8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) October 1, 2009

SALIX PHARMACEUTICALS, LTD.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

000-23265	94-3267443
(Commission File Number)	(IRS Employer ID Number)

1700 Perimeter Park Drive, Morrisville, North Carolina 27560

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (919) 862-1000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On October 1, 2009, Salix Pharmaceuticals, Inc., a wholly-owned subsidiary of Salix Pharmaceuticals, Ltd., entered into a Development, Commercialization and License Agreement, effective as of September 30, 2009, with Lupin Ltd., a corporation organized under the laws of India, for the development and commercialization of a proposed product incorporating rifaximin and utilizing Lupin’s proprietary bioadhesive drug delivery technology for purposes of gastrointestinal drug delivery.

Salix and Lupin also entered into a Rifaximin Manufacturing and Supply Agreement, referred to as the API Supply Agreement, pursuant to which Lupin committed to supply, and Salix committed to purchase, certain of Salix’s needs for rifaximin.

Under the License Agreement, Lupin granted Salix an exclusive, royalty-bearing license to the bioadhesive rifaximin product for all use in humans in the United States. The license granted to Salix includes the sole right to commercialize the bioadhesive rifaximin product in the United States and the right to grant sublicenses.

As consideration for the rights Salix acquired under the License Agreement, Salix is required to pay Lupin an upfront patent license fee of $5.0 million. Lupin may also receive up to $53.0 million in clinical trial, NDA and regulatory milestone payments, as well as royalty payments based on net sales of licensed products during the royalty term. Royalty rates will be reduced in certain circumstances.

The term of the License Agreement continues until the expiration of the last royalty obligation with respect to the bioadhesive rifaximin product. The royalty term will end upon the date of commercial introduction in the United States of an approved prescription product containing rifaximin and utilizing bioadhesive technology by anyone other than Salix or, if earlier, then the later of (1) 10 years from the first commercial sale of the bioadhesive rifaximin product in the United States and (2) the first date on which there is no longer (i) a Lupin patent or Lupin improvement patent that includes at least one valid claim in the United States or (ii) any data exclusivity with respect to the bioadhesive rifaximin product in the United States. In addition, Salix may terminate the License Agreement at any time if Salix determines that it is not feasible or desirable to pursue the development or commercialization of the bioadhesive rifaximin product. Either party may terminate the License Agreement due to the insolvency of or a material breach of the agreement by the other. Lupin may terminate the License Agreement upon termination of the API Supply Agreement (other than by Salix due to Lupin’s breach). If termination occurs after initial regulatory approval of the bioadhesive rifaximin product, Salix is entitled to a royalty on net sales of the product in the United States by Lupin and its licensees.

Under the License Agreement, Salix and Lupin will establish a joint steering committee to oversee and coordinate the development and other exploitation of the bioadhesive rifaximin product in the United States. Salix has the sole responsibility and authority for clinical trials, regulatory approvals and commercialization of the product in the

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United States. The License Agreement also provides for the parties to consult and cooperate in respect of the global development and commercialization of the bioadhesive rifaximin product.

Pursuant to the License Agreement, Salix granted to Lupin an exclusive license and right of reference to Salix information and intellectual property and regulatory documentation resulting from work conducted under the License Agreement with respect to the development and commercialization of the bioadhesive rifaximin product for exploitation of the bioadhesive rifaximin product outside the United States and inside the United States for non-human use. Salix and Lupin will jointly own all improvements jointly developed under the License Agreement, with Salix having the right to exploit such improvements in all human use in the United States and Lupin having the right to exploit such improvements outside the United States or inside the United States for non-human use.

Lupin agrees in the License Agreement that it will not research, develop, market or sell in the United States for human use any prescription or non-prescription pharmaceutical product or dietary supplement or food product that contains rifaximin. Such restrictions will cease to apply upon termination of the API Supply Agreement.

Under the API Supply Agreement, Lupin agrees to manufacture and supply Salix with rifaximin at a set price pursuant to rolling monthly forecasts and quarterly firm forecasts. Effective as of January 1, 2010, Salix must take or pay for rifaximin in an amount equal to not less than 50% of its requirements of rifaximin. For the calendar quarter ending December 31, 2009, Salix commits to pay Lupin an amount equal to the set purchase price for one-eighth of Salix’s rifaximin requirements for calendar year 2009.

