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, 2009
 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)
    
    30-0520478(I.R.S. employer
identification no.)4520 East-West Highway, Suite 300
Bethesda, MD 20814
    
    (301) 961-3400(Address of principal executive offices, 
including zip code)
    
    (Registrants telephone number,
including area code)
 þ o
 o o
  Large accelerated filer oAccelerated filer þNon-accelerated filer o(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 March 31, 2009 and December 31, 2008
    
    
    1Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three Months Ended March 31, 2009 and 2008
    
    
    2Condensed Consolidated Statement of Changes in Stockholders Equity for the Three Months Ended March 31, 2009
    
    
    3Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008
    
    
    4Notes to Condensed Consolidated Financial StatementsItem 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4.
    
    Controls and Procedures
    
    
    26Part II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    28Item 1A.
    
    Risk Factors
    
    
    28Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3.
    
    Defaults Upon Senior Securities
    
    
    29Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    29Item 5.
    
    Other Information
    
    
    29Item 6.
    
    Exhibits
    
    
    30SIGNATURESINDEX TO EXHIBITS




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##### 



PART I  FINANCIAL INFORMATION
 
 Item 1. Condensed Consolidated Financial Statements (Unaudited)
 
 SUCAMPO PHARMACEUTICALS, INC.
Condensed Consolidated Balance Sheets (Unaudited)
 March 31,
    
    
    December 31,2009
    
    
    2008ASSETS:Current assets:Cash and cash equivalents
    
    $
    17,797
    
    
    $
    11,536Investments, current
    
    
    103,257
    
    
    
    93,776Product royalties receivable
    
    
    8,945
    
    
    
    9,725Unbilled accounts receivable
    
    
    3,826
    
    
    
    4,373Accounts receivable
    
    
    249
    
    
    
    878Prepaid and income taxes receivable
    
    
    1,539
    
    
    
    133Deferred tax assets, net
    
    
    413
    
    
    
    963Prepaid expenses and other current assets
    
    
    3,209
    
    
    
    3,641Total current assets
    
    
    139,235
    
    
    
    125,025Investments, non-current
    
    
    9,494
    
    
    
    16,222Property and equipment, net
    
    
    2,272
    
    
    
    2,275Deferred tax assets  noncurrent, net
    
    
    4,225
    
    
    
    4,026Other assets
    
    
    873
    
    
    
    3,246Total assets
    
    $
    156,099
    
    
    $
    150,794LIABILITIES AND STOCKHOLDERS EQUITY:Current liabilities:Accounts payable
    
    $
    2,763
    
    
    $
    1,433Accrued expenses
    
    
    8,910
    
    
    
    9,764Deferred revenue  current
    
    
    19,053
    
    
    
    15,599Total current liabilities
    
    
    30,726
    
    
    
    26,796Deferred revenue, net of current portion
    
    
    11,463
    
    
    
    8,061Other liabilities
    
    
    2,047
    
    
    
    2,147Total liabilities
    
    
    44,236
    
    
    
    37,004Commitments (Note 7)Stockholders equity:Preferred stock, $0.01 par value;
$5,000,000 shares authorized at March 31,
2009 and December 31, 2008; no shares
issued and outstanding at March 31, 2009
and December 31, 2008
    
    
    
    
    
    
    Class A common stock, $0.01 par value;
270,000,000 shares authorized at March 31,
2009 and December 31, 2008; 15,652,759 and
15,651,849 shares issued and outstanding at
March 31, 2009 and December 31, 2008,
respectively
    
    
    156
    
    
    
    156Class B common stock, $0.01 par value;
75,000,000 shares authorized at March 31,
2009 and December 31, 2008; 26,191,050
shares issued and outstanding at March 31,
2009 and
December 31, 2008
    
    
    262
    
    
    
    262Additional paid-in capital
    
    
    98,359
    
    
    
    98,243Accumulated other comprehensive income
    
    
    86
    
    
    
    354Retained earnings
    
    
    13,000
    
    
    
    14,775Total stockholders equity
    
    
    111,863
    
    
    
    113,790Total liabilities and stockholders equity
    
    $
    156,099
    
    
    $
    150,794
  1




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##### 



SUCAMPO PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited)
 Three Months Ended March 31,2009
    
    
    2008Revenues:Research and development revenue
    
    $
    5,526
    
    
    $
    6,110Product royalty revenue
    
    
    8,946
    
    
    
    6,080Co-promotion revenue
    
    
    896
    
    
    
    1,222Contract and collaboration revenue
    
    
    146
    
    
    
