranging study in Japan to
evaluate the safety and efficacy of lubiprostone for treating chronic idiopathic constipation
in adults and we expect to complete this trial by the end of the fourth quarter of 2008.
    
    Cobiprostone.We are developing orally administered cobiprostone to treat various
gastrointestinal and liver disorders, including non-steroidal anti-inflammatory
drug-induced ulcers, portal hypertension, non-alcoholic fatty liver disease and
gastrointestinal disorders associated with cystic fibrosis. We also are planning to develop
an inhaled formulation of cobiprostone for the treatment of respiratory symptoms of cystic
fibrosis and chronic obstructive pulmonary disease. Our near term focus is on the
development of cobiprostone as a treatment for non-steroidal anti-inflammatory drug-induced
ulcers. We commenced a Phase II clinical trial of cobiprostone for the treatment of
non-steroidal anti-inflammatory drug-induced ulcers in the third quarter of 2007. We expect
to enroll approximately 120 patients in this clinical trial, which we plan to complete in
mid-2009. We also initiated a Phase II proof-of-concept study of cobiprostone for the
treatment of portal hypertension in patients with liver cirrhosis in July 2008 and we
expect to complete the trials by mid-2009.
    
    SPI-017.We are developing SPI-017 to treat vascular disease and central nervous system
disorders. We are initially focused on developing an intravenous formulation of this
product candidate for the treatment of peripheral arterial disease. We also are developing
an oral formulation of SPI-017 for the treatment of Alzheimers disease. We plan to
initiate Phase I clinical trials of the intravenous and oral formulation of SPI-017 by the
end of 2008.
 Results of Operations
 Reclassifications
  19




---



##### 



Comparison of three months ended June 30, 2008 and June 30, 2007
 Revenues
  Three Months EndedJune 30,(In thousands)
    
    2008
    
    
    2007Research and development revenue
    
    $
    55,436
    
    
    $
    38,087Product royalty revenue
    
    
    10,901
    
    
    
    9,562Co-promotion revenue
    
    
    1,236
    
    
    
    1,134Contract and collaboration revenue
    
    
    141
    
    
    
    151Total
    
    $
    67,714
    
    
    $
    48,934
    Revenue
    
    
    Change inCash Received
    
    
    Recognized
    
    
    Accountsfor the
    
    
    for the
    
    
    ReceivableAmount
    
    
    Six Months
    
    
    Six Months
    
    
    for the Six
    
    
    AmountDeferred at
    
    
    Ended
    
    
    Ended
    
    
    Months Ended
    
    
    Deferred atDecember 31,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,(In thousands)
    
    2007
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    2008Collaboration revenue:Up-front payment associated with our
obligation to participate in joint
committees with Takeda
    
    $
    1,911
    
    
    $
    
    
    
    $
    74
    
    
    $
    
    
    
    $
    1,837Research and development revenue:Development milestones
    
    $
    
    
    
    $
    50,000
    
    
    $
    50,000
    
    
    $
    
    
    
    $
    Reimbursement of research and development
    
    
    
    
    
    
    20,545
    
    
    
    11,546
    
    
    
    (881
    )
    
    
    8,118Total
    
    $
    
    
    
    $
    70,545
    
    
    $
    61,546
    
    
    $
    (881
    )
    
    $
    8,118Product royalty revenue
    
    $
    
    
    
    $
    15,471
    
    
    $
    16,981
    
    
    $
    1,616
    
    
    $
    106
 20




---



##### 



RevenueCash Received
    
    
    Recognizedfor the
    
    
    for theAccounts
    
    
    Six Months
    
    
    Six Months
    
    
    Accounts
    
    
    AmountReceivable at
    
    
    Ended
    
    
    Ended
    
    
    Receivable at
    
    
    Deferred atDecember 31,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,(In thousands)
    
    2007*
    
    
    2008
    
    
    2008
    
    
    2008*
    
    
    2008Research and development revenue:Development milestones
    
    $
    
    
    
    $
    50,000
    
    
    $
    50,000
    
    
    $
    
    
    
    $
    Reimbursement of research and development expenses
    
    $
    6,887
    
    
    $
    20,545
    
    
    $
    11,546
    
    
    $
    6,006
    
    
    $
    8,118Product royalty revenue
    
    $
    8,667
    
    
    $
    15,471
    
    
    $
    16,981
    
    
    $
    10,283
    
    
    $
    106Co-promotion revenue
    
    $
    360
    
    
    $
    2,442
    
    
    $
    2,458
    
    
    $
    376
    
    
    $
    
 
 *
    
    Includes billed and unbilled accounts receivable. ® ® ®
  Research and Development Expenses
  Three Months EndedJune 30,(In thousands)
    
    2008
    
    
    2007Direct costs:AMITIZA
    
    $
    10,040
    
    
    $
    5,759Cobiprostone
    
    
    1,276
    
    
    
    1,442SPI  017
    
    
    937
    
    
    
    204Other
    
    
    164
    
    
    
    332Total
    
    
    12,417
    
    
    
    7,737Indirect costs
    
    
    514
    
    
    
