Prostones are a class of compounds derived from functional fatty acids that occur naturally in the human body. The therapeutic potential of prostones was first identified by Dr. Ueno. Fatty acids serve as fuel for energy production in cells in many organisms and are intermediates in the synthesis of other important chemical compounds. To date, two prostone products have received marketing approval.

Studies published in The American Journal of Gastroenterology estimate that approximately 42 million people in the United States suffer from constipation. Based on these studies, it is estimated that approximately 12 million people can be characterized as suffering from chronic idiopathic constipation. In an additional study published in The American Journal of Gastroenterology, 91% of physicians expressed a desire for better treatment options for constipation.

According to the American College of Gastroenterology, irritable bowel syndrome affects approximately 58 million people in the United States, and irritable bowel syndrome with constipation accounts for approximately one-third of these cases.

According to the American Pain Foundation, over 50 million Americans suffer from chronic pain, and nearly 25 million Americans experience acute pain each year due to injuries or surgery. Opioid pain relievers are widely prescribed for these patients, many of whom also develop opioid-induced bowel dysfunction.

The Company plans to commence Phase III pivotal clinical trials of orally administered AMITIZA gelatin capsules for the treatment of opioid-induced bowel dysfunction in the third quarter of 2007.

The Company is developing the prostone compound SPI-8811 for oral administration to treat various gastrointestinal and liver disorders, including NSAID-induced ulcers, non-alcoholic fatty liver disease, portal hypertension and gastrointestinal disorders associated with cystic fibrosis. The Company also plans to develop an inhaled formulation of SPI-8811 for the treatment of respiratory symptoms of cystic fibrosis and chronic obstructive pulmonary disease.

The Company is conducting preclinical development of SPI-017 for the treatment of peripheral arterial and vascular disease and central nervous system disorders. Initially, the Company is working on the development of an intravenous formulation of SPI-017 for the treatment of peripheral arterial disease and stroke. The Company also is developing an oral formulation of SPI-017 for the treatment of Alzheimer’s disease.

Total research and development expenses for the three months ended March 31, 2007 were $5.9 million compared to $6.1 million for the three months ended March 31, 2006, a decrease of $174,000.

General and administrative expenses were $2.8 million for the three months ended March 31, 2007 compared to $3.0 million for the three months ended March 31, 2006, a decrease of $134,000.

Selling and marketing expenses were $3.2 million for the three months ended March 31, 2007 compared to $948,000 for the three months ended March 31, 2006, an increase of $2.3 million.