10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2011

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM              TO             

COMMISSION FILE NUMBER 000-15313

SAVIENT PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	13-3033811
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
One Tower Center, 14th Floor, East Brunswick, New Jersey	08816
(Address of Principal Executive Offices)	(Zip Code)

(732) 418-9300

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x    

The number of shares outstanding of the issuers’ Common Stock, par value $.01 per share, as of November 5, 2011 was 71,471,431.

SAVIENT PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2011

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements:		3
	Consolidated Balance Sheets		3
	Consolidated Statements of Operations		4
	Consolidated Statement of Changes in Stockholders’ Equity		5
	Consolidated Statements of Cash Flows		6
	Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		42
Item 4.	Controls and Procedures		43
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings		43
Item 1A.	Risk Factors		44
Item 6.	Exhibits		64
	Signatures		65
	Exhibit Index		66

2

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SAVIENT PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	September 30, 2011			December 31, 2010
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	154,773		$	44,791
Short-term investments		47,935			20,070
Accounts receivable, net		3,709			909
Inventories, net		8,004			3,140
Prepaid expenses and other current assets		5,295			2,415
Total current assets		219,716			71,325
Deferred income taxes, net		—			4,200
Property and equipment, net		680			809
Deferred financing costs, net		4,246			—
Other assets (including restricted cash)		1,280			1,284
Total assets	$	225,922		$	77,618
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	6,947		$	1,601
Deferred revenues		335			428
Deferred income taxes		5,769			—
Accrued interest on convertible notes		1,912			—
Other current liabilities		14,861			16,023
Total current liabilities		29,824			18,052
Convertible notes, net of discount of $56,155		173,845			—
Other liabilities		3,412			10,299
Commitments and contingencies
Stockholders’ Equity:
Preferred stock—$.01 par value 4,000,000 shares authorized; no shares issued		—			—
Common stock—$.01 par value 150,000,000 shares authorized; 71,473,000 issued and outstanding at September 30, 2011 and 70,259,000 shares issued and outstanding at December 31, 2010		715			703
Additional paid-in-capital		404,873			364,139
Accumulated deficit		(386,747	)		(315,576	)
Accumulated other comprehensive income		—			1
Total stockholders’ equity		18,841			49,267
Total liabilities and stockholders’ equity	$	225,922		$	77,618

The accompanying notes are an integral part of these consolidated financial statements.

3

SAVIENT PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Revenues:
Product sales, net	$	2,581		$	988		$	5,855		$	3,068
Cost and expenses:
Cost of goods sold		4,584			421			6,008			998
Research and development		5,858			8,958			17,315			22,521
Selling, general and administrative		22,268			7,265			62,761			16,764
		32,710			16,644			86,084			40,283
Operating loss		(30,129	)		(15,656	)		(80,229	)		(37,215	)
Investment income, net		39			33			107			82
Interest expense on convertible notes		(3,406	)		—			(11,393	)		—
Other (expense) income, net		(141	)		(43,729	)		1,289			(35,525	)
Loss before income taxes		(33,637	)		(59,352	)		(90,226	)		(72,658	)
Income tax benefit		(6,245	)		—			(19,055	)		—
Net loss	$	(27,392	)	$	(59,352	)	$	(71,171	)	$	(72,658	)
Loss per common share:
Basic and diluted	$	(0.39	)	$	(0.89	)	$	(1.02	)	$	(1.09	)
Weighted-average number of common and common equivalent shares:
Basic and diluted		70,122			67,047			70,037			66,773

The accompanying notes are an integral part of these consolidated financial statements.

4

SAVIENT PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

	Common Stock
	Shares			Par Value		Additional Paid-In- Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Total Stockholders’ Equity
Balance December 31, 2010		70,259		$	703	$	364,139		$	(315,576	)	$	1		$	49,267
Comprehensive loss:		—			—		—			—			—			—
Net loss		—			—		—			(71,171	)		—			(71,171	)
Unrealized loss on marketable securities, net		—			—		—			—			(1	)		(1	)
Total comprehensive loss		—			—		—			—			—			(71,172	)
Restricted stock grants		1,174			11		(11	)		—			—			—
Amortization of deferred compensation		—			—		2,440			—			—			2,440
Forfeiture of restricted stock grants		(87	)		—		—			—			—			—
Exercise of stock options		34			—		168			—			—			168
Issuance of common stock		93			1		499			—			—			500
ESPP compensation expense		—			—		504			—			—			504
Stock option compensation expense		—			—		2,707			—			—			2,707
Convertible note conversion option, net of tax of $23,924		—			—		34,427			—			—			34,427
Balance September 30, 2011		71,473		$	715	$	404,873		$	(386,747	)	$	—		$	18,841

The accompanying notes are an integral part of these consolidated financial statements.