    345Total
    
    $
    12,931
    
    
    $
    8,082
  21




---



##### 



General and Administrative Expenses
  Three Months EndedJune 30,(In thousands)
    
    2008
    
    
    2007Salaries, benefits and related costs
    
    $
    1,206
    
    
    $
    862Legal and consulting expenses
    
    
    595
    
    
    
    647Stock-based compensation
    
    
    58
    
    
    
    43Founders stock-based award
    
    
    
    
    
    
    10,187Other operating expenses
    
    
    1,702
    
    
    
    1,278Total
    
    $
    3,561
    
    
    $
    13,017
  Selling and Marketing Expenses
  Product Royalties  Related Parties
  Milestone Royalties  Related Parties
  22




---



##### 



Non-Operating Income and Expense
  Three Months EndedJune 30,(In thousands)
    
    2008
    
    
    2007Interest income
    
    $
    565
    
    
    $
    471Other (expense) income, net
    
    
    (13
    )
    
    
    42Total non-operating income, net
    
    $
    552
    
    
    $
    513
  Income Taxes
  Comparison of six months ended June 30, 2008 and June 30, 2007
 Revenues
  Six Months EndedJune 30,(In thousands)
    
    2008
    
    
    2007Research and development revenue
    
    $
    61,546
    
    
    $
    47,453Product royalty revenue
    
    
    16,981
    
    
    
    11,871Co-promotion revenue
    
    
    2,458
    
    
    
    2,267Contract and collaboration revenue
    
    
    283
    
    
    
    304Total
    
    $
    81,268
    
    
    $
    61,895
   ®
 23




---



##### 



® ®
  Research and Development Expenses
  Six Months EndedJune 30,(In thousands)
    
    2008
    
    
    2007Direct costs:AMITIZA
    
    $
    19,026
    
    
    $
    10,709Cobiprostone
    
    
    2,270
    
    
    
    2,226SPI  017
    
    
    1,616
    
    
    
    755Other
    
    
    299
    
    
    
    405Total
    
    
    23,211
    
    
    
    14,095Indirect costs
    
    
    936
    
    
    
    595Total
    
    $
    24,147
    
    
    $
    14,690
  General and Administrative Expenses
  Six Months EndedJune 30,(In thousands)
    
    2008
    
    
    2007Salaries, benefits and related costs
    
    $
    2,124
    
    
    $
    1,891Legal and consulting expenses
    
    
    1,249
    
    
    
    1,367Stock-based compensation
    
    
    102
    
    
    
    (203
    )Founders stock-based award
    
    
    
    
    
    
    10,187Other
    
    
    3,253
    
    
    
    1,928Total
    
    $
    6,728
    
    
    $
    15,170
   24




---



##### 



Selling and Marketing Expenses
  Product Royalties  Related Parties
  Milestone Royalties  Related Parties
  Non-Operating Income and Expense
  Six Months EndedJune 30,(In thousands)
    
    2008
    
    
    2007Interest income
    
    $
    1,207
    
    
    $
    795Other (expense) income, net
    
    
    (1
    )
    
    
    36Total non-operating income, net
    
    $
    1,206
    
    
    $
    831
  Income Taxes
  Reportable Geographic Segments
  25




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##### 



Intercompany(In thousands)
    
    United States
    
    Europe
    
    Japan
    
    Eliminations
    
    ConsolidatedThree Months Ended June 30, 2008Total revenues
    
    $
    67,714
    
    
    $
    
    
    
    $
    210
    
    
    $
    (210
    )
    
    $
    67,714Income (loss) from operations
    
    
    47,045
    
    
    
    (584
    )
    
    
    (2,560
    )
    
    
    
    
    
    
    43,901Three Months Ended June 30, 2007Total revenues
    
    $
    48,924
    
    
    $
    
    
    
    $
    220
    
    
    $
    (210
    )
    
    $
    48,934Income (loss) from operations
    
    
    21,478
    
    
    
    (144
    )
    
    
    (475
    )
    
    
    
    
    
    
    20,859Six Months Ended June 30, 2008Total revenues
    
    $
    81,268
    
    
    $
    
    
    
    $
    417
    
    
    $
    (417
    )
    
    $
    81,268Income (loss) from operations
    
    
    43,555
    
    
    
    (2,422
    )
    
    
    (3,024
    )
    
    
    3
    
    
    
    38,112Six Months Ended June 30, 2007Total revenues
    
    $
    61,874
    
    
    $
    
    
    
    $
    441
    
    
    $
    (420
    )
    
    $
    61,895Income (loss) from operations
    
    
    22,202
    
    
    
    (309
    )
    
    
    (495
    )
    
    
    
    
    
    
    21,398Identifiable AssetsAt June 30, 2008
    
    $
    173,195
    
    
    $
    471
    
    
    $
    3,070
    
    
    $
    (12,041
    )
    
    $
    164,695At December 31, 2007
    
    
    114,490
    
    
    
    2,381
    
    
    
    1,987
    
    
    
    (8,831
    )
    
    
    110,027
 Liquidity and Capital Resources
 Sources of Liquidity
     26




---



##### 



Cash Flows
  Six Months EndedJune 30,(In thousands)
    
