UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

SUCAMPO PHARMACEUTICALS, INC.

(Name of Registrant as Specified in Its Charter)

 

Not applicable

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

April 25, 2008

 

Dear Fellow Stockholders:

 

You are cordially invited to attend the Sucampo Pharmaceuticals, Inc. Annual Meeting of Stockholders to be held on June 5, 2008 at 10:00 a.m., Eastern time, at the Hyatt Regency Bethesda, One Metro Center, 7400 Wisconsin Avenue, Bethesda, Maryland 20814. Details about the meeting, nominees for the Board of Directors and other matters to be acted on are included in the Notice of 2008 Annual Meeting of Stockholders and Proxy Statement that follow.

 

We hope you plan to attend the annual meeting. Whether or not you plan to attend the meeting, please vote your shares by completing, dating, signing and returning the enclosed proxy card as described in the Proxy Statement. Your proxy may be revoked at any time before it is exercised as explained in the Proxy Statement.

 

If you plan to attend the meeting, please bring photo identification for admission. Also, if your shares are held in the name of a broker, bank or other nominee, please bring with you a proxy, letter or account statement (or copy thereof) from your broker, bank or nominee confirming your ownership of Sucampo Pharmaceuticals, Inc. stock so that you can be admitted to the meeting. Also, if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a broker’s proxy card issued in your name.

 

On behalf of the Board of Directors and management, it is my pleasure to express our appreciation for your continued support.

 

Sincerely,

 

 

Ryuji Ueno, M.D., Ph.D., Ph.D.

Chief Executive Officer, Chief Scientific Officer and
Chair of the Board of Directors

 

 

 

 

 

SUCAMPO PHARMACEUTICALS, INC.

4520 EAST-WEST HIGHWAY, SUITE 300

BETHESDA, MARYLAND 20814

 

 

NOTICE OF 2008 ANNUAL MEETING OF STOCKHOLDERS

To Be Held On June 5, 2008

 

 

To Our Stockholders:

 

NOTICE IS HEREBY GIVEN that the 2008 Annual Meeting of Stockholders of Sucampo Pharmaceuticals, Inc. will be held on June 5, 2008 at 10:00 a.m., Eastern time, at the Hyatt Regency Bethesda, One Metro Center, 7400 Wisconsin Avenue, Bethesda, Maryland 20814. At the annual meeting, stockholders will consider and vote on the following matters:

 

1. The election to the board of directors of Ryuji Ueno, M.D., Ph.D., Ph.D., Anthony C. Celeste, Timothy I. Maudlin, V. Sue Molina and John C. Wright, each for a term of one year.

 

2. The ratification of the selection by the audit committee of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008.

 

Stockholders also will consider and vote on any other matters as may properly come before the annual meeting or any adjournment or postponement thereof. Our board of directors has no knowledge of any other matters which may come before the meeting.

 

Stockholders of record at the close of business on April 16, 2008 are entitled to notice of, and to vote at, the annual meeting or any adjournment or postponement thereof. Your vote is important regardless of the number of shares you own.

 

We hope that all stockholders will be able to attend the annual meeting in person. In order to ensure that a quorum is present at the meeting, please complete, date, sign and promptly return the enclosed proxy card, whether or not you plan to attend the annual meeting. A return envelope, which is postage pre-paid if mailed in the United States, addressed to American Stock Transfer & Trust Company, our transfer agent and registrar, has been enclosed for your convenience. If you return a proxy, you may cancel it by voting in person at the annual meeting. Please note, however, if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a broker’s proxy card issued in your name.

 

All stockholders are cordially invited to attend the meeting.

 

By Order of the Board of Directors,

 

 

Mariam E. Morris

Corporate Secretary

 

Bethesda, Maryland

April 25, 2008

 

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOUR VOTE IS IMPORTANT. IN ORDER TO ASSURE THE REPRESENTATION OF YOUR SHARES AT THE ANNUAL MEETING, PLEASE VOTE YOUR PROXY AS SOON AS POSSIBLE.

SUCAMPO PHARMACEUTICALS, INC.

4520 EAST-WEST HIGHWAY, SUITE 300

BETHESDA, MARYLAND 20814

 

 

 

PROXY STATEMENT

 

 

 

For the 2008 Annual Meeting of Stockholders
To Be Held On June 5, 2008

 

This proxy statement and the enclosed proxy card are being furnished in connection with the solicitation of proxies by the board of directors of Sucampo Pharmaceuticals, Inc. for use at the 2008 Annual Meeting of Stockholders to be held on June 5, 2008 at 10:00 a.m., Eastern time, at the Hyatt Regency Bethesda, One Metro Center, 7400 Wisconsin Avenue, Bethesda, Maryland 20814, and of any adjournment or postponement thereof.

 

All proxies will be voted in accordance with your instructions. If no choice is specified, the proxies will be voted as recommended by our board of directors. A stockholder who signs a proxy may revoke or revise that proxy at any time before the annual meeting.

 

This proxy statement is being mailed on or about April 25, 2008 to stockholders of record at the close of business on April 16, 2008.

 

A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 as filed with the Securities and Exchange Commission, or SEC, will be furnished without charge to any stockholder upon written or oral request to Sucampo Pharmaceuticals, Inc., Attn: Investor Relations, 4520 East-West Highway, Suite 300, Bethesda, Maryland 20814; telephone: (301) 961-3400. This proxy statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 also are available on our website at www.sucampo.com and the SEC’s website at www.sec.gov.

 

Voting Securities and Votes Required

 

Stockholders of record at the close of business on April 16, 2008 will be entitled to notice of and to vote at the annual meeting. On that date, 15,542,768 shares of our class A common stock and 26,191,050 shares of our class B common stock were issued and outstanding. Each share of class A common stock entitles the holder to one vote with respect to all matters submitted to stockholders at the meeting. Each share of class B common stock entitles the holder to ten votes with respect to all matters submitted to stockholders at the meeting. Stockholders are not entitled to cumulative voting rights. We have no other securities entitled to vote at the meeting.

 

The representation in person or by proxy of at least a majority in voting power of the shares of common stock issued, outstanding and entitled to vote at the annual meeting is necessary to establish a quorum for the transaction of business. If a quorum is not present, the meeting will be adjourned until a quorum is obtained.

 

Directors are elected by a plurality of votes cast by stockholders entitled to vote at the meeting. To be approved, any other matter submitted to our stockholders, including the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm, requires the affirmative vote of the majority in voting power of shares present in person or represented by proxy and voting on such matter at the annual meeting. A representative of American Stock Transfer & Trust Company will serve as the inspector of elections at the annual meeting.

 

Shares that abstain from voting as to a particular matter and shares held in “street name” by brokers, banks or other nominees who indicate on their proxy cards that they do not have discretionary authority to vote such shares as to a particular matter, which we refer to as “broker non-votes,” will be counted for the purpose of determining whether a quorum exists but will not have any effect upon the outcome of voting with respect to any matters voted on at the annual meeting. Brokers holding shares for clients who have not given specific voting instructions are permitted to

vote in their discretion with respect to “Proposal One — Election of Directors” and “Proposal Two — Ratification of Selection of Independent Registered Public Accounting Firm.”

 

Stockholders may vote in person or by proxy. Voting by proxy will not in any way affect a stockholder’s right to attend the meeting and vote in person. Any stockholder voting by proxy has the right to revoke the proxy at any time before the polls close at the annual meeting by giving our Secretary a duly executed proxy card bearing a later date than the proxy being revoked at any time before that proxy is voted or by appearing at the meeting and voting in person. The shares represented by all properly executed proxies received in time for the meeting will be voted as specified. If the shares you own are held in your name and you do not specify in the proxy card how your shares are to be voted, they will be voted in favor of the election as directors of those persons named as nominees in this proxy statement and in favor of the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm. If any other matters properly come before the meeting, the persons named in the accompanying proxy intend to vote, or otherwise act, in accordance with their judgment. If the shares you own are held in “street name,” the broker, bank or other nominee, as the record holder of your shares, is required to vote your shares in accordance with your instructions. In order to vote your shares held in “street name,” you will need to follow the directions that your broker, bank or other nominee provides to you.

