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Salix Pharmaceuticals Reports 3Q2012 Results

  Salix Pharmaceuticals Reports 3Q2012 Results

   Management Maintains 2012 Revenue Guidance of $735 Million And Increases
 Guidance for Adjusted Net Income to $200 Million or $3.13, Per Share, Fully
                                   Diluted

              27% Increase in Year-over-Year 3Q Product Revenue

20% Increase in Year-over-Year 3Q XIFAXAN^® Prescriptions on a Milligram Basis

           24% Increase in Year-over-Year 3Q APRISO^® Prescriptions

          89% Increase in Year-over-Year 3Q RELISTOR^® Prescriptions

Business Wire

RALEIGH, N.C. -- November 07, 2012

Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP) today announced financial and
operating results for the third quarter ended September 30, 2012 and other
business updates.

Total product revenue was $185.1 million for the third quarter of 2012, a 27%
increase compared to $146.2 million for the third quarter of 2011. Total
product revenue for the first nine months of 2012 was $537.3 million, a 39%
increase compared to $385.3 million for the first nine months of 2011.
XIFAXAN^® revenue for the third quarter of 2012 was $137.9 million, a 43%
increase compared to $96.7 million for the third quarter of 2011. XIFAXAN
revenue for the first nine months of 2012 was $367.5 million, a 39% increase
compared to $264.4 million for the first nine months of 2011. APRISO^® revenue
for the third quarter of 2012 was $19.7 million, a 31% increase compared to
$15.0 million for the third quarter of 2011. The combined revenue contribution
of our most recently-introduced products - RELISTOR^®, SOLESTA^® and DEFLUX^®-
totaled $12.1 million for the third quarter of 2012.

Total cost of products sold was $26.5 million for the third quarter of 2012
and $93.9 million for the first nine months of 2012, compared to $24.1 million
for the third quarter of 2011 and $67.9 million for the first nine months of
2011. Gross margin on total product revenue was 85.7% for the third quarter of
2012 compared to 83.5% for the third quarter of 2011, and 82.5% for the first
nine months of 2012 compared to 82.4% for the first nine months of 2011.
Research and development expenses were $32.8 million for the third quarter of
2012 and $86.7 million for the first nine months of 2012, compared to $24.8
million and $85.3 million, respectively, for the prior year periods. The
increase in research and development expenses for 2012 compared to 2011 is due
primarily to increased expenses related to our Phase 3 retreatment study of
rifaximin for irritable bowel syndrome with diarrhea. Selling, general and
administrative expenses were $61.5 million for the third quarter of 2012
compared to $41.4 million for the prior year period and $187.3 million for the
first nine months of 2012 compared to $132.8 million for the prior year
period. The increase in selling, general and administration expenses for 2012
compared to 2011 is due primarily to increased personnel costs related to our
sales force expansion in 2012 and increased marketing expenses related to
SOLESTA and XIFAXAN550 for hepatic encephalopathy. The Company reported GAAP
net income of $16.5 million, or $0.26 per share, fully diluted, for the third
quarter of 2012 and $46.6 million, or $0.73 per share, fully diluted, for the
nine-month period ended September 30, 2012.

Net income on a non-GAAP basis, excluding 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 expense, was $59.7 million, or $0.95 per share, fully diluted,
for the three-month period ended September 30, 2012 and $154.5 million or
$2.43 per share, fully diluted for the nine-month period ended September 30,
2012. 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. We have provided a reconciliation of these measures
to the most closely related GAAP measures in the accompanying financial
tables.

Cash and cash equivalents were $775.9 million as of September 30, 2012.

Adam Derbyshire, Executive Vice President and Chief Financial Officer, stated,
“XIFAXAN 550 mg continued to perform well during the third quarter of 2012.
During the quarter our XIFAXAN prescription business, comprised of XIFAXAN 200
mg tablets and XIFAXAN 550 mg tablets, demonstrated impressive growth, on a
milligram basis, of 20% compared to the third quarter of 2011. APRISO also
demonstrated strong prescription year-over-year growth of 24% for the third
quarter of 2012 compared to the third quarter of 2011. RELISTOR prescriptions
increased 89% year-over-year for the third quarter of 2012 compared to the
third quarter of 2011.

“We continue to believe total Company product revenue for 2012 will be
approximately $735 million, representing 36% growth over 2011 revenue. We now
believe we will be able to generate adjusted net income of approximately $200
million, or $3.13 per share, fully diluted on the non-GAAP basis described
above for the full year ending December 31, 2012.

“The current annualized run rates, based on dollarizing the August 2012
prescription data for XIFAXAN, MOVIPREP/OSMOPREP, APRISO, RELISTOR (U.S.) and
our ’other products’, are approximately $495 million, $108 million, $87
million, $32 million, and $48 million, respectively. In line with the full
year 2012 guidance provided above, for the fourth quarter of 2012 we
anticipate total Company product revenue should be approximately $198 million
and adjusted net income should be approximately $46 million, or $0.72 per
share, fully diluted, on the non-GAAP basis described above.”