Pursuant to the API Supply Agreement, Lupin will not sell rifaximin to anyone else in the United States. Lupin must maintain its current annual manufacturing capacity of rifaximin and the parties have also agreed to certain procedures to be followed in implementing any expansion of Lupin’s manufacturing capacity that may be required to meet Salix’s future needs for rifaximin. If Lupin fails to deliver a certain percentage of Salix’s rifaximin needs within a certain timeframe, then Salix may cancel all or any portion of its order or accept delivery and receive an agreed upon discount on the order. If a delivery is delayed beyond a specified period, then Salix may find another supplier and Lupin will make transfers of technology as appropriate to permit such other manufacturer to manufacture rifaximin and for that purpose will also grant the other manufacturer a royalty-free non-exclusive license to technology controlled by Lupin. If there is a shortage of rifaximin supply, Lupin will apportion its supply first to Salix. Salix will have the right to secure and qualify a second source of rifaximin supply and Lupin will make transfers of technology as appropriate to permit such second source manufacturer to manufacture rifaximin and for that purpose will also grant the second source manufacturer a royalty-free non-exclusive license to technology controlled by Lupin.

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The API Supply Agreement has a term of 10 years from the date Salix anticipates requiring commercial supply of rifaximin, unless extended for additional three-year periods at Salix’s option. Salix may terminate the API Supply Agreement if any regulatory authority causes the withdrawal of XIFAXAN^® or Salix-authorized generic versions thereof from the United States. Salix also may terminate the API Supply Agreement for any reason or no reason at any time after the earlier of the entry of an unauthorized generic version of XIFAXAN^® in the United States and the fourth anniversary of the effective date of agreement. Either party may terminate the API Supply Agreement due to the insolvency of or a material breach of the agreement by the other or if an order of a government authority prevents or delays the continued operation of the API Supply Agreement. Upon the expiration of the API Supply Agreement or if it is terminated by Salix due to Lupin’s breach or insolvency or upon government order, Lupin will promptly make transfers of technology as appropriate to permit another manufacturer designated by Salix to manufacture rifaximin and for that purpose will also grant the other manufacturer a royalty-free non-exclusive license to technology controlled by Lupin.

The descriptions of the License Agreement and the API Supply Agreement provided above are qualified in their entirety by reference to the full and complete terms contained in the License Agreement and the API Supply Agreement, which will be filed as exhibits to Salix’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2009.

Item 8.01. Other Events.

On October 5, 2009, Salix issued a press release announcing its entry into the License Agreement and the API Supply Agreement. A copy of this press release is attached as Exhibit 99.1.

The information in this Item 8.01, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
99.1	Press release dated October 5, 2009 announcing the License Agreement and API Supply Agreement between Salix Pharmaceuticals, Inc. and Lupin Ltd.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	SALIX PHARMACEUTICALS, LTD.
Date: October 5, 2009
	/S/    ADAM C. DERBYSHIRE
	Adam C. Derbyshire
	Executive Vice President and Chief Financial Officer

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EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contact: Adam C. Derbyshire Executive Vice President and Chief Financial Officer (919) 862-1000 G. Michael Freeman Associate Vice President, Investor Relations and Corporate Communications (919) 862-1000

SALIX PHARMACEUTICALS ACQUIRES U.S. RIGHT TO LUPIN’S

PROPRIETARY BIOADHESIVE TECHNOLOGY FOR EXTENDED RELEASE

RIFAXIMIN PRODUCT

Salix and Lupin to Collaborate in the Development and Commercialization of an Extended

Release Rifaximin Product

RALEIGH, NC October 5, 2009 – Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP) today announced that as of September 30, 2009 Lupin Ltd. granted Salix the exclusive right in the United States to its bioadhesive drug delivery technology for use with rifaximin. Salix and Lupin have entered into a development, commercialization and license agreement under which the two companies will collaborate in the development and commercialization of a product incorporating rifaximin and utilizing Lupin’s proprietary technology. In connection with this agreement, Salix and Lupin have entered into an exclusive agreement in the United States for supply of rifaximin active pharmaceutical ingredient (API). Salix is required to make a $5 million up-front payment and regulatory milestone payments to Lupin, with the majority contingent upon achievement of clinical development and U.S. regulatory milestones. In addition, Salix will pay royalties on net sales of the bioadhesive rifaximin product.

Carolyn Logan, President and CEO, Salix, commented, “We are pleased to enter into this strategic collaboration with Lupin. This collaboration to develop and commercialize an extended release formulation of rifaximin is a significant advancement in rifaximin’s lifecycle management strategy. With this collaboration Salix embarks on the development of our next generation rifaximin product incorporating Lupin’s proprietary drug delivery platform with our

proprietary gut-targeted antibiotic. We believe this novel delivery approach, which combines controlled-release as well as slowed gastrointestinal transit of rifaximin, might prove to provide a number of clinical advantages including patient compliance and patient convenience. The acquisition of these rights to Lupin’s proprietary bioadhesive drug delivery technology should serve to further protect this important Company asset.”