 

If your shares are registered directly in your name, you may vote:

 

 

If your shares are held in “street name” for your account by a broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee explaining how to vote. If you plan to vote in person at the annual meeting, you should contact the broker, bank or other nominee that holds your shares to obtain a broker’s proxy card and bring it with you to the meeting. A broker’s proxy is not the form of proxy enclosed with this proxy statement. You will not be able to vote shares you hold in street name at the annual meeting unless you have a proxy from your broker issued in your name giving you the right to vote the shares.

 

Stockholders Sharing the Same Address

 

The SEC has adopted rules that permit companies and intermediaries, such as brokers, to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. Because we utilize the “householding” rules for proxy materials, stockholders who share the same address will receive only one copy of the annual report and proxy statement, unless we receive contrary instructions from any stockholder at that address. We will continue to mail a proxy card to each stockholder of record. If you prefer to receive multiple copies of the proxy statement and annual report at the same address, additional copies will be provided to you promptly upon request. If you are a stockholder of record, you may obtain additional copies upon written request to Sucampo Pharmaceuticals, Inc., Attn: Investor Relations, 4520 East-West Highway, Suite 300, Bethesda, Maryland 20814. Eligible stockholders of record receiving multiple copies of the annual report and proxy statement can request householding by contacting us in the same manner.

 

If you are a beneficial owner and hold your shares in a brokerage or custody account, you can request additional copies of the proxy statement and annual report or you can request householding by notifying your broker, bank or other nominee.

STOCK OWNERSHIP INFORMATION

 

The following table sets forth information regarding the beneficial ownership of our class A and class B common stock as of April 16, 2008 by:

 

 

Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to shares of our class A and class B common stock. Shares of our class A common stock subject to stock options that are currently exercisable or exercisable within 60 days of April 16, 2008 are deemed to be outstanding and beneficially owned by the person holding the option for the purpose of calculating the percentage ownership of that person but are not deemed outstanding for the purpose of calculating the percentage ownership of any other person. The information set forth below is not necessarily indicative of beneficial ownership for any other purpose, and the inclusion of any shares deemed beneficially owned in this table does not constitute an admission of beneficial ownership of those shares. Except as otherwise noted, to our knowledge, the persons and entities named in the table have sole voting and investment power with respect to all of the shares of common stock beneficially owned by them, subject to community property laws, where applicable. Except as otherwise set forth below, the address of the beneficial owner is c/o Sucampo Pharmaceuticals, Inc., 4520 East-West Highway, Suite 300, Bethesda, Maryland 20814.

The following table sets forth the number of shares of our class A and class B common stock beneficially owned by the indicated parties. Each share of our class B common stock is convertible at any time into one share of class A common stock. Each share of our class B common stock entitles the holder to ten votes with respect to all matters submitted to stockholders at the meeting.

 

 

 

 

PROPOSAL ONE — ELECTION OF DIRECTORS

 

Our board of directors is currently authorized to have seven members and we currently have seven members, each with terms expiring at the 2008 annual meeting. Two of our current directors, Michael J. Jeffries and Hidetoshi Mine, are not standing for re-election at the 2008 annual meeting. Our board of directors, based on the recommendation of our nominating and corporate governance committee, nominated five candidates for election

at the 2008 annual meeting. Accordingly, we will have two vacancies on our board of directors following the 2008 annual meeting. Our nominating and corporate governance committee intends to seek qualified candidates to fill the vacancies on our board of directors following the 2008 annual meeting.

 

At the 2008 annual meeting, stockholders will have an opportunity to vote for the five nominees for director listed below. The persons named in the enclosed proxy card will vote to elect these five nominees as directors, unless you withhold authority to vote for the election of any or all of these nominees by marking the proxy card to that effect. Each of the nominees has indicated his or her willingness to serve, if elected. However, if any of the nominees should be unable or unwilling to serve, the proxies may be voted for a substitute nominee designated by our board of directors, or our board of directors may reduce the number of directors.

 

Board Recommendation

 

The board of directors recommends a vote “FOR” the election of each of the director nominees.

 

Director Nominees

 

The following paragraphs provide information as of the date of this proxy statement about each director nominee. The information presented includes information about each such director, including his or her age, all positions and offices he or she holds with us, his or her length of service as a director, his or her principal occupation and employment for the past five years and the names of other publicly held companies of which he or she serves as a director. For information about the number of shares of common stock beneficially owned by our directors as of April 16, 2008, see “Stock Ownership Information.”

 

No director or executive officer is related by blood, marriage or adoption to any other director or executive officer. No arrangements or understandings exist between any director or person nominated for election as a director and any other person pursuant to which such person is to be selected as a director or nominee for election as a director.

 

Ryuji Ueno, M.D., Ph.D., Ph.D., age 54.  Dr. Ueno, who became a director in 1996, is a founder of our company and has been our chief executive officer since September 2006 and our chief scientific officer since August 2004. Dr. Ueno also became the chairman of our board of directors effective June 1, 2007 following the resignation of Dr. Kuno from that position. Dr. Ueno served as chairman of our board of directors from December 2000 to September 2006. He also served as chief operating officer from December 1996 to November 2000 and again from March 2006 to September 2006 and as chief executive officer from December 2000 to September 2003. Dr. Ueno co-founded our affiliate R-Tech in September 1989 and served as its President from 1989 to March 2003. Dr. Ueno also co-founded Sucampo AG in December 1997 and served as its chairman of the board or vice chairman of the board since its inception. Dr. Ueno received his M.D. and a Ph.D. in medical chemistry from Keio University in Japan, and he received a Ph.D. in Pharmacology from Osaka University.

 

Anthony C. Celeste, age 69.  Mr. Celeste became a director in October 2007. Mr. Celeste has served as senior vice president of regulatory affairs for Kendle International, Inc., an international clinical research organization, since 2001. Prior to that, he served as the president and chief executive officer of AAC Consulting Group, Inc., an independent FDA consulting firm, from 1986 until its acquisition by Kendle International in February 2001. Prior to joining AAC Consulting in 1985, Mr. Celeste served for 25 years with the U.S. Food and Drug Administration, most recently as director of the Office of Regional Operations. Mr. Celeste holds a B.S. in chemistry from Fordham University.

 

Timothy I. Maudlin, age 57.  Mr. Maudlin became a director in September 2006. From 1989 through 2007, Mr. Maudlin was a managing partner of Medical Innovation Partners, a venture capital firm. Mr. Maudlin is a director of Website Pros, Inc., a web services company. Mr. Maudlin served on the board of directors of Curative Health Services, Inc., a biopharmaceutical company, from 1984 until May 2006. Mr. Maudlin holds a B.A. from St. Olaf College and an M.M. from the Kellogg School of Management at Northwestern University.

 

V. Sue Molina, age 60.  Ms. Molina became a director in September 2006. From November 1997 until her retirement in May 2004, she was a tax partner at Deloitte & Touche LLP, an international accounting firm, serving from 2000 until May 2004 as the National Partner in Charge of Deloitte’s Initiative for the Retention and

Advancement of Women. Prior to that, she spent 20 years with Ernst & Young LLP, an international accounting firm, the last ten years as a partner. Ms. Molina serves as vice chair of the board of directors of Royal Neighbors of America, a fraternal insurance company. She is also a member of the board of directors of DTS, Inc., a digital entertainment technology company. She holds a B.S.B.A. and a Masters of Accounting degree from the University of Arizona.