    142Total revenues
    
    
    15,514
    
    
    
    13,554Operating expenses:Research and development
    
    
    9,965
    
    
    
    11,216General and administrative
    
    
    3,455
    
    
    
    3,167Selling and marketing
    
    
    2,512
    
    
    
    2,848Milestone royalties  related parties
    
    
    500
    
    
    
    1,031Product royalties  related parties
    
    
    1,590
    
    
    
    1,081Total operating expenses
    
    
    18,022
    
    
    
    19,343Loss from operations
    
    
    (2,508
    )
    
    
    (5,789
    )Non-operating income:Interest income
    
    
    312
    
    
    
    642Other income, net
    
    
    822
    
    
    
    12Total non-operating income, net
    
    
    1,134
    
    
    
    654Loss before income taxes
    
    
    (1,374
    )
    
    
    (5,135
    )Income tax (provision) benefit
    
    
    (401
    )
    
    
    5,640Net (loss) income
    
    $
    (1,775
    )
    
    $
    505Net (loss) income per share:Basic net (loss) income per share
    
    $
    (0.04
    )
    
    $
    0.01Diluted net (loss) income per share
    
    $
    (0.04
    )
    
    $
    0.01Weighted average common shares outstanding  basic
    
    
    41,844
    
    
    
    41,733Weighted average common shares outstanding  diluted
    
    
    41,844
    
    
    
    42,061Comprehensive (loss) income:Net (loss) income
    
    $
    (1,775
    )
    
    $
    505Other comprehensive loss:Unrealized loss on investments, net of tax effect
    
    
    (65
    )
    
    
    (840
    )Foreign currency translation
    
    
    (203
    )
    
    
    330Comprehensive loss
    
    $
    (2,043
    )
    
    $
    (5
    )
  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 (Loss)
    
    
    Earnings
    
    
    EquityBalance at December 31, 2008
    
    
    15,651,849
    
    
    $
    156
    
    
    
    26,191,050
    
    
    $
    262
    
    
    $
    98,243
    
    
    $
    354
    
    
    $
    14,775
    
    
    $
    113,790Employee stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    111Stock issued under employee stock purchase plan
    
    
    910
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (203
    )
    
    
    
    
    
    
    (203
    )Unrealized loss on investments, net of tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65
    )
    
    
    
    
    
    
    (65
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,775
    )
    
    
    (1,775
    )Balance at March 31, 2009
    
    
    15,652,759
    
    
    $
    156
    
    
    
    26,191,050
    
    
    $
    262
    
    
    $
    98,359
    
    
    $
    86
    
    
    $
    13,000
    
    
    $
    111,863
  3




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##### 



SUCAMPO PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
 Three Months Ended March 31,2009
    
    
    2008Cash flows from operating activities:Net (loss) income
    
    $
    (1,775
    )
    
    $
    505Adjustments to reconcile net income to net cash used in operating activities:Depreciation and amortization
    
    
    122
    
    
    
    102Deferred tax provision (benefit)
    
    
    394
    
    
    
    (5,640
    )Stock-based compensation
    
    
    111
    
    
    
    259Unrealized gain on trading securities
    
    
    (2,672
    )
    
    
    Unrealized loss on settlement rights on auction rate securities
    
    
    2,423
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    617
    
    
    
    (309
    )Unbilled accounts receivable
    
    
    547
    
    
    
    896Product royalties receivable
    
    
    780
    
    
    
    2,587Prepaid and income taxes receivable and payable, net
    
    
    (1,406
    )
    
    
    1,803Accounts payable
    
    
    1,382
    
    
    
    1,413Accrued expenses
    
    
    (811
    )
    
    
    (1,592
    )Deferred revenue
    
    
    7,245
    
    
    
    (318
    )Other assets and liabilities, net
    
    
    348
    
    
    
    (86
    )Net cash provided by (used in) operating activities
    
    
    7,305
    
    
    
    (380
    )Cash flows from investing activities:Purchases of investments
    
    
    (77,289
    )
    
    
    (45,909
    )Proceeds from the sales of investments
    
    
    47,452
    
    
    
    38,325Maturities of investments
    
    
    29,504
    
    
    
    15,000Purchases of property and equipment
    
    
    (127
    )
    
    
    (171
    )Net cash (used in) provided by investing activities
    
    
    (460
    )
    
    
    7,245Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    
    
    
    
    42Proceeds from employee stock purchase plan
    
    
    5
    
    
    
    Net cash provided by financing activities
    
    
    5
    
    
    
