Salix Pharmaceuticals Reports 2Q2012 Results

For more information, please visit our Website at www.salix.com or contact the Company at 919-862-1000. Follow us on Twitter (@SalixPharma) and Facebook ( www.facebook.com/SalixPharma). Information on our Twitter feed, Face book page and web site is not incorporated in our SEC filings.

Please Note: The materials provided herein contain projections and other forward–looking statements regarding future events. Such statements are just predictions and are subject to risks and uncertainties that could cause the actual events or results to differ materially. These risks and uncertainties include, among others: the unpredictability of the duration and results of regulatory review of New Drug Applications and Investigational NDAs; generic and other competition in an increasingly global industry; litigation and the possible impairment of, or inability to obtain, intellectual property rights and the costs of obtaining such rights from third parties in an increasingly global industry; the cost, timing and results of clinical trials and other development activities involving pharmaceutical products; post-marketing approval regulation; market acceptance for approved products; revenue recognition and other critical accounting policies; and the need to acquire new products. The reader is referred to the documents that the Company files from time to time with the Securities and Exchange Commission.

Salix Pharmaceuticals, Ltd.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)					Three Months Ended									Six Months Ended
					June 30,					June 30,				June 30,					June 30,
						2012					2011				2012					2011
					(unaudited)					(unaudited)				(unaudited)					(unaudited)
Revenues:
	Net product revenues				$	181,006				$	133,162			$	352,139				$	239,059
Costs and Expenses:
	Cost of products sold					33,257					25,242				67,447					43,828
	Amortization of product rights and intangible assets					11,344					2,890				22,689					5,127
	Research and development					27,157					29,477				53,858					60,480
	Selling, general and administrative					65,279					44,658				125,723					91,347
	Total costs and expenses					137,037					102,267				269,717					200,782
	Income from operations					43,969					30,895				82,422					38,277
	Loss on extinguishment of debt					-					-				(14,369	)				-
	Interest expense					(15,085	)				(7,997	)			(23,899	)				(15,852	)
	Interest and other income					6,237					749				10,130					1,573
	Income before income tax					35,121					23,647				54,284					23,998
	Income tax expense					14,987					4,400				24,197					4,473
Net Income					$	20,134				$	19,247			$	30,087				$	19,525
Income per share, basic					$	0.35				$	0.33			$	0.51				$	0.33
Income per share, diluted					$	0.32				$	0.32			$	0.47				$	0.34
Shares used in computing net income per share, basic						58,116					58,423				58,630					58,321
Shares used in computing net income per share, diluted						63,654					65,572				64,059					65,514

