SUPPLY AGREEMENT

Exhibit 10.23

SUPPLY AGREEMENT

     THIS SUPPLY AGREEMENT is made as of October 29, 2004, by and among Sucampo Pharmaceuticals, Inc., a Delaware corporation having its principal place of business at 4733 Bethesda Avenue, Suite 450, Bethesda, Maryland 20814 USA (“SPI”), Takeda Pharmaceutical Company Limited, a corporation organized under the laws of Japan having its principal place of business at 1-1, Doshomachi 4-chome, Chuo-ku, Osaka 540-8645, JAPAN (“Takeda”) and R-Tech Ueno, Ltd., a corporation organized under the laws of Japan having its principal place of business at 10F, Yamato Life Insurance Bldg., 1-1-7 Uchisaiwaicho, Chiyoda-ku, Tokyo 100-0011, JAPAN (“RTU”) (this “Agreement”). SPI, Takeda and RTU are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

Recitals

     WHEREAS, SPI is a United States based pharmaceutical company;

     WHEREAS, Takeda is a multinational health care company with research, development, manufacturing and marketing activities worldwide;

     WHEREAS, RTU is a Japanese pharmaceutical company with research, development, manufacturing and marketing activities;

     WHEREAS, Takeda has obtained from SPI an exclusive license to co-develop, use, sell, promote, offer for sale, import and distribute the Product (hereinafter defined) for the gastroenterology indications in the United States and Canada under the Licensed Trademarks (hereinafter defined) under a collaboration and license agreement of even date herewith (the “Collaboration and License Agreement”);

     WHEREAS, prior to the grant of such license from SPI to Takeda, SPI has appointed RTU as the exclusive contract manufacturer to manufacture and supply the Product for clinical and commercial purposes in the United States and Canada;

     WHEREAS, each Party desires to define in this Agreement certain parameters of their business relationship regarding each Party’s rights and obligations to or in manufacturing and supply of the Compound (hereinafter defined) and Product;

     NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the Parties hereto have agreed as follows:

Article 1 INTRODUCTORY PROVISIONS

1.1 Defined Terms . The following terms, when used in capitalized form in this Agreement, shall have the meanings set forth below:

“Additional Indication(s)” shall mean all Initial Indications, other than Constipation and Constipation-predominant Irritable Bowel Syndrome (“C-IBS”).

“Affiliate” shall mean, in relation to a Party, any corporation or entity that, directly or indirectly, controls, is controlled by or is under common control with such Party. For purposes of this definition, the term “control” shall mean the ownership, directly or indirectly, of fifty percent (50%) or more of the voting interest in, or fifty percent (50%) or more of the equity of or the right to appoint fifty percent (50%) or more of the directors or managers of that corporation or other business entity or the power to direct or cause the direction of the management and policies of such corporation or entity, whether pursuant to the ownership of voting securities, by contract or otherwise.

“Applicable Regulations” means all statutes, laws and regulations applicable to the development, manufacture and testing of pharmaceutical materials in effect at a particular time and promulgated by the FDA or any other Regulatory Authority, including without limitation current good laboratory practices (“cGLP”), current good clinical practices (“cGCP”), current good manufacturing and control practices (“cGMP”) and quality system regulations (“QSR”), and any successor or replacement statues, laws and regulations.

“Best Efforts” shall mean those efforts that would be made by a reasonably prudent business person acting in good faith and in the exercise of reasonable commercial judgment based on acceptable practice, process and speed found in the pharmaceutical industry and taking into account the potential commercial market for the applicable product in the Initial Territory.

“Chief Officer” shall mean chief executive officer in the case of SPI, chief operating officer in the case of Takeda and Representative Director in the case of RTU.

“Collaboration and License Agreement” shall have the meaning set forth in the Recital.

“Commercial Launch” shall mean the date of first sale of a Product in any country of the Initial Territory for any indication.

“Commercialization” or “Commercialize” shall mean all activities undertaken pursuant to an approved commercialization plan relating to the import, promotion, marketing, detail, storage, handling, offering for sale and sale of a Product for the Initial Indications and, if applicable, Additional Indications and/or New Formulations in the Initial Territory.