    42Effect of exchange rates on cash and cash equivalents
    
    
    (589
    )
    
    
    267Net increase in cash and cash equivalents
    
    
    6,261
    
    
    
    7,174Cash and cash equivalents at beginning of period
    
    
    11,536
    
    
    
    25,559Cash and cash equivalents at end of period
    
    $
    17,797
    
    
    $
    32,733
  4




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##### 



1. Business Organization and Basis of Presentation
 Description of the Business
       Basis of Presentation
   2. Summary of Significant Accounting Policies
 5




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##### 



Cash and Cash Equivalents
  Current and Non-current Investments
 , Accounting for Certain Investments in
Debt and Equity Securities
 Fair Value
 Fair Value Measurements
 Revenue Recognition
 Revenue Recognition Reporting Revenue Gross as a Principal Versus Net as an Agent Accounting for Revenue Arrangements with Multiple Deliverables
    6




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##### 



Certain Risks, Concentrations and Uncertainties
      7




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##### 



Reclassifications
  Recent Accounting Pronouncements
 Accounting for Collaborative
Arrangements ( The Equity Method of Accounting for Investments in Common Stock
 Effective
Date of FASB Statement No. 157,
 8




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##### 



The Hierarchy of Generally Accepted Accounting
Principles
 Determining the Fair Value of a Financial
Asset in a Market That is Not Active ( Accounting Changes and Error Corrections
 3. Earnings per Share
   Three Months Ended March 31,(In thousands, except per share data)
    
    2009
    
    
    2008Basic net (loss) income per share:Net (loss) income
    
    $
    (1,775
    )
    
    $
    505Weighted average class A and B common shares outstanding
    
    
    41,844
    
    
    
    41,733Basic net (loss) income per share
    
    $
    (0.04
    )
    
    $
    0.01Diluted net (loss) income per share:Net (loss) income
    
    $
    (1,775
    )
    
    $
    505Weighted average class A and B common shares outstanding for diluted net
(loss) income per share
    
    
    41,844
    
    
    
    41,733Assumed exercise of dilutive stock options under the treasury stock method
    
    
    
    
    
    
    32841,844
    
    
    
    42,061Diluted net (loss) income per share
    
    $
    (0.04
    )
    
    $
    0.01
  Three Months Ended March 31,(In thousands)
    
    2009
    
    2008Employee stock options
    
    
    
    
    
    
    608Non-employee stock options
    
    
    
    
    
    
    510
  Three Months Ended March 31,(In thousands)
    
    2009
    
    2008Employee stock options
    
    
    694
    
    
    
    268Non-employee stock options
    
    
    450
    
    
    
    
 9




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##### 



4. Current and Non-Current Investments
 Fair Value Measurement
   March 31, 2009Unrealized
    
    
    Unrealized(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueCurrent:U.S. Treasury bills and notes
    
    $
    33,061
    
    
    $
    27
    
    
    $
    
    
    
    $
    33,088Money market funds
    
    
    33,662
    
    
    
    
    
    
    
    
    
    
    
    33,662Municipal securities
    
    
    27,111
    
    
    
    
    
    
    
    (4
    )
    
    
    27,107Auction rate securities
    
    
    9,400
    
    
    
    
    
    
    
    
    
    
    
    9,400Total
    
    $
    103,234
    
    
    $
    27
    
    
    $
    (4
    )
    
    $
    103,257Non-current:Auction rate securities
    
    $
    10,000
    
    
    $
    
    
    
    $
    (506
    )
    
    $
    9,494
 December 31, 2008Unrealized
    
    
    Unrealized(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueCurrent:U.S. Treasury bills and notes
    
    $
    42,620
    
    
    $
    130
    
    
    $
    
    
    
    $
    42,750Money market funds
    
    
    51,026
    
    
    
    
    
    
    
    
    
    
    
    51,026Total
    
    $
    93,646
    
    
    $
    130
    
    
    $
    
    
    
    $
    93,776Non-current:Auction rate securities
    
    $
    19,400
    
    
    $
    
    
    
    $
    (3,178
    )
    
    $
    16,222
   Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    Unobservable
    
    
    Total as ofIdentical Assets
    
    
    Observable Inputs
    
    
    Inputs
    
    
    March 31,(In thousands)
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    2009U.S. Treasury bills and notes
    
    $
    33,088
    
    
    $
    
    
    
    $
    
    
    
    $
    33,088Municipal securities
    
    
    27,107
    
    
    
    
    
    
    
    
    
    
    
    27,107Auction rate securities
    
    
    