Reconciliation of GAAP Amounts to Non-GAAP Amounts:
(In thousands, except per share data)
We are disclosing our non-GAAP Condensed Consolidated Statements of Operations, as adjusted, to eliminate the impact of the $10.0 million Lupin payment that occured in February 2011, the loss on extinguishment of debt and non-cash adjustments related to the repurchase of a portion of our 2028 Notes in March 2012, the difference between income taxes paid and income taxes expensed, and non-cash depreciation, amortization, stock-based compensation and convertible debt interest expenses that occured in the three-month and six-month periods ended June 30, 2012 and 2011, respectively. We believe these non-GAAP measures might provide investors additional relevant information, in part for purposes of historical comparison. In addition, we use these non-GAAP measures to analyze our performance in more detail and with better historical comparability; however, you should be aware that non-GAAP measures are not superior to nor a substitute for the comparable GAAP measures. A reconciliation of our non-GAAP measures to the comparable GAAP measures follows.
				Three Months Ended										Three Months Ended
				June 30,			June 30,			June 30,				June 30,			June 30,			June 30,
				2012			2012-Non-GAAP Adjustments			2012-Non-GAAP as adjusted				2011			2011-Non-GAAP Adjustments			2011-Non-GAAP as adjusted
				(unaudited)			(unaudited)			(unaudited)				(unaudited)			(unaudited)			(unaudited)
Revenues:
	Net product revenues			$	181,006		$	-		$	181,006			$	133,162		$	-		$	133,162
Costs and Expenses:
	Cost of products sold				33,257			-			33,257				25,242			-			25,242
	Amortization of product rights and intangible assets				11,344			(11,344	)		-				2,890			(2,890	)		-
	Research and development				27,157			(1,400	)		25,757				29,477			(2,575	)		26,902
	Selling, general and administrative				65,279			(5,597	)		59,682				44,658			(4,301	)		40,357
	Total costs and expenses				137,037			(18,341	)		118,696				102,267			(9,766	)		92,501
	Income from operations				43,969			18,341			62,310				30,895			9,766			40,661
	Loss on extinguishment of debt				-			-			-				-			-			-
	Interest expense				(15,085	)		9,648			(5,437	)			(7,997	)		4,792			(3,205	)
	Interest and other income				6,237			(5,659	)		578				749			-			749
	Income before income tax				35,121			22,330			57,451				23,647			14,558			38,205
	Income tax expense				14,987			(7,622	)		7,365				4,400			-			4,400
Net Income, as adjusted				$	20,134		$	29,952		$	50,086			$	19,247		$	14,558		$	33,805
Income per share, basic				$	0.35		$	0.52		$	0.86			$	0.33		$	0.25		$	0.58
Income per share, diluted				$	0.32		$	0.47		$	0.79			$	0.32		$	0.22		$	0.54
Shares used in computing net income per share, basic					58,116			58,116			58,116				58,423			58,423			58,423
Shares used in computing net income per share, diluted					63,654			63,654			63,654				65,572			65,572			65,572
				Six Months Ended										Six Months Ended
				June 30,			June 30,			June 30,				June 30,			June 30,			June 30,
				2012			2012-Non-GAAP Adjustments			2012-Non-GAAP as adjusted					2011		2011-Non-GAAP Adjustments			2011-Non-GAAP as adjusted
				(unaudited)			(unaudited)			(unaudited)				(unaudited)			(unaudited)			(unaudited)
Revenues:
	Net product revenues			$	352,139		$	-		$	352,139			$	239,059		$	-		$	239,059
Costs and Expenses:
	Cost of products sold				67,447			-			67,447				43,828			-			43,828
	Amortization of product rights and intangible assets				22,689			(22,689	)		-				5,127			(5,127	)		-
	Research and development				53,858			(2,542	)		51,316				60,480			(13,285	)		47,195
	Selling, general and administrative				125,723			(10,166	)		115,557				91,347			(7,141	)		84,206
	Total costs and expenses				269,717			(35,397	)		234,320				200,782			(25,553	)		175,229
	Income from operations				82,422			35,397			117,819				38,277			25,553			63,830
	Loss on extinguishment of debt				(14,369	)		14,369			-				-			-			-
	Interest expense				(23,899	)		14,882			(9,017	)			(15,852	)		9,452			(6,400	)
	Interest and other income				10,130			(9,325	)		805				1,573			-			1,573
	Income before income tax				54,284			55,323			109,607				23,998			35,005			59,003
	Income tax expense				24,197			(9,365	)		14,832				4,473			-			4,473
Net Income, as adjusted				$	30,087		$	64,688		$	94,775			$	19,525		$	35,005		$	54,530
Income per share, basic				$	0.51		$	1.10		$	1.62			$	0.33		$	0.60		$	0.93
Income per share, diluted				$	0.47		$	1.01		$	1.48			$	0.34		$	0.53		$	0.88
Shares used in computing net income per share, basic					58,630			58,630			58,630				58,321			58,321			58,321
Shares used in computing net income per share, diluted					64,059			64,059			64,059				65,514			65,514			65,514

Salix Pharmaceuticals, Ltd.
Condensed Consolidated Balance Sheets
(In thousands)					June 30,				December 31,
						2012				2011
					(unaudited)				(audited)
Assets
	Cash and cash equivalents				$	715,927			$	292,814
	Accounts receivable, net					211,675				151,207
	Inventory, net					63,636				49,205
	Other assets					802,167				819,743
Total Assets					$	1,793,405			$	1,312,969
Liabilities and Stockholders' Equity
	Accounts payable and other liabilities				$	1,288,982			$	763,332
	Total liabilities					1,288,982				763,332
	Common stock					58				59
	Additional paid-in-capital					610,011				685,315
	Other comprehensive loss					(105,539	)			(111	)
	Accumulated deficit					(107	)			(135,626	)
	Total stockholders' equity					504,423				549,637
Total Liabilities and Stockholders' Equity					$	1,793,405			$	1,312,969

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