“Compound” shall mean the active pharmaceutical ingredient known as SPI-0211 or by the USAN name Lubiprostone, as further described in Exhibit A.

“Confidential Information” shall mean all information, including but not limited to any information on the markets, customers, suppliers, patents or patent applications, inventions, products, procedures, designs, formulas, business plans, financial projections, organizations,

employees, consultants or any other similar aspects of a Party’s present or future business, the secrecy of which confers a competitive advantage upon that Party. Confidential Information shall include the terms of this Agreement and the Proprietary Product Information.

“Development” or “Develop” shall mean all activities undertaken pursuant to an approved development plan to obtain Regulatory Approval for a Product for the Initial Indications and, if applicable, Additional Indications and/or New Formulations in the Initial Territory. This includes preclinical studies, including but not limited to toxicology, pharmacology, chemistry manufacturing and control of bulk and finished product and any clinical studies as well as all the process and procedures necessary to obtain Regulatory Approval, including preparation and submission of an NDA and other regulatory application(s).

“Drug Approval Application” shall mean an application for Regulatory Approval, such as an NDA, required to be approved before commercial sale or use of a Product as a drug in a regulatory jurisdiction.

“Effective Date” shall mean the date first above written.

“Exchange Rate” shall mean the rate of One United States dollars equals to One Hundred Ten JPY (US$1.00 = JPY110.00); provided, however, that, if the exchange rate between United States and JPY as of the Effective Date, as reported by the Wall Street Journal, fluctuates from the above-mentioned rate (i.e., US$1.00 = JPY110.00) by Four JPY (JPY4.00) or more, then the Exchange Rate shall be the medium of the rate of US$1.00 = JPY110.00 and the rate so reported by the Wall Street Journal. By way of example, if the exchange rate so reported by the Wall Street Journal at the Effective Date is US$1.00 = JPY105.00, then the Exchange Rate shall be US$1.00 = JPY107.50 (instead of US$1.00 = JPY110.00).

“FDA” shall mean the United States Food and Drug Administration or any successor entity thereto.

“Force Majeure” shall mean any event, not existing as of the Effective Date and not reasonably within the control of the Parties as of such date, which, in whole or in material part, prevents or makes commercially unreasonable one Party’s performance of its obligations (except payment obligations) under this Agreement. Force Majeure shall include, without limitation: fire, storm, earthquake, flood, acts of State or other governmental action, war or civil unrest, strikes, and prolonged shortage of energy or any other supplies.

“GAAP” shall mean generally accepted accounting principles current in the United States.

“ICC” shall have the meaning set forth in Section 12.3.

“Initial Indications” shall mean all gastroenterology indications, including but not limited to, Constipation and C-IBS for the Product.

“Initial Territory” shall mean the United States and Canada.

“JPY” shall mean Japanese Yen.

“Liability” shall have the meaning set forth in Section 7.1.

“Licensed Trademarks” shall mean the trademark(s) and tradename(s) selected by SPI for use in connection with the Products.

“Manufacturing and Supply Agreement” shall have the meaning set forth in Article 2.

“Manufacturing Specification(s)” shall mean the commercial specification for the manufacturing, quality control, packaging, labeling, shipping, delivery and storage of the Product as set forth in a Drug Approval Application and/or in the specification agreed upon in accordance with this Agreement and/or the Supply and Purchase Agreement.

“Marketing Authorization” shall mean (a) for the United States, the approval of an NDA and (b) for Canada, the approval from the relevant Regulatory Authority to necessary market and sell the Product in Canada, including, without limitation, all applicable pricing and government reimbursement approvals.

“NDA” shall mean a new drug license application or supplemental application filed with the FDA or any comparable application filed with a Regulatory Authority in or for Canada to obtain Marketing Authorization for a pharmaceutical product in or for Canada.