 

John C. Wright, age 60.  Mr. Wright became a director in February 2008 and is a retired partner of Ernst & Young LLP, an international auditing firm. He was with Ernst & Young LLP from 1971 until 2000, most recently as an audit partner focusing on the technology sector. He was the executive vice president and chief financial officer of Quadramed Corporation, a software company, from July 2003 to September 2005. Prior to that, Mr. Wright served as a financial consultant from January 2003 to July 2003. Mr. Wright also serves on the board of directors of Watson Wyatt Worldwide, a global provider of human capital consulting services. Mr. Wright holds a B.S. in accounting from the University of North Carolina.

 

Executive Officers of the Registrant

 

Our executive officers and their respective ages and positions as of April 24, 2008 are as follows:

 

 

 

 

Ryuji Ueno, M.D., Ph.D., Ph.D.  For more information about Dr. Ueno, see “Proposal One — Election of Directors — Director Nominees.”

 

Mariam E. Morris.  Ms. Morris has been our chief financial officer and treasurer since January 2008 and served as our chief accounting officer and treasurer from January 2007 to December 2007. She became our secretary in April 2008. Ms. Morris served as our chief financial officer from March 2006 to December 2006 and as our director of finance from February 2004 to March 2006. From January 2003 to February 2004, she worked as an independent consultant for AuditWatch, Inc., a training and consultancy firm for the audit profession. Ms. Morris was a supervising auditor with the public accounting firm of Snyder, Cohn, Collyer, Hamilton & Associates, P.C. from November 2001 to December 2002. Ms. Morris also was a senior auditor with the public accounting firm of PricewaterhouseCoopers LLP from September 2000 to October 2001. Ms. Morris is a certified public accountant and holds a B.B.A. degree in Accounting from Texas Tech University and a Master’s degree in Taxation from Old Dominion University.

 

Brad E. Fackler.  Mr. Fackler has been our executive vice president of commercial operations since September 2005. From January 2005 to September 2005, Mr. Fackler was vice president of The Collaborative Group, a specialty consultancy firm servicing the pharmaceutical industry. From September 2004 until January 2005, he was self-employed. From 1978 to September 2004, Mr. Fackler was a senior sales executive for Novartis Pharmaceuticals Corporation. Mr. Fackler holds a Bachelors degree in Life Science from Otterbein College and an M.B.A. degree from New York University, Leonard Stern School of Business.

 

Gayle R. Dolecek, P.D.  Dr. Dolecek has been our senior vice president of research and development since May 2006. From August 1995 to April 2006, he was a senior consultant at AAC Consulting Group, Inc., a provider of regulatory consulting services to the pharmaceutical industry. Prior to 1995, Dr. Dolecek was an officer with the U.S. Public Health Service where he served in pharmacy and health service related positions. He completed his career with the government in the Food and Drug Administration as director of compendial operations in the Center

for Drug Evaluation and Research. Dr. Dolecek received his B.S./P.D. in Pharmacy from the University of Maryland and a M.P.H. in Health Services and Planning from the University of Hawaii.

 

Kei S. Tolliver.  Ms. Tolliver has been our vice president of business development and company operations since March 2006. She served as our secretary from March 2006 to April 2008. On March 31, 2008, Ms. Tolliver gave notice of her voluntary resignation from her positions with our company. Her resignation will be effective as of May 31, 2008. From October 2004 to March 2006, Ms. Tolliver was our director of business development. Since joining our company in May 1998, Ms. Tolliver has held a number of positions within the Sucampo group of affiliated companies, including director of business development for S&R Technology Holdings, LLC, a position she has held since May 2002, supplemental director for Sucampo AG, a position she has held since September 2004, director of Sucampo Pharma, Ltd., a position she has held since July 2004, and general manager and director of Sucampo Pharma Europe Ltd., a position she has held since January 2003. Ms. Tolliver holds a Bachelors degree in Political Science from West Virginia University.

 

CORPORATE GOVERNANCE

 

General

 

Our board of directors believes that good corporate governance is important to ensure that Sucampo is managed for the long-term benefit of our stockholders. This section describes key corporate governance guidelines and practices that our board has adopted. Complete copies of our corporate governance guidelines, committee charters and code of conduct are available on our website at www.sucampo.com under “For Investors — Corporate Governance.” Alternatively, you can request a copy of any of these documents by writing to Sucampo Pharmaceuticals, Inc., Attn: Investor Relations, 4520 East-West Highway, Suite 300, Bethesda, Maryland 20814.

 

Corporate Governance Guidelines

 

Our board of directors has adopted corporate governance guidelines to assist in the exercise of its duties and responsibilities and to serve the best interests of Sucampo and our stockholders. These guidelines, which outline a framework for the conduct of the board’s business, provide that:

 

 

Board Determination of Independence

 

Under applicable NASDAQ rules, a director will only qualify as an “independent director” if, in the opinion of our board of directors, that person does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 

The board of directors has determined that each of the current non-employee directors of our company (Messrs. Celeste, Jeffries, Maudlin, Mine and Wright and Ms. Molina), who collectively constitute a majority of the board of directors, and each of the persons nominated to become non-employee directors (Messrs. Celeste, Maudlin and Wright and Ms. Molina), who collectively would, upon election, constitute a majority of the board of directors,

is an independent director as defined in Rule 4200(a)(15) of the Marketplace Rules of The NASDAQ Stock Market, Inc. and that none of these directors has a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 

Board of Directors Meetings and Attendance

 

Our board of directors met 11 times during the year ended December 31, 2007, either in person or by teleconference. During 2007, each of our directors attended at least 75% of the aggregate of the number of board meetings held during the period for which he or she has been a director and the number of meetings held by all committees on which he or she then served.

 

Lead Director

 

Our corporate governance guidelines provide that in the event the chairman of our board of directors is not an independent director, a majority of the board’s independent directors may appoint an independent director, who has been nominated by the nominating and corporate governance committee, to serve as lead director. Because Dr. Ueno, the chairman of our board of directors, is not an independent director, our independent directors, based on the recommendation of the nominating and corporate governance committee, have appointed Michael J. Jeffries as the lead director. As lead director, Mr. Jeffries serves as the presiding director at all executive sessions of our non-management or independent directors, determines the need for special meetings of the board of directors and consults with Dr. Ueno on matters relating to corporate governance and board performance. Our independent directors may appoint a new lead director following the 2008 annual meeting as Mr. Jeffries is not standing for re-election.

 

Board Committees

 

Our board of directors has established three standing committees — audit, compensation, and nominating and corporate governance — each of which operates under a charter that has been approved by our board of directors. Current copies of each committee’s charter are available on our website at www.sucampo.com under “For Investors — Corporate Governance.” In light of the decision of Messrs. Jeffries and Mine not to stand for re-election at the 2008 annual meeting, our board of directors intends to reconstitute the membership of each of its committees following the 2008 annual meeting so that each committee will be composed solely of members who are independent within the meaning of Rule 4200(a)(15) of the Marketplace Rules of The NASDAQ Stock Market, Inc. and will satisfy the other requirements for committee composition imposed by NASDAQ and the Securities and Exchange Commission.

 

The following table provides membership and meeting information for each of the board committees during 2007:

 

 

 

 

 

      X Member

 

Audit Committee

 

Our audit committee assists our board of directors in its oversight of the integrity of our financial statements, our independent registered public accounting firm’s qualifications and independence and the performance of our independent registered public accounting firm.

 

Our audit committee’s responsibilities, as set forth in the written charter adopted by our board of directors, include:

 

 

Our board has determined that each member of the audit committee qualifies as an independent director under the applicable NASDAQ rules and the applicable rules and regulations of the Securities Exchange Commission. Our board has also determined that each member of the audit committee is “financially literate” under the applicable NASDAQ rules and that Mr. Jeffries qualifies as an “audit committee financial expert” under Securities and Exchange Commission rules by virtue of the experience described above. Our independent directors will designate a member of the audit committee as the financial expert following the 2008 annual meeting as Mr. Jeffries is not standing for re-election.