    2008
    
    
    2007Cash provided by (used in):Operating activities
    
    $
    50,601
    
    
    $
    (12,824
    )Investing activities
    
    
    (50,085
    )
    
    
    (1,316
    )Financing activities
    
    
    404
    
    
    
    (632
    )Effect of exchange rates
    
    
    4
    
    
    
    (69
    )Net increase (decrease) in cash and cash equivalents
    
    $
    924
    
    
    $
    (14,841
    )
 Six Months Ended June 30, 2008
    Six Months Ended June 30, 2007
    27




---



##### 



Funding Requirements
  
    
    fund our 30% share of the two post-marketing studies of AMITIZA to evaluate its safety
in patients with renal impairment and patients with hepatic impairment;
    
    fund regulatory efforts in Europe and Japan for AMITIZA;
    
    fund development and regulatory activities for cobiprostone and SPI-017;
    
    fund research and development activities for prostone compounds other than AMITIZA,
cobiprostone and SPI-017;
    
    fund the expansion of our commercialization activities in the United States and the
initiation of commercialization efforts in non-U.S. markets; and
    
    fund costs for capital expenditures to support the growth of our business.
  
    
    the revenue from AMITIZA;
    
    the future expenditures we may incur to increase revenue from AMITIZA;
    
    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.
   Recent Accounting Pronouncements
  28




---



##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
     Item 4. Controls and Procedures
 a) Evaluation of Disclosure Controls and Procedures
  b) Changes in Internal Controls
  Part II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1A. Risk Factors
  We depend significantly upon Takedas sales force to market AMITIZA. In addition to its own sales
force, Takeda has been utilizing a sales force within an affiliated joint venture for this purpose,
and the joint venture was recently terminated. Any disruptions in the marketing of AMITIZA by the
Takeda sales force as a result of this development could cause a decline in our revenues.
  29




---



##### 



The resignations of our chief financial officer and our vice president of business development and
company operations could be disruptive to our business, and our inability to replace them on a
timely basis could compromise our ability to manage our company.
   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Use of Proceeds from Initial Public Offering of Class A Common Stock
    
    
    approximately $1.2 million to fund our share of two post-marketing studies of AMITIZA to
evaluate its safety in patients with renal impairment and patients with hepatic impairment;
    
    approximately $5.9 million to fund development and regulatory activities for SPI-8811
and SPI-017;
    
    approximately $8.4 million to fund regulatory efforts by Sucampo Europe and Sucampo
Japan for AMITIZA;
    
    approximately $600,000 for research and development activities for prostone
compounds other than AMITIZA, cobiprostone and SPI-017; and
    
    approximately $400,000 to fund costs in connections with computers, software and
information technology to support growth in our business.
 
 30




---



##### 



Item 4. Submission of Matters to a Vote of Security Holders
  (a)
    
    To elect five nominees to serve as directors and hold officer for a term of one year.
Our stockholders voted to elect all five nominees to serve as directors. Votes recorded, by
nominee, were as follows:
 Nominee
    
    For
    
    Against/WithheldRyuji Ueno, M.D., Ph.D., Ph.D.
    
    
    271,318,829
    
    
    
    5,208Anthony C. Celeste
    
    
    271,318,834
    
    
    
    5,203Timothy I. Maudlin
    
    
    271,318,834
    
    
    
    5,203V. Sue Molina
    
    
    271,318,834
    
    
    
    5,203John C. Wright
    
    
    271,318,834
    
    
    
    5,203
 (b)
    
    To consider and vote upon a proposal to ratify the selection of PricewaterhouseCoopers
LLP as our independent registered public accounting firm for the fiscal year ending
December 31, 2008. Votes recorded were as follows:
 For
    
    Against
    
    Abstain271,315,634
    
    
    4,400
    
    
    
    4,002
 31




---



##### 



Item 6. Exhibits
 (a) Exhibits
 ExhibitNumber
    
    Description
    
    Reference3.1
    
    Restated Certificate of Incorporation
    
    Exhibit 3.1 to the
Companys Current
Report on Form 8-K
(filed August 8,
2007)3.2
    
    Form of Restated Bylaws
    
    Exhibit 3.4 to
Registration
Statement No.
333-135133, Amendment
No. 2 (filed October
20, 2006)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
 32




---



##### 



SIGNATURES
  Sucampo Pharmaceuticals, Inc.August 14, 2008
    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)August 14, 2008
    By:
    /s/  JAN SMILEKJan SmilekVice President, Finance and Acting
Chief Financial Officer
(Principal Financial Officer) 33




---



##### 



Sucampo Pharmaceuticals, Inc.
Exhibit Index
 ExhibitNumber
    
    Description
    
    Reference3.1
    
    Restated Certificate of Incorporation
    
    Exhibit 3.1 to the
Companys Current
Report on Form 8-K
(filed August 8,
2007)3.2
    
    Form of Restated Bylaws
    
    Exhibit 3.4 to
Registration
Statement No.
333-135133, Amendment
No. 2 (filed October
20, 2006)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