    
    
    
    
    
    
    
    18,894
    
    
    
    18,894Settlement rights for auction rate securities*
    
    
    
    
    
    
    
    
    
    
    395
    
    
    
    395Other available-for-sale securities
    
    
    33,662
    
    
    
    
    
    
    
    
    
    
    
    33,662Total assets measured at fair value
    
    $
    93,857
    
    
    $
    
    
    
    $
    19,289
    
    
    $
    113,146
 
 *
    
    included in non-current other assets in the accompanying condensed consolidated balance sheets 10




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##### 



Auction RateSecuritiesand RelatedSettlement(In thousands)
    
    RightsBalance at December 31, 2008
    
    $
    19,040Total net unrealized gains included in earnings
    
    
    249Balance at March 31, 2009
    
    $
    19,289
 5. Accrued Expenses
  March 31,
    
    
    December 31,(In thousands)
    
    2009
    
    
    2008Research and development costs
    
    $
    5,620
    
    
    $
    7,086Employee compensation
    
    
    788
    
    
    
    1,748Selling and marketing costs
    
    
    39
    
    
    
    346Product royalty liability  related party
    
    
    1,582
    
    
    
    Other accrued expenses
    
    
    881
    
    
    
    584Total
    
    $
    8,910
    
    
    $
    9,764
 6. Commitments
 Operating Leases
  (In thousands)2009 (April-December)
    
    $
    1,1452010
    
    
    1,1402011
    
    
    1,0012012
    
    
    9632013
    
    
    9922014 and thereafter
    
    
    3,297Total minimum lease payments
    
    $
    8,538
  Research and Development Costs
  7. Related Party Transactions
 R-Tech Ueno, Ltd.
   11




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##### 



Three Months Ended March 31,(In thousands)
    
    2009
    
    
    2008Clinical supplies
    
    $
    1,044
    
    
    $
    388Other research and development services
    
    
    5
    
    
    
    10$
    1,049
    
    
    $
    398
  March 31,
    
    
    December 31,(In thousands)
    
    2009
    
    
    2008Deferred revenue  current
    
    $
    430
    
    
    $
    419Deferred revenue, net of current portion
    
    
    6,552
    
    
    
    6,444$
    6,982
    
    
    $
    6,863
   Sucampo AG License Agreements
  
    
    the patent royalty on net sales, due until the expiration of the last patent covering
lubiprostone that existed at the time of the Companys initial public offering, was reduced
from 4.5% to 2.2%;
    
    the patent royalty on net sales, due thereafter until all other patents covering
lubiprostone have expired in the relevant country, was reduced from 2.25% to 1.1%; and
    
    the know-how royalty on net sales, due until the fifteenth anniversary of the first
commercial sale of lubiprostone, was reduced from 2.0% to 1.0%.
  12




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##### 



8. Collaboration and License Agreements
 Abbott license and commercialization and supply agreement
       13




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##### 



RevenueCash Received
    
    
    Recognized
    
    
    Foreignfor the
    
    
    for the
    
    
    Currency EffectsAmount
    
    
    Three Months
    
    
    Three Months
    
    
    for the Three
    
    
    AmountDeferred at
    
    
    Ended
    
    
    Ended
    
    
    Months Ended
    
    
    Deferred atDecember 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,(In thousands)
    
    2008
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009Collaboration revenue:Up-front payment associated with
the Companys obligation to
participate in joint
commercialization and steering
committee with Abbott
    
    $
    
    
    
    $
    677
    
    
    $
    5
    
    
    $
    34
    
    
    $
    638Research and development revenue:Up-front payment
    
    $
    
    
    
    $
    9,323
    
    
    $
    374
    
    
    $
    475
    
    
    $
    8,474
 Takeda commercialization and license agreement
    Revenue
    
    
    Change inCash Received
    
    
    Recognized
    
    
    Accountsfor the
    
    
    for the
    
    
    ReceivableAmount
    
    
    Three Months
    
    
    Three Months
    
    
    for the Three
    
    
    AmountDeferred at
    
    
    Ended
    
    
    Ended
    
    
    Months Ended
    
    
    Deferred atDecember 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,(In thousands)
    
    2008
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009Collaboration revenue:Up-front payment associated with
the Companys obligation to
participate in joint committees
with Takeda
    
    $
    1,764
    
    
    $
    
    
    
    $
    37
    
    
    $
    
    
    
    $
    1,727Research and development revenue:Reimbursement of research and
development expenses
    
    $
    
    
    