“Net Sales Revenue” shall mean the gross invoiced sales of the Product by Takeda, Takeda Affiliates and/or its sub-licensee to a third party, less a deduction for any amounts actually incurred by Takeda, Takeda Affiliates and/or its sub-licensee for any of the following items to the extent such items specifically relate to sale of the Product and are incurred by Takeda, Takeda Affiliates and/or its sub-licensee in the normal course of business, provided that the total deductions for any particular sale shall not exceed [**] percent ([**]%) of the gross invoiced amount of such sale of the Product:

     Such amounts shall be determined from the books and records of Takeda maintained in accordance with GAAP consistently applied.

“New Formulation(s)” shall mean any formulation of the Product other than the Initial Formulation.

“Party” or “Parties” shall have the meaning set forth in the introductory paragraph.

“Product” shall mean any and all pharmaceutical preparation for human use that contains the Compound, a chemical equivalent, a salt, or a prodrug thereof as an active ingredient.

“Proprietary Product Information” shall mean (a) all information and data now or hereafter contained in any Drug Approval Application or otherwise submitted in support of any Regulatory Approval to which either Party shall have the right under applicable law, regulations and administrative decisions to refer to, to authorize third parties to refer to and to prohibit third parties from referring to the Initial Indications and, if applicable, Additional Indications and/or New Formulations in the Initial Territory; (b) all data concerning any serious or unexpected adverse events, side effects and contra-indications of the Product which may come to the attention of either Party, its Affiliates or any sublicensee; (c) all data and information in the possession of either Party or any permitted sublicensee of a Party relating to (i) the pharmacological or toxicological properties of a Product, (ii) pre-clinical or clinical testing and experience in relation to a Product which is not included in any Drug Approval Application and (iii) to the extent reasonably required for purposes of any application for Drug Approval Application, the chemical composition, manufacturing processes and quality control testing of a Product and (d) all other information and data now or hereafter in existence and not in the public domain, which is in the possession of either Party and its Affiliates and which relates in any way to the Development, testing, manufacture, marketing, use or sale of the Products, including, without limitation, all such information or data that is developed as a result of the Development and/or Commercialization of the Products hereunder. Notwithstanding the foregoing, any data and information developed or obtained by a Party or its Affiliates or any sublicensee that not based upon the other Party’s confidential or proprietary information shall not be deemed to be Proprietary Product Information.

“Regulatory Approval(s)” shall mean any approvals (including pricing and reimbursement approvals), product and/or establishment licenses, registrations or authorizations of any federal, state or local regulatory agency, department, bureau or other governmental entity, necessary for the manufacture, use, storage, importation, marketing, export, transport or sale of a Product for the Initial Indications and, if applicable, Additional Indications and/or New Formulations in a regulatory jurisdiction of the Initial Territory.

“Regulatory Authority” shall mean, in respect of any country, any agency responsible for the issuance of Regulatory Approvals for pharmaceutical products marketed in that country.

“SPI and/or RTU” shall mean both SPI and RTU jointly or, either SPI or RTU as decided mutually between SPI and RTU.

“Supply and Purchase Agreement” shall have the meaning set forth in Article 2.

“Takeda Affiliates” shall mean those Affiliates of Takeda listed on Exhibit B; provided that Exhibit B may be modified from time to time during the term of this Agreement by mutual

written agreement of SPI and Takeda.

“TPDHC” shall mean the Therapeutic Products Directorate of Health Canada.

1.2 Other Rules of Interpretation . Unless the context clearly indicates otherwise, the following rules shall govern the interpretation of this Agreement:

          (a) The definitions of all terms defined herein shall apply equally to the singular, plural, and possessive forms of such terms.

          (b) All references to “Sections,” or “Exhibits” shall mean the corresponding Sections of and Exhibits to this Agreement.

Article 2 ACKNOWLEDGEMENTS

     RTU hereby acknowledges that SPI and Takeda have agreed to enter into the Collaboration and License Agreement for the Product as of the date hereof in which Takeda has obtained from SPI an exclusive license to co-develop, use, sell, promote, offer for sale, import and distribute the Product for the Initial Indications in the Initial Territories.