 

Compensation Committee

 

Our compensation committee assists our board of directors in the discharge of its responsibilities relating to the compensation of our executive officers.

 

Our compensation committee’s responsibilities, as set forth in the written charter adopted by the board of directors, include:

 

 

 

Our board has determined that each member of our compensation committee qualifies as an independent director under the applicable NASDAQ rules.

 

Nominating and Corporate Governance Committee

 

Our nominating and corporate governance committee’s responsibilities, as set forth in the written charter adopted by the board of directors, include:

 

 

Our board has determined that each member of our nominating and corporate governance committee qualifies as an independent director under the applicable NASDAQ rules.

 

Executive and Director Compensation Process

 

Our compensation committee has implemented an annual review program for our executives pursuant to which the committee determines annual salary increases, annual cash bonus amounts and annual stock option awards granted to our executives. Our chief executive officer and our director of human resources prepare compensation recommendations regarding the compensation of each of our executive officers, other than our chief executive officer, and present these recommendations to our compensation committee for approval. Our compensation committee reviews and approves corporate goals and objectives relevant to the compensation of our chief executive officer, evaluates the chief executive officer’s performance in light of these goals and objectives and determines and approves the compensation of the chief executive officer based on this evaluation.

 

Our board of directors has delegated to our chief executive officer the authority to grant stock options to employees under our 2006 Stock Incentive Plan. Our chief executive officer is not authorized to grant options to himself or to any other director or executive officer. In addition, in any one calendar year, the chief executive officer is not authorized to grant options with respect to more than 100,000 shares of class A common stock or to grant to any person options with respect to more than 10,000 shares of class A common stock.

 

Our compensation committee has the authority to retain compensation consultants and other outside advisors to assist in the evaluation of executive officer compensation. During 2007, our compensation committee retained Towers Perrin as an outside consultant to advise our compensation committee on market compensation practices and the implementation of public company compensation programs and policies and to review recommendations from management on compensation matters. More information about the process followed and decisions made by our compensation committee regarding executive compensation are included under the heading “Compensation Discussion and Analysis.”

 

Our board of directors as a whole determines the compensation to be paid to board members.

 

Director Nomination Process

 

The process followed by our nominating and corporate governance committee to identify and evaluate director candidates includes requests to members of our board of directors and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of our nominating and corporate governance committee and our board of directors.

In considering whether to recommend any particular candidate for inclusion in the board of director’s slate of recommended director nominees, our nominating and corporate governance committee considers the candidate’s integrity, business acumen, commitment to understand our business and industry, experience, conflicts of interest and the ability to act in the interests of all stockholders. Our nominating and corporate governance committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee. Our board of directors believes that the backgrounds and qualifications of its directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow it to fulfill its responsibilities.

 

Stockholders may recommend individuals to our nominating and corporate governance committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of any class of our common stock for at least a year as of the date such recommendation is made, to Nominating and Corporate Governance Committee, c/o Sucampo Pharmaceuticals, Inc., 4520 East-West Highway, Suite 300, Bethesda, Maryland 20814. Assuming that appropriate biographical and background material has been provided on a timely basis, our nominating and corporate governance committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. Stockholders also have the right under our by-laws to directly nominate director candidates, without any action or recommendation on the part of the nominating and corporate governance committee or the board of directors, by following the procedures set forth under “Stockholder Proposals.”

 

Communicating with the Independent Directors

 

Our board of directors will give appropriate attention to written communications that are submitted by stockholders and other interested parties, and will respond if and as appropriate. The lead director or, if there is no lead director, the chairman of the board of directors is primarily responsible for monitoring communications from stockholders and for providing copies or summaries to the other directors as he or she considers appropriate.

 

Stockholders who wish to send communications on any topic to our board of directors should address such communications to Board of Directors, c/o Corporate Secretary, Sucampo Pharmaceuticals, Inc., 4520 East-West Highway, Suite 300, Bethesda, Maryland 20814.

 

Audit Committee Report

 

Among other responsibilities of the audit committee, as stated in its charter, the audit committee evaluates auditor performance, manages relations with our independent public accountants and evaluates policies and procedures relating to internal control systems. The members’ functions are not intended to duplicate or to certify the activities of management and the independent public accountants. The audit committee serves as a board level oversight role in which we provide advice, counsel and direction to management and the independent public accountants on the basis of the information we receive, discussions with management and the independent public accountants, and our experience in business, financial and accounting matters.

 

The audit committee has reviewed our audited financial statements for the year ended December 31, 2007 and discussed them with our management and our independent registered public accounting firm.

 

The audit committee also has received from, and discussed with, our independent registered public accounting firm various communications that our independent registered public accounting firm is required to provide to the audit committee, including the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.

 

The audit committee has received the written disclosures and the letter from our independent registered public accounting firm required by Independence Standards Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees), as adopted by the Public Company Accounting

Oversight Board in Rule 3600T, and has discussed with our independent registered public accounting firm their independence.

 

In addition to the matters specified above, the audit committee discussed with our independent public accountants the overall scope, plans and estimated costs of their audit. The audit committee met with our independent public accountants periodically, with and without management present, to discuss the results of the independent auditors’ examinations, the overall quality of the company’s financial reporting and the independent public accountant’s reviews of the quarterly financial statements and draft of the quarterly and annual reports.

 

Based on the review and discussions referred to above, the audit committee recommended to our board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2007.

 

By the Audit Committee of the Board of Directors of

Sucampo Pharmaceuticals, Inc.

 

Michael J. Jeffries, Chair

Timothy I. Maudlin

V. Sue Molina

John C. Wright

 

RELATED PARTY TRANSACTIONS

 

Sucampo AG License Agreements

 

Pursuant to our license agreements with Sucampo AG, we have made a number of payments to Sucampo AG since the beginning of 2007. Sucampo AG is wholly owned by Dr. Ueno, a significant stockholder of our company and our chairman of the board, chief executive officer and chief scientific officer, and his wife, Dr. Sachiko Kuno. Dr. Kuno is a significant stockholder of our company and was also a director and executive officer of our company until June 2007. Dr. Kuno currently serves as our advisor, international business development.

 

As required by our license agreements, we made the following payments to Sucampo AG since January 1, 2007:

 

 

In March 2008, we recorded an expense of $1.0 million resulting from our submission of a regulatory filing in the United Kingdom and other European countries seeking marketing approval for AMITIZA for the treatment of chronic idiopathic constipation and we plan to make this payment during the second quarter of 2008.

 

We expect to continue to make payments to Sucampo AG, pursuant to our license agreements, for 2008 and thereafter in the regular course of business.

 

R-Tech Ueno, Ltd

 

Pursuant to our exclusive supply agreements with R-Tech Ueno, or R-Tech, an affiliate, R-Tech provides us with clinical supplies of all prostones under development. Since January 1, 2007, we have purchased from R-Tech

approximately $4.3 million of clinical supplies under the terms of these agreements. Drs. Ueno and Kuno directly and indirectly own a majority of the capital stock of R-Tech.

 

We expect to continue to make payments to R-Tech, pursuant to our exclusive supply agreements, for 2008 and thereafter in the regular course of business.

