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Salix Pharmaceuticals Reports 3Q2012 Results

“The Company plans to continue to work with the FDA to generate a reasonable path forward that can be agreed upon by both parties for the further development and regulatory review of RELISTOR. While it is not possible to definitively determine the duration of our discussion with the FDA regarding this matter, at this time we anticipate a path forward could be reached with the FDA during 2013. Opioid induced constipation is a debilitating and unmet medical need that occurs as a consequence of opioid use in some patients that are taking opioids for chronic pain. Currently, there are no FDA-approved therapies for OIC in chronic, non-cancer pain. Before changing our plans for development of RELISTOR, we intend to make every effort to gain approval for the expanded use of RELISTOR to extend the benefit RELISTOR has provided to relieving OIC in advanced illness patients since 2008 to meet the unmet medical need of OIC in patients with chronic, non-cancer pain. Based on the information discussed above, we reassessed the value of the indefinite lived intangible asset related to the chronic, non-cancer pain indication and recorded a non-cash charge to earnings of $41.6 million in the three-month period ended September 30, 2012. We also reassessed the fair value of the contingent consideration related to Relistor and recorded a $33.0 million decrease in the contingent consideration that resulted in a corresponding increase to earnings in the three-month period ended September 30, 2012.

“In respect of the currently-approved subcutaneous formulation of RELISTOR for OIC in patients with advanced illness who are receiving palliative care, physician feedback indicates a significant need in the marketplace for a treatment that targets the underlying cause of OIC without impacting opioid–mediated analgesic effects on the central nervous system. RELISTOR does this by displacing opioid binding in tissues in the gastrointestinal tract. Since we introduced RELISTOR in April 2011, an increasing number of physicians have begun to treat their patients with advanced illness who are receiving palliative care with RELISTOR as a solution to OIC when response to laxative treatment has not been sufficient. In early November the Centers for Medicare and Medicaid Services (CMS) assigned RELISTOR a unique Healthcare Common Procedure Coding System, or HCPCS code, of “J2212” for reimbursement purposes. We initially estimated peak year sales of RELISTOR for advanced illness could reach $50 million. Based on RELISTOR’s performance over the past 18 months we are increasing our estimate of peak year sales to approximately $100 million for this indication.

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