    $
    18,126
    
    
    $
    5,152
    
    
    $
    (540
    )
    
    $
    12,434Product royalty revenue
    
    $
    
    
    
    $
    9,891
    
    
    $
    8,946
    
    
    $
    (945
    )
    
    $
    
 14




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##### 



RevenueCash Received
    
    
    Recognizedfor the
    
    
    for theAccounts
    
    
    Three Months
    
    
    Three Months
    
    
    Accounts
    
    
    AmountReceivable at
    
    
    Ended
    
    
    Ended
    
    
    Receivable at
    
    
    Deferred atDecember 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,(In thousands)
    
    2008*
    
    
    2009
    
    
    2009
    
    
    2009*
    
    
    2009Research and development revenue:Reimbursement of research and
development expenses
    
    $
    4,407
    
    
    $
    18,126
    
    
    $
    5,152
    
    
    $
    3,867
    
    
    $
    12,434Product royalty revenue
    
    $
    9,890
    
    
    $
    9,891
    
    
    $
    8,946
    
    
    $
    8,945
    
    
    $
    Co-promotion revenue
    
    $
    395
    
    
    $
    1,165
    
    
    $
    896
    
    
    $
    126
    
    
    $
    
 
 *
    
    Includes billed and unbilled accounts receivable. 9. Stock Option Plans
  Weighted
    
    
    WeightedAverage
    
    
    Average Remaining
    
    
    AggregateExercise Price
    
    
    Contractual
    
    
    Intrinsic(In thousands, except share and per share data)
    
    Shares
    
    
    Per Share
    
    
    Term (Years)
    
    
    ValueOptions outstanding, December 31, 2008
    
    
    455,600
    
    
    $
    10.34Options forfeited
    
    
    (850
    )
    
    
    10.00Options expired
    
    
    (7,650
    )
    
    
    10.00Options outstanding, March 31, 2009
    
    
    447,100
    
    
    
    10.34
    
    
    
    3.99
    
    
    $
    Options exercisable, March 31, 2009
    
    
    438,600
    
    
    
    10.35
    
    
    
    3.93
    
    
    $
    
  Weighted
    
    
    WeightedAverage
    
    
    Average Remaining
    
    
    AggregateExercise Price
    
    
    Contractual
    
    
    Intrinsic(In thousands, except share and per share data)
    
    Shares
    
    
    Per Share
    
    
    Term (Years)
    
    
    ValueOptions outstanding, December 31, 2008
    
    
    275,000
    
    
    $
    13.86Options forfeited
    
    
    (46,750
    )
    
    
    13.38Options expired
    
    
    (2,000
    )
    
    
    14.12Options outstanding, March 31, 2009
    
    
    226,250
    
    
    
    13.96
    
    
    
    6.27
    
    
    $
    Options exercisable, March 31, 2009
    
    
    118,250
    
    
    
    14.34
    
    
    
    5.23
    
    
    $
    
   15




---



##### 



Weighted
    
    
    WeightedAverage
    
    
    Average Remaining
    
    
    AggregateExercise Price
    
    
    Contractual
    
    
    Intrinsic(In thousands, except share and per share data)
    
    Shares
    
    
    Per Share
    
    
    Term (Years)
    
    
    ValueOptions outstanding, December 31, 2008
    
    
    450,000
    
    
    $
    5.85Options outstanding, March 31, 2009
    
    
    450,000
    
    
    
    5.85
    
    
    
    6.09
    
    
    $
    126Options exercisable, March 31, 2009
    
    
    450,000
    
    
    
    5.85
    
    
    
    6.09
    
    
    $
    126
  Employee Stock Purchase Plan
  10. Income Taxes
  Interim Financial
Reporting
 Uncertain Tax Positions
 Accounting for
Uncertainty in Income Taxes
   11. Segment Reporting
  16




---



##### 



Intercompany(In thousands)
    
    United States
    
    
    Europe
    
    
    Japan
    
    
    Eliminations
    
    
    ConsolidatedThree 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
    )
    
    
    15,514Depreciation and amortization
    
    
    117
    
    
    
    3
    
    
    
    2
    
    
    
    
    
    
    
    122Other operating expenses
    
    
    14,458
    
    
    
    480
    
    
    
    3,172
    
    
    
    (210
    )
    
    
    17,900Income (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
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    127Three Months Ended March 31, 2008Research and development revenue
    
    $
    6,110
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,110Product royalty revenue
    
    
    6,080
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,080Co-promotion revenue
    
    
    1,222
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,222Contract and collaboration revenue
    
    
    142
    
    
    