 

Part-Time Employment Agreement with Dr. Kuno

 

Following Dr. Kuno’s resignation as an executive officer and director of our company effective May 31, 2007, we entered into an employment agreement with her effective June 1, 2007. This new agreement superseded her previous employment agreement. Pursuant to the new employment agreement, we agreed to employ Dr. Kuno on a part-time basis as our advisor, international business development, with the additional titles of founding chief executive officer and co-founder, for a term of one year. This agreement renews automatically each year for a period of one year unless earlier terminated by Dr. Kuno or us. This agreement provides that Dr. Kuno will work eight hours per week. Under this agreement, Dr. Kuno is entitled to receive an annual base salary of $76,000, to be reviewed annually by our compensation committee and our board of directors and increased, but not decreased unless agreed by Dr. Kuno and us. Dr. Kuno is also eligible for an annual bonus, targeted at 50% of her base salary, as determined by our compensation committee in its discretion based on its assessment of Dr. Kuno’s achievement of annual objectives. As a part-time employee, Dr. Kuno is not eligible to participate in employee benefit plans, but we have agreed to reimburse her for parking expenses. Under this agreement, Dr. Kuno has assigned to us all inventions conceived or reduced to practice during the term of her employment that make use of confidential information or trade secrets or which relate to our actual or anticipated research and development. Dr. Kuno has also agreed not to compete with our company for a period of 12 months following termination of her employment.

 

Special Stock and Cash Awards to Drs. Kuno and Ueno

 

On June 19, 2007, the compensation committee of our board of directors authorized a one-time stock and cash award to each of Drs. Kuno and Ueno. These awards are discussed in more detail under the caption “Compensation Discussion and Analysis.”

 

Policies and Procedures for Related Person Transactions

 

Our board of directors has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which Sucampo is a participant, the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or holders of 5% or more of either class of our common stock, or the immediate family members of any of the foregoing, each of whom we refer to as a related person, has a direct or indirect material interest.

 

If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a related person transaction, the related person must report the proposed related person transaction to our chief financial officer. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by our audit committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, our audit committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chairman of our audit committee to review and, if deemed appropriate, approve proposed related person transactions that arise between audit committee meetings, subject to ratification by our audit committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.

 

A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by our audit committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, our audit committee will review and consider:

 

 

 

Our audit committee may approve or ratify the transaction only if the audit committee determines that, under all of the circumstances, the transaction is consistent with our best interests. Our audit committee may impose any conditions on the related person transaction that it deems appropriate.

 

In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, our board of directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:

 

 

INFORMATION ABOUT EXECUTIVE AND DIRECTOR COMPENSATION

 

Compensation Discussion and Analysis

 

Overview

 

In August 2007, we completed our initial public offering and became a publicly traded company. Our compensation committee spent considerable time and effort throughout 2007 conducting a comprehensive review of our executive compensation practices, including our overall compensation philosophy, the appropriate elements of executive compensation and the allocation of compensation among those elements, our overall compensation levels and the structure of our incentive compensation. In addition, the compensation committee reviewed a comparison of our compensation program to that of similar companies and assessed our procedures for designing, approving and evaluating the compensation program. Our compensation committee determined that we needed more formal compensation structures than we had as a private, closely held company and that those structures should be built on solid compensation principles and provide clearer guidelines for compensation, including executive compensation.

 

As part of this review, our compensation committee engaged Towers Perrin, an independent executive compensation consulting firm, to study our executive compensation program, to conduct benchmarking of our compensation levels as compared to other similar companies and to make recommendations regarding our executive compensation program. Our compensation committee also worked closely with our director of human resources and Dr. Ueno, our chief executive officer, in this project. Towers Perrin delivered its report to the committee in June 2007.

Based on the Towers Perrin report and other benchmarking data prepared by our director of human resources, our compensation committee concluded that, in general, the overall level of compensation for our executive officers lagged somewhat behind that of other companies the committee felt to be comparable to our company. Our compensation committee also concluded that the portion of overall compensation we provide in the form of equity was generally lower than in comparable companies.

 

Our compensation committee determined that overall executive compensation levels should generally fall within a range centered on the 50^th percentile, or median, of compensation paid by comparable companies to ensure that we can attract and retain talented, high-potential individuals for our executive level positions. At the same time, the compensation committee acknowledged the management philosophy of Dr. Ueno, discussed in more detail below, that it is appropriate for our company in some cases to compensate executives below median levels or even below the relevant range because we are willing to hire or promote individuals who may have less experience than those in similar positions in other companies, but who demonstrate great potential and possess unique talents that will allow them to grow and develop in their roles. Finally, it was the view of our compensation committee that, in those cases where overall compensation levels for a particular executive were below the appropriate levels, the compensation should be increased incrementally over time to bring his or her compensation closer to the median as the executive progresses and develops in his or her role.

 

With these considerations in mind, our compensation committee took the following actions during the course of 2007 to improve our executive compensation program and to begin to bring overall compensation levels more in line with industry medians:

 

 

We expect our executive compensation program will continue to evolve in 2008 and over the coming years.

 

Compensation Philosophy

 

The primary goal of our executive compensation program has been to provide compensation levels sufficient to retain our existing executives and, when necessary, to attract new executives. A further goal of our executive compensation program is to reward, on an annual basis, individual performance that promotes the success of our company and to provide longer-term incentives that align the financial interests of our executives with the long-term performance of our company.

 

Our compensation philosophy also reflects the view that compensation should not be the only incentive for joining our company. Dr. Ueno believes that Sucampo provides a unique work environment where people are afforded significant opportunities to learn and develop, to make significant contributions to the business and to see the impact they have on the outcomes and results of the company. Historically, Dr. Ueno’s philosophy has also been to hire individuals who have the potential and ability to add value to our company, but may not necessarily have the level of experience and background that others in similar positions in the industry might have. This gives our employees the opportunity to develop and grow into their positions.

 

Compensation Benchmarking

 

As a general rule, we target our total executive compensation levels at a range centered on the median of the compensation levels at a peer group of comparable companies, which include both small and medium-sized specialty pharmaceutical companies and biotechnology companies. As a part of its overall evaluation of our executive compensation program, the compensation committee reviewed compensation data from a peer group of comparable companies. In developing this peer group, we and Towers Perrin sought companies in our industry with

similar revenue and market capitalization, employee size, research and development expense levels and life cycle stage. The peer group consisted of Progenics Pharmaceuticals, Inc., Indevus Pharmaceuticals, Inc., CollaGenex Pharmaceuticals, Inc., Salix Pharmaceuticals, Ltd., Savient Pharmaceuticals, Inc., GenVec, Inc., Idenix Pharmaceuticals, Inc., Intermune, Inc., United Therapeutics Corporation, ViroPharma Incorporated, Digene Corporation and Critical Therapeutics, Inc. Towers Perrin then reviewed proxy data regarding executive compensation of the comparable companies and subsequently made recommendations to the compensation committee regarding executive compensation. In addition to considering the compensation benchmarks from peer companies through the Towers Perrin study, we also considered the executive compensation data provided in the 2007 Radford Life Sciences Survey. We also compared recommendations from Towers Perrin with the Radford survey data and, because they were very similar, averages of the data were prepared by our director of human resources and presented to the compensation committee for their consideration.

 

The Elements of our Executive Compensation Program

 

The key elements of our 2007 executive compensation program were:

 

 

We believe that each of these elements, and all the elements together, must be competitive in order to meet our primary goal of retaining our executives and, when necessary, attracting new executives. Potential employees and existing employees will compare the overall compensation package available at our company to the overall compensation packages offered by other potential employers as they decide whether to join us in the first place and whether to stay with us after they do join. Accordingly, we have attempted to maintain our overall compensation packages at levels sufficient to retain our current executives and attract new ones.

 

We provide a portion of our executive compensation in the form of incentive compensation that rewards executives for both short-term and long-term contributions. Short-term incentive compensation has historically taken the form of eligibility for annual cash bonus payments. Long-term incentives have historically taken the form of eligibility for stock option grants, which are designed to reward executives for, and align their financial interests with, the longer term success of our company as reflected in appreciation of our stock value.