     Takeda hereby acknowledges that SPI has appointed RTU, under the exclusive manufacturing and supply agreement by and between SPI and RTU (the “Manufacturing and Supply Agreement”), as the exclusive contract manufacturer to manufacture and supply the Product for clinical and commercial purposes for the Initial Indications in the Initial Territory, provided, however, that SPI retains the license to manufacture the Product in the Initial Territory. Further, Takeda hereby acknowledges and agrees that neither it, Takeda Affiliates nor its sub-licensee(s) are granted any right or license to manufacture the Product under the Collaboration and License Agreement.

     The Parties further acknowledge and agree that the Parties shall enter into a definitive supply and purchase agreement (the “Supply and Purchase Agreement”) among SPI, Takeda (or, if applicable, Takeda Affiliates or its sub-licensee(s)) and RTU for the purpose of determining more detailed terms and conditions for the manufacturing and supply of the Product to Takeda, or if applicable, Takeda Affiliates or its sub-licensee(s), including, but not limited to: the Manufacturing Specification, ordering processes, supply of forecast requirements, acceptance/rejection of the Product, provision regarding cGMP inspection, and any other terms and conditions not covered by this Agreement. The Parties shall discuss in good faith the above terms and conditions and to execute Manufacturing and Supply Agreement as soon as practicable after the execution of this Agreement. The Parties acknowledge and agree that SPI may allow RTU to directly supply the Product to Takeda, or if applicable, Takeda Affiliates or its sub-licensee(s) under such Supply and Purchase Agreement.

Article 3 SUPPLY PRICE OF THE PRODUCT

     Under the Supply and Purchase Agreement to be separately established among SPI, Takeda and RTU pursuant to Article 2, SPI shall supply Takeda, or if applicable, Takeda Affiliates or its sub-licensee(s) with the Product at the following supply prices:

     (a) Until the earlier of (i) the [**] anniversary of the first Commercial Launch by Takeda, or if applicable, Takeda Affiliates or its sub-licensee(s) of any Product for the Initial Indications in the Initial Territory or (ii) such time as the cumulative quantity of the Product supplied to Takeda, or if applicable, Takeda Affiliates or its sub-licensee(s) for commercial purposes (but excluding samples of the Product for promotion and samples of the Product for the Development) reaches [**] capsules, the supply price for the Product payable by Takeda, or if applicable, Takeda Affiliates or its sub-licensee(s) shall be the following:

          (i) US$[**] of the total quantity and JPY equivalent of US$[**] using the Exchange Rate for the remaining [**] of the total quantity in case NDA approval for the Product is for BID (i.e., [**] intake per day) only;

          (ii) US$[**] of the total quantity and JPY equivalent of US$[**] using the Exchange Rate for the remaining [**] of the total quantity in case NDA approval for the Product is for QD (i.e., [**] intake per day); and

          (iii) such price as shall be determined within the ranges of US$[**] and US$[**] of the total quantity and of JPY equivalent of thus determined price using the Exchange Rate for the remaining [**] of the total quantity, taking into due consideration the ratio of BID and QD supplied to Takeda (or, if applicable, Takeda Affiliates or its sub-licensee(s)) hereunder and/or under the Supply and Purchase Agreement, in case that NDA approvals for the Product are for both BID and QD.

     (b) Immediately after the earlier of (i) the [**] anniversary of the first Commercial Launch by Takeda, or if applicable, Takeda Affiliates or its sub-licensee(s) of any Product for the Initial Indications in the Initial Territory or (ii) such time as the cumulative quantity of the Product supplied to Takeda, or if applicable, Takeda Affiliates, or its sub-licensee(s) for commercial purposes (but excluding samples of the Product for promotion and samples of the Product for the Development) reaches [**] capsules, the supply price shall be [**] percent ([**]%) of the Net Sales Revenue of the Product, provided, however, that, if only QD dosage (and nothing else) is Commercialized for the Initial Indications, then the supply price for the Product payable by Takeda, or if applicable, Takeda Affiliates or its sub-licensee(s) shall not exceed US$[**]. In case there i