5

SAVIENT PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)

	Nine Months Ended September 30,
	2011			2010
Cash flows from operating activities:
Net loss	$	(71,171	)	$	(72,658	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		294			321
Accretion of discount on convertible notes		4,109			—
Change in valuation of warrant liability		—			32,224
Warrant liability transferred to APIC upon exercise of warrant		—			2,682
Amortization of deferred compensation related to restricted stock (including restricted stock awards that contain performance conditions)		2,440			3,818
Amortization of deferred financing costs		449			—
Stock compensation expense		3,211			2,680
Recoverable income taxes		—			2,006
Unrecognized tax benefit liability		(6,853	)		196
Deferred income taxes		(13,955	)		—
Accrued interest on convertible notes		1,912			—
Changes in:
Accounts receivable, net		(2,800	)		(246	)
Inventories, net		(4,864	)		91
Prepaid expenses and other current assets		(2,185	)		(467	)
Accounts payable		5,346			(3,283	)
Other current liabilities		(1,162	)		(3,581	)
Deferred revenues		(93	)		286
Net cash used in operating activities		(85,322	)		(35,931	)
Cash flows from investing activities:
Reclassification to cash and cash equivalents		—			5,095
Purchases of held-to-maturity securities (investments—short-term)		(27,865	)		(19,859	)
Capital expenditures		(165	)		(22	)
Changes in other long-term assets		4			8
Net cash used in investing activities		(28,026	)		(14,778	)
Cash flows from financing activities:
Proceeds from issuance of common stock		667			2,069
Stock repurchase and cancellation		—			(1,282	)
Proceeds from issuance of convertible notes, net of expenses		222,697			—
Proceeds from the issuance of common stock from the exercise of warrants		—			5,100
Changes in other long-term liabilities		(34	)		(43	)
Net cash provided by financing activities		223,330			5,844
Net increase (decrease) in cash and cash equivalents		109,982			(44,865	)
Cash and cash equivalents at beginning of period		44,791			108,172
Cash and cash equivalents at end of period	$	154,773		$	63,307
Supplementary Information
Other information:
Income tax paid	$	—		$	—
Interest paid	$	5,393		$	73

The accompanying notes are an integral part of these consolidated financial statements.

6

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary for a fair presentation of Savient Pharmaceuticals, Inc.’s (“Savient” or the “Company”) financial position at September 30, 2011, the results of its operations for the nine months ended September 30, 2011 and 2010, and cash flows for the nine months ended September 30, 2011 and 2010. Interim financial statements are prepared on a basis consistent with the Company’s annual financial statements. Results of operations for the nine months ended September 30, 2011 are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2011.

The consolidated balance sheet as of December 31, 2010 was derived from the audited financial statements at that date and does not include all of the information and notes required by GAAP for complete financial statements. The interim statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Savient Pharma Holdings, Inc. and Savient Pharma Ireland Limited.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to investments, accounts receivable, reserve for product returns, inventories, rebates, property and equipment, share-based compensation and income taxes. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Results may differ from these estimates due to actual outcomes differing from those on which the Company bases its assumptions.

Investments

The Company classifies investments as “available-for-sale securities,” “held-to-maturity securities” or “trading securities.” Investments that are purchased and held principally for the purpose of selling them in the near-term are classified as trading securities and marked to fair value through earnings. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity securities. Investments not classified as trading securities or held-to-maturity securities are considered to be available-for-sale securities. Changes in the fair value of available-for-sale securities are reported as a component of accumulated other comprehensive income in the consolidated statements of stockholders’ equity and are not reflected in the consolidated statements of operations until a sale transaction occurs or when declines in fair value are deemed to be other-than-temporary (“OTT”).

Inventories, net

Inventories are stated at the lower of cost or market. Cost is determined based on actual cost. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, reserves are recorded for the difference between cost and market value. These reserves are determined based on estimates.

Convertible debt

The debt and equity components of the Company’s 4.75% Convertible Senior Notes (“the 2018 Convertible Notes”) due on February 1, 2018 are bifurcated and accounted for separately. The debt component of the 2018 Convertible Notes, which excludes the associated equity conversion feature, is recorded at fair value as of the issuance date. The equity component, representing the difference between the amount allocated to the debt component and the proceeds received upon issuance of the 2018 Convertible Notes, is recorded in additional paid-in-capital in the consolidated balance sheets. The carrying value of the 2018 Convertible Notes resulting from bifurcation is subsequently accreted back to its principal amount through the recognition of non-cash interest expense. See Note 14 to the consolidated financial statements for more details.

7

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

Deferred Financing Costs, net

The Company incurred $7.3 million in financing costs related to the issuance of $230 million principal amount of the 2018 Convertible Notes, which is allocated to the debt and equity components of the Company’s convertible debt instruments. The Company allocated $5.4 million to the debt component and recorded it as deferred finance costs. The Company allocated the remaining $1.9 million to the equity component and recorded it against additional paid-in-capital. At September 30, 2011, the Company had $4.9 million of net deferred financing costs recorded with respect to the Convertible Notes on the consolidated balance sheets, $4.2 million of which was recorded as a long-term asset. These costs are being amortized using the effective interest rate method over the seven-year contract term that the 2018 Convertible Notes are outstanding.