    
    
    
    
    207
    
    
    
    (207
    )
    
    
    142Total revenues
    
    
    13,554
    
    
    
    
    
    
    
    207
    
    
    
    (207
    )
    
    
    13,554Depreciation and amortization
    
    
    100
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    102Other operating expenses
    
    
    16,944
    
    
    
    1,838
    
    
    
    669
    
    
    
    (210
    )
    
    
    19,241Loss from operations
    
    
    (3,490
    )
    
    
    (1,838
    )
    
    
    (464
    )
    
    
    3
    
    
    
    (5,789
    )Interest income
    
    
    656
    
    
    
    4
    
    
    
    3
    
    
    
    (21
    )
    
    
    642Other non-operating (expense) income, net
    
    
    (27
    )
    
    
    19
    
    
    
    2
    
    
    
    18
    
    
    
    12Loss before income taxes
    
    $
    (2,861
    )
    
    $
    (1,815
    )
    
    $
    (459
    )
    
    $
    
    
    
    $
    (5,135
    )Capital expenditures
    
    $
    171
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    171As of March 31, 2009Property and equipment, net
    
    $
    2,143
    
    
    $
    36
    
    
    $
    93
    
    
    $
    
    
    
    $
    2,272Identifiable assets, net of intercompany loans and investments
    
    $
    140,984
    
    
    $
    2,564
    
    
    $
    13,044
    
    
    $
    (493
    )
    
    $
    156,099As of December 31, 2008Property and equipment, net
    
    $
    2,134
    
    
    $
    39
    
    
    $
    102
    
    
    $
    
    
    
    $
    2,275Identifiable assets, net of intercompany loans and investments
    
    $
    146,074
    
    
    $
    568
    
    
    $
    4,469
    
    
    $
    (317
    )
    
    $
    150,794
 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, 2008 included in our Annual Report on Form
10-K.
 Overview
 ®
   ®
  18




---



##### 



Our Clinical Development Programs
  
    
    Amitiza (lubiprostone) in the United States and Canada.We currently are developing
Amitiza to treat opioid-induced bowel dysfunction. We recently have completed enrollment
into two identically designed Phase III placebo-controlled pivotal clinical trials of
Amitiza for the treatment of OBD and we expect to complete these trials in mid-2009. We are
also conducting a follow-on open label safety extension trial that we plan to complete by
the end of 2009. If these trials are successful, we plan to file a supplemental new drug
application for Amitiza in OBD with the FDA in 2010.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. We anticipate filing
results from these post-marketing studies with the FDA in the second quarter of 2009. 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. 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. In
accordance with the collaboration and co-promotion arrangement, Takeda funds the majority of
Amitizas development program in the United States.
    
    Amitiza (lubiprostone) in other countries.We currently are awaiting responses to our
marketing authorization applications for lubiprostone, 24 mcg, for the treatment of chronic
idiopathic constipation in adults filed in ten European countries in early 2008.In September 2008, we announced positive results from our multi-center Phase 2b dose-ranging
study in Japan to evaluate the safety and efficacy of lubiprostone for treating chronic
idiopathic constipation in adults. The results enabled us to enter into the license agreement
with Abbott in Japan. We plan to initiate Phase III clinical trials in Japan during the
second quarter of 2009.
    
    Rescula.In April 2009, we licensed from R-Tech the development and commercialization
rights to Rescula (unoprostone isopropyl) in the United States and Canada, including all
associated patents and other intellectual property. Although Rescula has been approved for
marketing in the United States for the treatment of open-angle glaucoma and ocular
hypertension since 2000, it was marketed only to a limited extent by a previous licensee
shortly after the approval and is not currently commercialized in these countries. We plan
to relaunch Rescula in the United States for the treatment of glaucoma and ocular
hypertension in 2010. We also intend to initiate a phase 2 clinical trial of unoprostone
isopropyl to treat dry age-related macular degeneration in 2010.
    
    Cobiprostone.We are developing orally administered cobiprostone to treat various
gastrointestinal and liver disorders, including the prevention of non-steroidal
anti-inflammatory drug-induced ulcers and the treatment of non-alcoholic fatty
 19




---



##### 



liver disease. We also plan to develop an inhaled formulation of cobiprostone for the
treatment of respiratory symptoms of cystic fibrosis and chronic obstructive pulmonary
disease and a topical formulation for the treatment of ulcers and wounds.Our near-term focus is on the development of cobiprostone for the prevention of non-steroidal
anti-inflammatory drug-induced ulcers. We commenced a Phase II clinical trial of cobiprostone
for the prevention of non-steroidal anti-inflammatory drug-induced ulcers in the third
quarter of 2007. The trial was fully enrolled in December 2008 and we anticipate completion
of the study in mid-2009. In December 2008, we discontinued enrollment into a Phase II
proof-of-concept study of cobiprostone for the treatment of portal hypertension in patients
with liver cirrhosis due to lower than anticipated enrollment resulting from lack of patient
eligibility, interest and study compliance. We are reviewing the trial design to determine if
future studies for this indication are warranted.
    