 

We have not adopted any formal or informal policy for allocating compensation between long-term and short-term compensation, between cash and non-cash compensation or among the different forms of non-cash compensation. We view each of the elements of our compensation program as related but distinct. Our decisions about each individual element do not necessarily affect the decisions we make about other elements. For example, we do not believe that significant compensation derived from one element of compensation, such as equity awards, should necessarily negate or reduce compensation from other elements.

 

Dr. Ueno, our chief executive officer, is a founder of our company and holds a significant majority of our common stock. Our compensation committee does not hold the view, however, that Dr. Ueno should be ineligible for further equity based incentives; rather, the compensation committee believes that stock options are a valuable tool for incentivizing Dr. Ueno and aligning his performance with the overall goals and objectives of our company.

 

2007 Base Salary Levels

 

In the second half of 2007, the compensation committee assessed the base salary levels of all our employees, including our senior executives, in relation to the compensation study completed by Towers Perrin and additional information provided by our director of human resources. In response, the compensation committee approved a formal salary structure for all positions across our company. Each position within our company was benchmarked against the most analogous position at comparable companies, taking into account the level and breadth of responsibility inherent in the position. Each position was then assigned to one of several salary grade levels and, based on benchmarking against the comparable companies, each level was assigned a minimum, midpoint, and

maximum base salary amount and a target bonus as a percentage of base salary. In general, the compensation committee targeted the midpoint of each salary grade level at the median level for similar positions in the peer group companies.

 

The positions held by our executive officers, other than the chief executive officer, were assigned to base salary grade levels as follows:

 

 

The compensation committee, with the input of Dr. Ueno, then determined where within the applicable base salary grade level the base salary for each executive should fall. These determinations were based principally on an assessment of the experience the executive brings to the role and his or her past performance and contributions to Sucampo.

 

As a result, in October 2007, the compensation committee increased base salaries for some of our executives as reflected in the table below:

 

 

The compensation committee made these salary increases retroactive to June 2007 because we had not increased executive salaries since the first half of 2006, in part because we were awaiting the results of the Towers Perrin study. The compensation committee believed it would be appropriate under these circumstances to make the increases retroactive.

 

In the case of Ms. Morris and Dr. Dolecek, these new base salary levels were near the minimum for their salary range. In the case of Ms. Tolliver, the new base salary level was below the minimum, but represented a significant increase from her existing salary and reflected the view of the compensation committee that her salary should continue to move towards the minimum assuming her continued strong performance and the expansion of her responsibilities would be consistent with someone performing her role in comparable companies.

 

In January 2008, Ms. Morris became our chief financial officer, which is a Level 13 position, and her base salary was increased to $220,000.

 

The compensation committee also reviewed Dr. Ueno’s salary in October 2007 and raised it as shown below retroactive to June 2007.

 

 

Although this new salary was higher than the median base salary of $440,000 for chief executive officers in the peer group companies, the compensation committee considered several other factors in making this decision. Throughout 2007, Dr. Ueno was serving in multiple roles, not only as our chief executive officer, but also as our medical director and our chief scientific officer. Following the resignation of Dr. Kuno as our president on May, 31 2007, Dr. Ueno assumed significant additional responsibilities that had previously been held by Dr. Kuno. The compensation committee believed that, because of the multiple roles and responsibilities assumed by Dr. Ueno, he should be compensated more highly than the median salary of other chief executive officers in similar companies.

2007 Annual Cash Incentive Bonus Program

 

In June 2007, the compensation committee established our annual cash incentive bonus program for 2007. This program was designed to align efforts throughout our company with overall company goals and objectives and to reward individual performance.

 

For each executive, a target bonus amount was established equal to a percentage of his or her base salary, which was 50% for Dr. Ueno and 25% for each of the other executives. In each case, 70% of the target bonus would be based on the achievement of company-wide corporate performance goals for 2007, which are the same for all executives, and 30% would be based on an assessment of each executive’s individual performance for the year. The maximum bonus to which each executive would be entitled was 150% of the target bonus amount. The bonuses were to be paid in 2008 following the determination by our compensation committee as to whether we had achieved our company goals and its assessment of individual executive performance for the year.

 

As part of this process, the compensation committee approved five corporate goals, which would be used to measure whether the executives would be entitled to bonuses based on corporate performance, the weighting of each of these five goals and goal achievement levels to measure the realization of these goals. The compensation committee did not establish individual performance goals for the executives. Instead, the compensation committee determined individual performance following the end of the year, using its discretion, and in consultation with Dr. Ueno in all cases but his own.

 

The following tables summarize our 2007 cash incentive bonus program, the corporate goals established by the committee and the amount of bonuses actually paid in 2008 with respect to 2007 performance.

 

Overall Plan

 

 

Corporate Performance Goals for 2007

 

The compensation committee determined that we exceeded expectations for goal number 1 by completing the initial public offering one month before the target date, resulting in a payout of 110.0%. The compensation committee also determined, notwithstanding that goal number 2 with respect to net revenues for AMITIZA was not met, that half of the bonus attributable to that goal should nonetheless be awarded. This decision was made at the recommendation of Dr. Ueno and reflected the view that achievement of the goal was not entirely within the control of our executives since most of the sales activities for AMITIZA are conducted by the sales force of Takeda Pharmaceuticals. The compensation committee also considered Dr. Ueno’s report that our internal sales force, which is focused on the sales to long-term care facilities and medical institutions, had outperformed its goals for the year. As a result of this decision, an additional 12.5% was added to the 77.0% derived from the performance of our company against the goals described in the table above. The result was a factor of 89.5% for corporate performance.

 

2007 Incentive Bonus Payouts

 

 

The compensation committee also granted a discretionary bonus of $40,000 to Dr. Kuno, our former president and chair of our board, for her services in 2007. In determining the amount of this bonus, the committee considered Dr. Kuno’s accomplishments throughout the year, including her work during the period when she served as an executive officer and her efforts since that time as a part-time employee focused on international business development.

 

Equity Incentives

 

Historically, we have awarded a limited number of stock options and other equity awards. As a result, we believe the equity incentive portion of our executive compensation package is relatively small compared to other companies in our peer group.

 

In December 2007, our compensation committee approved a grant of incentive stock options to several employees, including all of our executives. These option awards reflected a determination by the compensation committee to bring total compensation and the proportion of overall compensation taking the form of equity in closer alignment with the practices of other comparable companies. The number of options to be granted to each employee was proposed by Dr. Ueno and was based on a variety of factors, including his view of the importance of each individual’s role, the individual’s historic performance and the number of options the individual already held. Although the overall level of these grants was below that seen in most of our peer group as shown in the Towers Perrin study, our compensation committee acknowledged the views of Dr. Ueno regarding appropriate equity grant levels and determined that an incremental approach to increasing equity compensation levels over time is desirable. Our compensation committee also began to discuss with Dr. Ueno alternative equity compensation arrangements, such as restricted stock, that might be used in the future and result in a lower level of dilution to our stockholders.

 

In October 2007, our compensation committee approved an amendment to Dr. Ueno’s employment agreement. This amendment removed the provision contained in the agreement that prohibited Dr. Ueno from receiving stock options and other equity awards from our company as long as he and Dr. Kuno, his wife, continue to own

collectively at least 50% of the class A common stock and class B common stock. This amendment reflected the view of the compensation committee that additional equity awards could be an effective method of incentivizing Dr. Ueno and aligning his performance with the overall goals and objectives of our company.

 

We currently do not have any equity ownership guidelines for our executive officers.