Nilesh Gupta, Group President and Executive Director, Lupin, stated, “We are pleased to enter into this collaboration with Salix. We believe our proprietary bioadhesive drug delivery technology, which combines controlled-release as well as slowed gastrointestinal transit, could provide an extended release formulation of rifaximin that will be an important component of Salix’s lifecycle management strategy for rifaximin. This formulation, coupled with Salix’s commercialization capabilities, gives us the opportunity to jointly bring a potentially great product to the marketplace. We also believe that this alliance further validates Lupin’s increasing capabilities as a drug delivery provider. “

About XIFAXAN^® (rifaximin)

Rifaximin is a gut-selective antibiotic with negligible systemic absorption (<0.4%) and broad-spectrum activity in vitro against both gram-positive and gram-negative pathogens. Rifaximin has a similar tolerability profile to that of placebo. XIFAXAN revenue for 2008 was approximately $80 million.

Rifaximin tablets 200 mg, which Salix markets in the United States under the trade name XIFAXAN^® (rifaximin) tablets 200 mg, currently is approved for the treatment of patients, 12 years of age or older, with travelers’ diarrhea (TD) caused by non–invasive strains of Escherichia coli. XIFAXAN (rifaximin) is a gut–selective antibiotic with negligible systemic absorption (<0.4%) and broad–spectrum activity in vitro against both gram–positive and gram–negative pathogens. Rifaximin has a similar tolerability profile to that of placebo and has activity against the most common TD pathogens. XIFAXAN should not be used in patients with diarrhea complicated by fever or blood in the stool or diarrhea due to pathogens other than Escherichia coli. XIFAXAN should be discontinued if diarrhea symptoms get worse or persist more than 24–48 hours and alternative antibiotic therapy should be considered. In clinical trials, XIFAXAN was generally well tolerated. The most common side effects (vs. placebo) were flatulence 11.3% (versus 19.7%), headache 9.7% (versus 9.2%), abdominal pain 7.2% (versus 10.1 %) and rectal tenesmus 7.2% (versus 8.8%).

Rifaximin has been used in Italy for 24 years and is approved in 33 countries. Salix acquired rights to market rifaximin in North America from Alfa Wassermann S.p.A. in Bologna, Italy. Alfa Wassermann markets rifaximin in Italy under the trade name Normix^®.

About Salix Pharmaceuticals

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

About Lupin

Headquartered in Mumbai, India, Lupin Limited is an innovation led transnational pharmaceutical company producing a wide range of quality, affordable generic and branded formulations and APIs for the developed and developing markets of the world. The Company today has significant market share in key markets in the Cardiovasculars (prils and statins), Diabetology, Asthma, Pediatrics, CNS, GI, Anti-Infectives and NSAIDs therapy segments, not to mention global leadership positions in the Anti-TB and Cephalosporins. The Company’s R&D endeavors have resulted in significant progress in its NCE program. The Company’s foray into Advanced Drug Delivery Systems has resulted in the development of platform technologies that are being used to develop value-added drugs and generic pharmaceuticals.

Lupin’s Drugs and products reach over 70 countries in the world. Today, Lupin has the unique distinction of being the fastest growing top 10 Generics players in the two largest pharmaceutical markets of the world – The U.S (ranked 9th by prescriptions & growing at 92 %) and Japan (ranked 7th and growing at 23%). The company is also the fastest growing, top 5 pharmaceutical players in India (ORG IMS - March 2009) and the fastest growing Generic player in South Africa (ranked 6th and growing at over 30 % YoY - IMS)

Additional Salix Information

Salix also markets OSMOPREP^® (sodium phosphate monobasic monohydrate, USP and sodium phosphate dibasic anhydrous, USP) Tablets, MOVIPREP^® (PEG 3350, Sodium Sulfate, Sodium Chloride, Potassium Chloride, Sodium Ascorbate and Ascorbic Acid for Oral Solution), VISICOL^® (sodium phosphate monobasic monohydrate, USP, and sodium phosphate dibasic anhydrous, USP) Tablets, APRISO™ (mesalamine) extended-release capsules 0.375 g., METOZOLV^TM ODT (metoclopramide HCl), 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 and rifaximin for additional indications are under development.

For full prescribing information on Salix products, please visit www.salix.com. Salix trades on the NASDAQ Global Select Market under the ticker symbol “SLXP.”

For more information, please visit Salix’s Web site at www.salix.com or contact the Company at 919-862-1000. Information on our Web site is not incorporated into 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 reliance on third parties, such as Lupin, under collaborative agreements and for manufacturing of products; the possible impairment of, or inability to obtain, intellectual property rights and the costs of obtaining such rights from third parties; drug development risks; the unpredictable nature of the duration and results of regulatory review of new drug applications; market acceptance for approved products; generic and other competition; our need to return to profitability; 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.