Carolyn Logan, President and Chief Executive Officer, stated, “Our third
quarter growth was driven primarily by XIFAXAN 550, APRISO and RELISTOR.
XIFAXAN continues to grow sequentially, with prescriptions, on a milligram
basis, increasing 5% for the third quarter of 2012 compared to the second
quarter of 2012. APRISO also continued to exceed the Company’s expectations
during the quarter. APRISO prescriptions increased 4% during the third quarter
of 2012 compared to the second quarter of 2012. RELISTOR prescriptions
increased 18% during the third quarter of 2012 compared to the second quarter
of 2012.

“During the third quarter our sales force continued launching SOLESTA^® - our
first-in-class, biocompatible tissue bulking agent for the treatment of fecal
incontinence, or FI. Fecal incontinence is estimated to affect approximately
15% of people in the United States over the age of 50 and is the leading
reason for admission to assisted living facilities in the United States.
Physicians and patients have shown significant interest in the use of SOLESTA
as an alternative to more invasive treatment options in the treatment of FI.
In early November the Centers for Medicare and Medicaid Services (CMS)
assigned SOLESTA a unique HCPCS code of “L8605” for reimbursement purposes.
This new code will facilitate separate reimbursement for SOLESTA across
multiple settings of care. SOLESTA will be billed under the new code L8605
(Injectable Bulking Agent, Anal Canal) effective January 1, 2013.

“On July 27, 2012 the Company received from the FDA a Complete Response Letter
(CRL) requesting additional clinical data for our supplemental New Drug
Application (sNDA) for RELISTOR (methylnaltrexone bromide) injection for
subcutaneous use for the treatment of opioid-induced constipation (OIC) in
adult patients with chronic, non-cancer pain. On October 5, 2012 Salix
conducted an End-of-Review meeting with the FDA’s Division of Gastroenterology
and Inborn Errors Products to better understand the contents of the letter.
The Division has expressed a concern that there may be a risk associated with
the chronic use of mu-opioid antagonists in patients that are taking opioids
for chronic pain. In order to understand this potential risk, the Division has
communicated that a very large, well-controlled, chronic administration trial
will have to be conducted to assess the safety of any mu-opioid antagonist
prior to market approval for the treatment of patients with OIC who are taking
opioids for chronic, non-cancer pain. Salix has held discussions with the
Division and has expressed the view that the post-marketing, clinical and
preclinical data currently available for RELISTOR adequately demonstrate an
appropriate and expected safety profile sufficient to permit the approval of
the current sNDA.

“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.

“We continue to anticipate an action by the FDA by the end of the first
quarter of 2013 on our NDA for Crofelemer 125 mg tablets for the proposed
indication of the control and symptomatic relief of diarrhea in patients with
human immunodeficiency virus (HIV)/acquired immune deficiency syndrome (AIDS)
on anti-retroviral therapy.

Both the FDA and Salix are continuing to work collaboratively to progress this
important product through its full review. To date, this collaboration has
resulted in substantial progress in handling topics important to crofelemer as
well as to future botanical products in general. The primary focus of our
collaboration is the production and control of the crofelemer active
pharmaceutical ingredient in order to ensure compliance with the manufacturing
and product quality requirements of the Federal Food, Drug & Cosmetic Act.
Both Salix and the FDA are committed to a robust level of cooperation and data
exchange with the goal of providing crofelemer to patients suffering from the
very important unmet need of the indication for which we are seeking approval.
Our efforts to date have advanced both the chemical and the regulatory science
methods available to ensure the quality and clinical usefulness of crofelemer
and, potentially, other products that are of botanical origin.

“On February 21, 2012 the Company initiated TARGET 3 - a Phase 3 study to
evaluate the efficacy and safety of repeat treatment with rifaximin 550 mg TID
(three times daily) for 14 days in subjects with irritable bowel syndrome with
diarrhea (IBS-D) who respond to an initial treatment course with rifaximin 550
mg TID for 14 days. During the third quarter we continued to enroll a number
of subjects sufficient to randomize approximately 800 subjects (400 subjects
per treatment group) into the double blind retreatment phase of the study. We
initiated patient enrollment in TARGET 3 during the first half of 2012 and
currently anticipate securing a FDA decision regarding approvability during
the first half of 2014. We continue to strengthen our intellectual property
relating to rifaximin for the treatment of IBS-D. A method of treatment patent
regarding XIFAXAN550 for the treatment of IBS-D should issue November 13, 2012
and should provide protection until 2029.