 

Employee Benefits

 

Each executive has the opportunity to participate in our 401(k) plan, which provides a 50% match on every dollar contributed by any participating employee up to 10% of his or her compensation or up to the maximum contribution allowed by law in 2007. In addition, every executive has the opportunity to select insurance coverage at the same cost as every other employee, including health and life insurance. We pay the premiums for the life insurance benefit for each executive and 70% of the premiums for the health insurance benefit. We also pay for parking at our headquarters facility for each of our executives.

 

Prior to the change in Dr. Kuno’s employment status in June 2007, her employment agreement required us to provide her with additional life insurance, for which the premium in 2007 was $24,750. Effective May 29, 2008, this policy will be transferred to Dr. Kuno and Sucampo will no longer provide additional life insurance to her.

 

Severance and Change of Control Benefits

 

Pursuant to employment agreements with our named executive officers, each is entitled to specified benefits in the event of a change of control of our company or the termination of the employment of the executive under specified circumstances. In October 2007, our compensation committee approved amendments to the employment agreements between our company and Dr. Dolecek, Mr. Fackler, Ms. Morris and Ms. Tolliver. These amendments increased from two months to six months the amount of base salary the executive will receive as severance, in a lump sum payment, in the event his or her employment is terminated by us without cause or upon the disability of the executive or in the event the executive terminates his or her employment for specified good reasons, as well as the period over which the executive will be entitled to receive reimbursement for the cost of continued health insurance coverage after termination. In addition, these amendments increased from four months to twelve months the amount of base salary the executive will receive as severance, in a lump sum payment, in the event his or her employment is terminated without cause within 18 months of a change of control of our company. These amendments were intended by our compensation committee to bring the severance package for the executives more in line with the market data provided by Towers Perrin.

 

We have provided estimates of the value of these severance and change of control benefits under various circumstances under “Potential Payments upon Termination or Change of Control” below.

 

Special One-Time Awards to Founders

 

On June 19, 2007, our compensation committee authorized a one-time stock and cash award to each of Drs. Kuno and Ueno. Dr. Kuno was our president and chairman of the board of directors through May 2007, when she resigned as an executive and director of our company. These awards were settled immediately following our initial public offering in August 2007. These awards were intended by our compensation committee to compensate Drs. Kuno and Ueno for the lost value of stock options that had been granted to them in 2001 and 2002 and had been understood by them to have ten-year terms, but which had expired in 2006 and early 2007 as a result of the provisions of our 2001 Stock Incentive Plan. The expired options would have entitled Dr. Kuno to purchase 144,500 shares of class A common stock at a price of $0.21 per share and 42,500 shares at a price of $2.95 per share and they would have entitled Dr. Ueno to purchase 433,500 shares of class A common stock at a price of $0.21 per share and 93,500 shares at a price of $2.95 per share.

 

These stock and cash awards had an aggregate value equal to the difference between the value of the shares that could have been purchased under each of the expired options, determined on the basis of the public offering price of $11.50 per share in our initial public offering, and the respective aggregate exercise prices for such shares as provided in the original option agreements. The aggregate value of these grants was $2.4 million for Dr. Kuno and $6.8 million for Dr. Ueno.

These awards consisted of a combination of cash and shares of class A common stock. Of the aggregate value of each award, 40% was paid in cash and 60% was paid in stock. Dr. Kuno received 104,074 shares and $798,000 in cash and Dr. Ueno received 297,059 shares and $2.3 million in cash. The awards were fully vested upon their grant.

 

Severance Arrangements with Our Former Chief Financial Officer

 

In December 2007, our compensation committee approved a number of agreements with Mr. Kaiser, at the time our chief financial officer, in connection with his planned departure as of December 31, 2007. These agreements included:

 

 

2008 Base Salary Levels

 

In February 2008, our compensation committee approved salary increases (effective March 10, 2008) for 2008 for our executives as reflected in the table below:

 

 

 

 

Executive Compensation

 

Summary Compensation

 

The following table sets forth the total compensation earned for the years ended December 31, 2007 and 2006 by our chief executive officer, our former chief executive officer, our chief financial officer and our three other most

highly compensated executive officers for the year ended December 31, 2007. We refer to these officers as our named executive officers.

 

Summary Compensation Table

 

 

 

 

 

Information Regarding Option Grants and Other Plan-Based Awards

 

The following table sets forth additional information regarding the plan-based awards we granted to our named executive officers in the year ended December 31, 2007.

 

2007 Grants of Plan-Based Awards

 

 

 

 

Outstanding Equity Awards; Option Exercises and Stock Vesting

 

The following table sets forth information regarding outstanding stock options held by our named executive officers as of December 31, 2007. All of these options were granted under our 2001 Stock Incentive Plan or 2006 Stock Incentive Plan. Our named executive officers did not hold restricted stock or other stock awards at the end of 2007. Our named executive officers did not exercise any options in 2007 and they did not have any stock awards that vested in 2007.

 

Outstanding Equity Awards at 2007 Fiscal Year-End

 

 

 

 

Potential Payments upon Termination or Change of Control

 

Our named executive officers are entitled to specified benefits in the event of the sale or merger of our company or the termination of their employment under some circumstances. Dr. Kuno and Mr. Kaiser are no longer entitled to these benefits as a result of their resignations as executive officers of our company in 2007. These benefits as of December 31, 2007 are:

 

 

 

The payment of severance benefits to an executive is, in all cases, conditioned upon our receipt of a release of claims from the executive.

 

Potential Benefits upon Sale of our Company or Executive’s Death.  The following table sets forth an estimate of the benefits that our named executive officers would be entitled to receive assuming that our company was acquired, was the non-surviving party in a merger or sold all or substantially all of its assets, or upon the death of the executive, in each case assuming that the applicable triggering event occurred as of December 31, 2007.

 

 

 

 

Potential Benefits upon Termination Without Cause, Upon Disability or With Good Reason.  The following table sets forth an estimate of the benefits that would have accrued to each of our named executive officers assuming that we had terminated the executive’s employment without cause, other than within 18 months after a change of control as discussed in the following table, or upon the disability of the executive, or the executive terminated his or her employment with good reason, in each case assuming that the applicable triggering event occurred as of December 31, 2007.

 

 

 

 

 

Potential Benefits upon Termination Without Cause Following a Change of Control.  The following table sets forth an estimate of the benefits that would have accrued to each of our named executive officers assuming that we, or a successor to our company, had terminated the executive’s employment without cause as of December 31, 2007 and that such termination had occurred within 18 months after a prior change of control of our company.

 

 

 

 

Board of Directors Compensation

 

In 2007, we paid each of our directors who is not an employee of, or a spouse of an employee of, our company, whom we refer to as our non-employee directors, an annual retainer of $60,000 for service as a director. Each non-employee director also received a fee of $1,000 for each meeting of the full board of directors or any committee of the board of directors attended by such non-employee director. We reimbursed each non-employee member of our board of directors for out-of-pocket expenses incurred in connection with attending our board and committee meetings. We also paid an annual retainer of $5,000 to the chair of the audit committee, $3,000 to the chairs of each of the compensation committee and the nominating and corporate governance committee and $10,000 to the lead independent director. In establishing the levels of cash compensation included in our 2007 director compensation program, our board of directors took into consideration the absence of any equity element of that program and the amount of time commitment necessary to serve as a director of a public company.

 

The following table sets forth information regarding the compensation of our directors in the year ended December 31, 2007. Our named executive officers who also served as directors (Dr. Ueno and Dr. Kuno in 2007) are

not included in this table because they were not separately compensated for their service as directors. Our directors received compensation only in the form of cash fees and held no stock options or other stock awards at year end.

 

2007 Director Compensation

 

 

 

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

The following table sets forth information as of December 31, 2007 regarding securities authorized for issuance under our equity compensation plans, consisting of our 2001 Stock Incentive Plan and 2006 Stock Incentive Plan and our 2006 Employee Stock Purchase Plan. All of our equity compensation plans were adopted with the approval of our stockholders.