    SPI-017.We are conducting pre-clinical development of 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 commenced a phase 1 clinical trial of the intravenous formulation of SPI-017
in December 2008 in Japan.
 Reclassifications
  Results of Operations
 Comparison of three months ended March 31, 2009 and March 31, 2008
 Revenues
  Three Months EndedMarch 31,(In thousands)
    
    2009
    
    
    2008Research and development revenue
    
    $
    5,526
    
    
    $
    6,110Product royalty revenue
    
    
    8,946
    
    
    
    6,080Co-promotion revenue
    
    
    896
    
    
    
    1,222Contract and collaboration revenue
    
    
    146
    
    
    
    142Total
    
    $
    15,514
    
    
    $
    13,554
    20




---



##### 



Research and Development Expenses
  Three Months EndedMarch 31,(In thousands)
    
    2009
    
    
    2008Direct costs:Amitiza
    
    $
    6,771
    
    
    $
    8,986Cobiprostone
    
    
    890
    
    
    
    994SPI - 017
    
    
    1,637
    
    
    
    679Other
    
    
    144
    
    
    
    135Total
    
    
    9,442
    
    
    
    10,794Indirect costs
    
    
    523
    
    
    
    422Total
    
    $
    9,965
    
    
    $
    11,216
  General and Administrative Expenses
  Three Months EndedMarch 31,(In thousands)
    
    2009
    
    
    2008Salaries, benefits and related costs
    
    $
    1,159
    
    
    $
    915Legal, consulting and other professional expenses
    
    
    1,077
    
    
    
    958Other operating expenses
    
    
    1,219
    
    
    
    1,294Total
    
    $
    3,455
    
    
    $
    3,167
  Selling and Marketing Expenses
  Milestone Royalties  Related Parties
 21




---



##### 



Product Royalties  Related Parties
  Non-Operating Income
  Three Months EndedMarch 31,(In thousands)
    
    2009
    
    
    2008Interest income
    
    $
    312
    
    
    $
    642Other income, net
    
    
    822
    
    
    
    12Total non-operating income, net
    
    $
    1,134
    
    
    $
    654
  Income Taxes
  Cost Reduction Initiatives
  Reportable Geographic Segments
  22




---



##### 



Intercompany(In thousands)
    
    United States
    
    Europe
    
    Japan
    
    Eliminations
    
    ConsolidatedThree Months Ended March 31, 2009Total revenues
    
    $
    15,135
    
    
    $
    
    
    
    $
    589
    
    
    $
    (210
    )
    
    $
    15,514Income (loss) before taxes
    
    
    1,163
    
    
    
    (519
    )
    
    
    (2,018
    )
    
    
    
    
    
    
    (1,374
    )Three Months Ended March 31, 2008Total revenues
    
    $
    13,554
    
    
    $
    
    
    
    $
    207
    
    
    $
    (207
    )
    
    $
    13,554Loss from before taxes
    
    
    (2,861
    )
    
    
    (1,815
    )
    
    
    (459
    )
    
    
    
    
    
    
    (5,135
    )Identifiable Assets, net of intercompany loans and investmentsAt March 31, 2009
    
    $
    140,984
    
    
    $
    2,564
    
    
    $
    13,044
    
    
    $
    (493
    )
    
    $
    156,099At December 31, 2008
    
    
    146,074
    
    
    
    568
    
    
    
    4,469
    
    
    
    (317
    )
    
    
    150,794
 Liquidity and Capital Resources
 Sources of Liquidity
   March 31,
    
    
    December 31,(In thousands)
    
    2009
    
    
    2008Cash and cash equivalents
    
    $
    17,797
    
    
    $
    11,536Investments, current
    
    
    103,257
    
    
    
    93,776Investments, non-current
    
    
    9,494
    
    
    
    16,222$
    130,548
    
    
    $
    121,534
   Cash Flows
 23




---



##### 



Three Months EndedMarch 31,(In thousands)
    
