Salix Pharmaceuticals Reports 3Q2012 Results

Salix markets XIFAXAN ^® (rifaximin) tablets 200 mg and 550 mg, MOVIPREP ^® (PEG 3350, Sodium Sulfate, Sodium Chloride, Potassium Chloride, Sodium Ascorbate and Ascorbic Acid for Oral Solution), OSMOPREP ^® (sodium phosphate monobasic monohydrate, USP and sodium phosphate dibasic anhydrous, USP) Tablets, APRISO ^® (mesalamine) extended-release capsules 0.375 g, METOZOLV ^® ODT (metoclopramide HCl), RELISTOR ^® (methylnaltrexone bromide) Subcutaneous Injection, SOLESTA ^®, DEFLUX ^®, PEPCID ^® (famotidine) for Oral Suspension, Oral Suspension DIURIL ^® (Chlorothiazide), AZASAN ^® (Azathioprine) Tablets, USP, 75/100 mg, ANUSOL-HC ^® 2.5% (Hydrocortisone Cream, USP), ANUSOL-HC ^® 25 mg Suppository (Hydrocortisone Acetate), PROCTOCORT ^® Cream (Hydrocortisone Cream, USP) 1% and PROCTOCORT ^® Suppository (Hydrocortisone Acetate Rectal Suppositories) 30 mg. Crofelemer, budesonide foam, RELISTOR ^® , LUMACAN ^™ and rifaximin for additional indications are under development.

For full prescribing information and important safety information on Salix products, including BOXED WARNINGS for OSMOPREP, AZASAN and METOZOLV, please visit www.salix.com where the Company promptly posts press releases, SEC filings and other important information or contact the Company at 919 862-1000.

Salix trades on the NASDAQ Global Select Market under the ticker symbol “SLXP”.