“In August Salix entered into an exclusive agreement with Alfa Wassermann
S.p.A. by which we licensed rights in the United States and Canada to an
extended intestinal release (EIR) formulation of rifaximin for
gastrointestinal and respiratory indications, including Crohn’s disease. The
EIR formulation of rifaximin has been designed to provide an efficient
delivery of rifaximin by releasing the active drug following passage through
the stomach in order to provide a homogeneous distribution of rifaximin in the
intestinal tract. This EIR formulation of rifaximin will be studied for its
potential to target difficult to treat diseases of the intestinal tract such
as Crohn’s disease. We intend to initiate two Phase 3 trials during the first
half of 2013 with the goal of securing FDA approval to market EIR rifaximin
for the treatment of Crohn’s disease.

“We received the rights to EIR formulation rifaximin products as part of a
restructuring of long-standing arrangements between Alfa Wassermann and Salix
for the development and commercialization of rifaximin products in the United
States and Canada for gastrointestinal and respiratory indications. The
restructuring does not affect arrangements for the rifaximin products
currently approved in the Salix territory, nor for any product for treatment
of irritable bowel syndrome that might be approved in the future. Under the
new arrangements, Salix has provided Alfa Wassermann with rights to obtain a
license to develop and commercialize, outside the United States and Canada for
gastrointestinal and respiratory indications, formulations of rifaximin
currently being developed by Salix and other new formulations of rifaximin
that Salix may develop in the future.

“During the third quarter of 2012 the Company also continued to make progress
in the development of budesonide foam, a new formulation of rifaximin and
LUMACAN™. We anticipate completing patient enrollment in our two budesonide
foam Phase 3 trials by the end of 2012. Currently we are targeting submission
of the NDA for budesonide foam for the treatment of moderate ulcerative
proctitis or proctosigmoiditis during the third quarter of 2013. Regarding our
next generation formulation of rifaximin, our pharmacokinetic study to assist
in the characterization of three prototype tablet formulations progressed
during the third quarter of 2012, and currently we intend to move forward with
the initiation of a clinical trial in the first half of 2013. Work continued
to progress on the development of LUMACAN oral formulation prototypes. During
the third quarter we initiated an exploratory study designed to evaluate
fluorescence kinetics of LUMACAN following enema administration for
precancerous and cancerous lesions, in respect of the quality, onset and
offset of fluorescence following administration of the enema. If the enema
administration is successful, we intend to proceed to orally administered test
formulations. We believe that LUMACAN, if approved, has the potential to
significantly improve earlier detection and diagnosis of colon cancer.

“During the third quarter we received a paragraph IV notification from Lupin
Limited stating that Lupin had filed an ANDA application to seek approval to
market a generic version of APRISO. The notification letter asserted
non-infringement and invalidity of the Company’s Orange Book-listed U.S.
Patent No.6,551,620. On September 7, 2012 Salix and Dr. Falk Pharma filed a
patent infringement complaint against Lupin. The filing of this suit imposes
an automatic 30-month stay of approval of Lupin’s ANDA. We have full
confidence in and continue to evaluate our intellectual property protecting
APRISO, and we intend to vigorously enforce our intellectual property rights.

“Salix is built on a tremendous history of success – including the approval of
eight New Drug Applications, the acquisition/licensing of 16 products and the
establishment of a top-ranked specialty sales force since 2000. Our core
business remains strong and continues to grow. Our portfolio of marketed
products is complemented by our impressive pipeline of product candidates in
development that should drive additional revenue growth over the long term as
they are commercialized. Additionally, the Company continues to actively
pursue additional product opportunities to expand and broaden our product
portfolio. We are extremely pleased with the success we have achieved to date,
and we believe the Company is well-positioned to continue to succeed in our
mission of being the leading specialty pharmaceutical company licensing,
developing and marketing innovative products to healthcare professionals to
prevent or treat gastrointestinal disorders.”

The Company will host a conference call at 5:00 p.m. ET, on Wednesday,
November 7, 2012. Interested parties can access the conference call by way of
web cast or telephone. The live web cast will be available at www.salix.com. A
replay of the web cast will be available at the same location. The telephone
numbers to access the live conference call are (877) 756-4253 (U.S. and
Canada) or (706) 902-2163 (international.) The telephone numbers to access the
replay of the call are (855) 859-2056 or (800) 585-8367 (U.S. and Canada) or
(404) 537-3406 (international). The access code for the replay is 95498100.

About Salix

Salix Pharmaceuticals, Ltd., headquartered in Raleigh, North Carolina,
develops and markets prescription pharmaceutical products for the prevention
and treatment of gastrointestinal diseases. Salix’s strategy is to in-license
late-stage or marketed proprietary therapeutic products, complete any required
development and regulatory submission of these products, and market them
through the Company’s gastroenterology specialty sales and marketing team.

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

Contact:

Salix Pharmaceuticals, Ltd.
Adam C. Derbyshire
Executive Vice President and Chief Financial Officer
or
G. Michael Freeman
Associate Vice President, Investor Relations and Corporate Communications
919-862-1000