    2009
    
    
    2008Cash provided by (used in):Operating activities
    
    $
    7,305
    
    
    $
    (380
    )Investing activities
    
    
    (460
    )
    
    
    7,245Financing activities
    
    
    5
    
    
    
    42Effect of exchange rates
    
    
    (589
    )
    
    
    267Net increase in cash and cash equivalents
    
    $
    6,261
    
    
    $
    7,174
 Three Months ended March 31, 2009
    Three Months ended March 31, 2008
    Off-Balance Sheet Arrangements
  Funding Requirements
  
    
    fund our share of the development program of Amitiza in the United States;
    
    fund development and regulatory efforts in Europe and Japan for Amitiza;
    
    fund development and regulatory activities for Rescula in the United States and
Canada;
    
    fund research and development activities for other prostone compounds including
cobiprostone and SPI-017;
 24




---



##### 




    
    fund the expansion of our commercialization activities in the United States and the
initiation of commercialization efforts in non-U.S. markets;
    
    fund costs for 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.
  
    
    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.
  Fair Value Estimates
 Fair
Value Measurement
  Recent Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Foreign Exchange Risk
  25




---



##### 



Interest Rate Risk
   Credit Risk
  March 31,(In thousands)
    
    2009Cash and cash equivalents
    
    $
    17,797Investments
    
    
    112,751Restricted cash
    
    
    213Less: amounts subject to federally insured limits
    
    
    (578
    )Total amounts in excess of federally insured limits
    
    $
    130,183
  
 Item 4. Controls and Procedures
 a) Evaluation of Disclosure Controls and Procedures
  b) Changes in Internal Controls
 26




---



##### 



27




---



##### 



Part II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Risks Related to Our Recently Licensed Product, Rescula ®
  Our existing sales force may not be sufficient to effectively market Rescula, which could limit our
ability to generate Rescula sales, require us to invest significant additional resources in our
sales force and hurt our sales of Amitiza.
  The market for glaucoma and ocular hypertension treatments is highly competitive.
 ® ®
 Our planned clinical trials for other indications for Rescula will be expensive and may not
demonstrate safety and efficacy in humans.
  Our dependence on a sole supplier to meet our commercial and clinical requirements for Rescula may
significantly impair our ability to successfully commercialize and develop the drug.
 28




---



##### 



Risk Related to Regulatory Approval and Oversight
 Even if we receive regulatory approval for a product,
the product could be subject to regulatory restrictions or withdrawal from the market, and we may be subject to
penalties if we fail to comply with ongoing regulatory requirements.
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information.
  29




---



##### 



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, 2009)3.2
    
    Certificate of Amendment
    
    Exhibit 3.2 to the
Companys Current Report
on Form 8-K (filed
December 29, 2009)3.3
    
    Restated Bylaws
    
    Exhibit 3.3 to the
Companys Current Report
on Form 8-K (filed
December 29, 2009)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)10.1*
    
    Unoprostone Exclusive
Manufacturing and Supply
Agreement between R-Tech Ueno,
Ltd. and Sucampo Pharma Americas,
Inc.
    
    Included herewith10.2*
    
    Unoprostone NDA Transfer, Patent
and Know-how Licensing, and Data
Sharing Agreement between R-Tech
Ueno, Ltd. and Sucampo Pharma
Americas, Inc.
    
    Included herewith31.1
    
    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
 
 *
    
    Confidential treatment has been requested for portions of this exhibit. 30




---



##### 



SIGNATURES
  Sucampo Pharmaceuticals, Inc.May 11, 2009
    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 11, 2009
    By:
    /s/ JAN SMILEKJan SmilekChief Financial Officer
(Principal Financial and Accounting Officer) 31




---



##### 



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, 2009)3.2
    
    Certificate of Amendment
    
    Exhibit 3.2 to the
Companys Current Report
on Form 8-K (filed
December 29, 2009)3.3
    
    Restated Bylaws
    
    Exhibit 3.3 to the
Companys Current Report
on Form 8-K (filed
December 29, 2009)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)10.1*
    
    Unoprostone Exclusive
Manufacturing and Supply
Agreement between R-Tech Ueno,
Ltd. and Sucampo Pharma Americas,
Inc.
    
    Included herewith10.2*
    
    Unoprostone NDA Transfer, Patent
and Know-how Licensing, and Data
Sharing Agreement between R-Tech
Ueno, Ltd. and Sucampo Pharma
Americas, Inc.
    
    Included herewith31.1
    
    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
 
 *
    
    Confidential treatment has been requested for portions of this exhibit. 32