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, Facebook 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								Nine Months Ended
					September 30,			September 30,					September 30,			September 30,
					2012			2011					2012			2011
					(unaudited)			(unaudited)					(unaudited)			(unaudited)
Revenues:
	Net product revenues				$	185,132		$	146,247				$	537,271		$	385,306
Costs and Expenses:
	Cost of products sold					26,471			24,056					93,918			67,884
	Amortization of product rights and intangible assets					11,345			2,890					34,034			8,017
	Research and development					32,819			24,814					86,677			85,294
	Selling, general and administrative					61,543			41,439					187,266			132,786
	Intangible asset impairment charge					41,600			-					41,600			-
	Change in acquisition-related contingent consideration					(31,398	)		-					(31,398	)		-
	Total costs and expenses					142,380			93,199					412,097			293,981
	Income from operations					42,752			53,048					125,174			91,325
	Loss on extinguishment of debt					-			-					(14,369	)		-
	Interest expense					(15,692	)		(8,080	)				(39,591	)		(23,932	)
	Interest and other income					279			509					10,409			2,082
	Income before income tax					27,339			45,477					81,623			69,475
	Income tax expense					10,803			11,198					35,000			15,671
Net Income					$	16,536		$	34,279				$	46,623		$	53,804
Income per share, basic					$	0.28		$	0.58				$	0.79		$	0.92
Income per share, diluted					$	0.26		$	0.55				$	0.73		$	0.89
Shares used in computing net income per share, basic						58,755			59,076					58,671			58,573
Shares used in computing net income per share, diluted						62,983			65,160					63,689			65,405
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 intangible asset impairment charge and change in acquisition-related contingent consideration that occurred in September 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 nine-month periods ended September 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
		September 30,			September 30,			September 30,					September 30,			September 30,			September 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	$	185,132		$	-		$	185,132				$	146,247		$	-		$	146,247
Costs and Expenses:
	Cost of products sold		26,471			-			26,471					24,056			-			24,056
	Amortization of product rights and intangible assets		11,345			(11,345	)		-					2,890			(2,890	)		-
	Research and development		32,819			(1,455	)		31,364					24,814			(2,531	)		22,283
	Selling, general and administrative		61,543			(5,824	)		55,719					41,439			(4,124	)		37,315
	Intangible asset impairment charge		41,600			(41,600	)		-					-			-			-
	Change in acquisition-related contingent consideration		(31,398	)		31,398			-					-			-			-
	Total costs and expenses		142,380			(28,826	)		113,554					93,199			(9,545	)		83,654
	Income from operations		42,752			28,826			71,578					53,048			9,545			62,593
	Loss on extinguishment of debt		-			-			-					-			-			-
	Interest expense		(15,692	)		10,380			(5,312	)				(8,080	)		4,882			(3,198	)
	Interest and other income		279			-			279					509			-			509
	Income before income tax		27,339			39,206			66,545					45,477			14,427			59,904
	Income tax expense		10,803			(3,969	)		6,834					11,198			-			11,198
Net Income, as adjusted		$	16,536		$	43,175		$	59,711				$	34,279		$	14,427		$	48,706
Income per share, basic		$	0.28		$	0.73		$	1.02				$	0.58		$	0.24		$	0.82
Income per share, diluted		$	0.26		$	0.69		$	0.95				$	0.55		$	0.22		$	0.77
Shares used in computing net income per share, basic			58,755			58,755			58,755					59,076			59,076			59,076
Shares used in computing net income per share, diluted			62,983			62,983			62,983					65,160			65,160			65,160
		Nine Months Ended											Nine Months Ended
		September 30,			September 30,			September 30,					September 30,			September 30,			September 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	$	537,271		$	-		$	537,271				$	385,306		$	-		$	385,306
Costs and Expenses:
	Cost of products sold		93,918			-			93,918					67,884			-			67,884
	Amortization of product rights and intangible assets		34,034			(34,034	)		-					8,017			(8,017	)		-
	Research and development		86,677			(3,997	)		82,680					85,294			(15,816	)		69,478
	Selling, general and administrative		187,266			(15,990	)		171,276					132,786			(11,265	)		121,521
	Intangible asset impairment charge		41,600			(41,600	)		-					-			-			-
	Change in acquisition-related contingent consideration		(31,398	)		31,398			-					-			-			-
	Total costs and expenses		412,097			(64,223	)		347,874					293,981			(35,098	)		258,883
	Income from operations		125,174			64,223			189,397					91,325			35,098			126,423
	Loss on extinguishment of debt		(14,369	)		14,369			-					-			-			-
	Interest expense		(39,591	)		25,262			(14,329	)				(23,932	)		14,334			(9,598	)
	Interest and other income		10,409			(9,325	)		1,084					2,082			-			2,082
	Income before income tax		81,623			94,529			176,152					69,475			49,432			118,907
	Income tax expense		35,000			(13,333	)		21,667					15,671			-			15,671
Net Income, as adjusted		$	46,623		$	107,862		$	154,485				$	53,804		$	49,432		$	103,236
Income per share, basic		$	0.79		$	1.84		$	2.63				$	0.92		$	0.84		$	1.76
Income per share, diluted		$	0.73		$	1.69		$	2.43				$	0.89		$	0.76		$	1.64
Shares used in computing net income per share, basic			58,671			58,671			58,671					58,573			58,573			58,573
Shares used in computing net income per share, diluted			63,689			63,689			63,689					65,405			65,405			65,405
Salix Pharmaceuticals, Ltd.
Condensed Consolidated Balance Sheets
(In thousands)					September 30,			December 31,
					2012			2011
					(unaudited)			(audited)
Assets
	Cash and cash equivalents				$	775,903		$	292,814
	Accounts receivable, net					213,766			151,207
	Inventory, net					71,654			49,205
	Other assets					759,578			819,743
Total Assets					$	1,820,901		$	1,312,969
Liabilities and Stockholders' Equity
	Accounts payable and other liabilities				$	1,288,306		$	763,332
	Total liabilities					1,288,306			763,332
	Common stock					59			59
	Additional paid-in-capital					621,474			685,315
	Other comprehensive loss					65			(111	)
	Accumulated deficit					(89,003	)		(135,626	)
	Total stockholders' equity					532,595			549,637
Total Liabilities and Stockholders' Equity					$	1,820,901		$	1,312,969

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