 

Equity Compensation Plan Information

 

 

Compensation Committee Interlocks and Insider Participation

 

During 2007, the members of our compensation committee were Ms. Molina, Mr. Celeste and Mr. Jeffries. No member of our compensation committee was at any time during 2007, or formerly, an officer or employee of Sucampo or any subsidiary of Sucampo, and no member of our compensation committee had any relationship with Sucampo during 2007 requiring disclosure under Item 404 of Regulation S-K.

During 2007, none of our executive officers served as a member of our board of directors or compensation committee, or other committee serving an equivalent function, of any other entity that has one or more executive officers who serve as a member of our board of directors or compensation committee.

 

Compensation Committee Report

 

Our compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on this review and discussion, the compensation committee has recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

By the Compensation Committee of the Board of Directors of Sucampo Pharmaceuticals, Inc.

 

V. Sue Molina, Chair

Anthony C. Celeste

Michael J. Jeffries

 

PROPOSAL TWO — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Our audit committee has selected PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008.

 

Although stockholder approval of the selection of PricewaterhouseCoopers LLP is not required by law, our board of directors and audit committee believe that it is advisable to give stockholders an opportunity to ratify this selection. If this proposal is not approved at the annual meeting, our board of directors will reconsider its selection of PricewaterhouseCoopers LLP.

 

PricewaterhouseCoopers LLP also served as our independent registered public accounting firm for the year ended December 31, 2007. Representatives of PricewaterhouseCoopers LLP are expected to be present at the annual meeting and will have the opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions from our stockholders.

 

Independent Registered Public Accounting Firm’s Fees

 

The following table summarizes the fees of PricewaterhouseCoopers LLP, our independent registered public accounting firm, incurred for each of the last two fiscal years for audit and other services.

 

 

 

 

Pre-Approval Policy and Procedures

 

Our audit committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. This policy generally provides that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the audit committee.

 

Board Recommendation

 

The board of directors recommends a vote “FOR” the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008.

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, directors and the holders of more than 10% of our common stock to file with the SEC initial reports of ownership of our common stock and other equity securities on a Form 3 and reports of changes in such ownership on a Form 4 or Form 5. Officers, directors and 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely upon a review of the copies of such forms furnished to us for the year ended December 31, 2007, and the information provided to us by those persons required to file such reports, no such person failed to file the forms required by Section 16(a) of the Exchange Act on a timely basis, except as disclosed in this paragraph. Anthony C. Celeste filed a Form 3 reflecting his initial election to the board of directors two days after its due date of October 28, 2007. Each of Ryuji Ueno, Ronald W. Kaiser, Mariam E. Morris, Brad E. Fackler, Gayle R. Dolecek and Kei S. Tolliver filed a Form 4 reflecting a stock option grant six days after its due date of December 13, 2007.

 

OTHER MATTERS

 

Our board of directors has no knowledge of any other matters which may come before the meeting. However, if any other matters are properly presented to the meeting, it is the intention of the persons named in the accompanying proxy to vote, or otherwise act, in accordance with their judgment on those matters.

 

SOLICITATION OF PROXIES

 

We are conducting the solicitation of proxies, and the cost of solicitation will be borne by Sucampo. In addition to the solicitation of proxies by mail, officers and employees of Sucampo may solicit proxies in person, by telephone, facsimile or mail. We will reimburse brokers, banks or other custodians or nominees for their expenses in sending proxies and proxy materials to beneficial owners.

 

REVOCATION OF PROXY

 

Subject to the terms and conditions set forth in this proxy statement, all proxies received by us will be effective, notwithstanding any transfer of the shares to which those proxies relate, unless prior to the closing of the polls at the annual meeting, we receive a written notice of revocation signed by the person who, as of the record date, was the

registered holder of those shares. The notice of revocation must indicate the certificate number and numbers of shares to which the revocation relates and the aggregate number of shares represented by the certificate(s).

 

STOCKHOLDER PROPOSALS

 

In order to be included in proxy material for our 2009 annual meeting of stockholders, stockholders’ proposed resolutions must be received by us at our principal executive offices, Sucampo Pharmaceuticals, Inc., Attn: Corporate Secretary, 4520 East-West Highway, Suite 300, Bethesda, Maryland 20814 no later than December 28, 2008. We suggest that proponents submit their proposals by certified mail, return receipt requested, addressed to our Corporate Secretary.

 

Our by-laws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders, including proposed nominations of persons for election to the board of directors. Following the second anniversary of the completion of our initial public offering, stockholders at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the board of directors or by a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has delivered timely notice in proper form to our corporate secretary of the stockholder’s intention to bring such business before the meeting. The required notice must be in writing and received by our corporate secretary at our principal offices not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, in the event that the date of the annual meeting is advanced by more than 20 days, or delayed by more than 60 days, from the first anniversary of the preceding year’s annual meeting, a stockholder’s notice must be so received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (A) the 90th day prior to such annual meeting and (B) the tenth day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs.

 

By Order of the Board of Directors,

 

 

Mariam E. Morris

Corporate Secretary

 

Bethesda, Maryland

April 25, 2008

 

OUR BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO VOTE YOUR PROXY AS SOON AS POSSIBLE. A PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK IN PERSON EVEN THOUGH THEY HAVE SENT IN THEIR PROXY CARDS.

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PROXY

SUCAMPO PHARMACEUTICALS, INC.

Notice of 2008 Annual Meeting of Stockholders - June 5, 2008

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF SUCAMPO PHARMACEUTICALS, INC.

		The undersigned revokes all previous proxies, acknowledges receipt of the Notice of the Annual Meeting of Stockholders to be held on June 5, 2008 and the Proxy Statement and appoints Mariam E. Morris and Brad E. Fackler and each of them, the attorneys and proxies of the undersigned, each with full power of substitution, to vote all the shares of class A common stock or class B common stock of Sucampo Pharmaceuticals, Inc., which the undersigned is entitled to vote, either on his or her own behalf or on behalf of any entity or entities, at the 2008 Annual Meeting of Stockholders to be held at the Hyatt Regency Bethesda, One Metro Center, 7400 Wisconsin Avenue, Bethesda, Maryland 20814, and at any adjournment or postponements thereof, with the same force and effect as the undersigned might or could do if personally present thereat. The shares represented by this proxy shall be voted in the manner set forth on the reverse side of this card.
		THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINEES LISTED ON THE REVERSE SIDE AND A VOTE FOR PROPOSAL 2. IF NO INSTRUCTION TO THE CONTRARY IS INDICATED, THIS PROXY WILL BE VOTED “FOR” PROPOSALS 1 and 2.

(Continued and to be signed on the reverse side)

ANNUAL MEETING OF STOCKHOLDERS OF

SUCAMPO PHARMACEUTICALS, INC.

Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.

â   Please detach along perforated line and mail in the envelope provided.  â

   n 20530000000000000000 7                                                                                     060508

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL THE NOMINEES LISTED AND “FOR” PROPOSAL 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ý

1. Election of Directors:

FOR

AGAINST

ABSTAIN

2.

Approve PricewaterhouseCoopers LLP as Sucampo Pharmaceuticals, Inc.’s Independent Registered Public Accounting Firm for the fiscal year ending December 31, 2008

o

o

o

NOMINEES:

o

FOR ALL NOMINEES

¡

Ryuji Ueno

¡

Anthony C. Celeste

In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any postponement or adjournment thereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.

o

WITHHOLD AUTHORITY FOR ALL NOMINEES

¡ ¡ ¡

Timothy I. Maudlin V. Sue Molina John C. Wright

o

FOR ALL EXCEPT (See instructions below)

INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: =

To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.

o

Signature of Stockholder

Date:

Signature of Stockholder

Date:

Note:		Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

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