Note 2—Recently Issued Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, Presentation of Comprehensive Income, which amends Accounting Standards Codification (“ASC”) Topic 220, Comprehensive Income. The amendments give an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The amendments eliminate the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 is effective prospectively for the Company’s consolidated financial statements for the year beginning January 1, 2012 and is not expected to have a significant impact on the Company’s consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”), which represents clarifications of ASC Topic 820, Fair Value Measurement, and includes some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. The amendments result in common fair value measurement and disclosure requirements in GAAP and IFRS. Consequently, the amendments change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the amendments do not result in a change in the application of the requirements in ASC Topic 820. Some of the amendments clarify the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. ASU 2011–04 is effective prospectively for the Company’s consolidated financial statements for the year beginning January 1, 2012. The Company is currently assessing the potential impact from its future adoption of ASU 2011-04 on its consolidated financial statements.

In December 2010, the FASB issued ASU 2010-27, Other Expenses (Topic 720): Fees Paid to the Federal Government by Pharmaceutical Manufacturers. ASU 2010-27 addresses questions concerning how pharmaceutical manufacturers should recognize and classify in their income statements fees mandated by the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act (collectively, the Acts). The Acts impose an annual fee on the pharmaceutical manufacturing industry for each calendar year beginning on or after January 1, 2011. The amendments in this update specify that the liability for the fee should be estimated and recorded in full upon the first qualifying sale with a corresponding deferred cost that is amortized to expense using a straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable. ASU 2010-27 is not expected to have a significant effect on the Company’s consolidated financial statements.

8

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

Note 3—Fair Value of Financial Instruments

The Company categorizes its financial instruments into a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets recorded at fair value on the Company’s consolidated balance sheets are categorized as follows:

Level 1: Unadjusted quoted prices for identical assets in an active market.

Level 2: Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full-term of the asset. Level 2 inputs include the following:

• quoted prices for similar assets in active markets,

• quoted prices for identical or similar assets in non-active markets,

• inputs other than quoted market prices that are observable, and

• inputs that are derived principally from or corroborated by observable market data through correlation or other means.

Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset.

The following table presents the Company’s cash and cash equivalents, and investments, including the hierarchy for its financial instruments measured at fair value on a recurring basis as of September 30, 2011:

	Carrying Amount		Estimated Fair Value		Assets and Liabilities Measured at Fair Value		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Cash and cash equivalents:
Cash	$	6,640	$	6,640	$	6,640	$	6,640	$	—	$	—
Money market funds		148,133		148,133		148,133		148,133		—		—
Total cash and cash equivalents		154,773		154,773		154,773		154,773		—		—
Short-term investments (available-for-sale):
Equity securities		—		—		—		—		—		—
Short-term investments (held-to-maturity):
Certificates of deposit		47,935		47,935		—		—		—		—
Total short-term investments		47,935		47,935		—		—		—		—
Total cash and cash equivalents and short-term investments		202,708		202,708		154,773		154,773		—		—
Long-term investments (held-to-maturity)
Certificates of deposit		1,280		1,280		—		—		—		—
Total long-term investments		1,280		1,280		—		—		—		—
Total	$	203,988	$	203,988	$	154,773	$	154,773	$	—	$	—

The $169.7 million debt component of the 2018 Convertible Notes was recorded at fair value as of the issuance date of February 4, 2011 based on a Level 3 input. The carrying value of the 2018 Convertible Notes is subsequently accreted back to its principal. The $173.8 million carrying amount of the 2018 Convertible Notes at September 30, 2011 includes accretion of the discount on the Convertible Notes subsequent to the issuance date of $4.1 million. See Note 14 to the consolidated financial statements for more details.

9

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

Note 4—Investments

At September 30, 2011 and December 31, 2010, the Company held no trading securities. Available-for-sale and held-to-maturity securities consisted of the following:

	September 30, 2011
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In thousands)
Available-for-sale securities:
Equity securities (1)	$	—	$	1	$	(1	)	$	—
Total available-for-sale securities		—		1		(1	)		—
Held-to-maturity securities:
Fixed maturities:
Bank deposits and certificates of deposit		49,215		—		—			49,215
Total held-to-maturity securities		49,215		—		—			49,215
Total	$	49,215	$	1	$	(1	)	$	49,215

	December 31, 2010
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In thousands)
Available-for-sale securities:
Equity securities (1)	$	—	$	1	$	—		$	1
Total available-for-sale securities		—		1		—			1
Held-to-maturity securities:
Fixed maturities:
Bank deposits and certificates of deposit		21,350		—		(1	)		21,349
Total held-to-maturity securities		21,350		—		(1	)		21,349
Total	$	21,350	$	1	$	(1	)	$	21,350

(1) Equity securities at September 30, 2011 and December 31, 2010 were comprised of the Company’s investment in common shares of Neuro-Hitech, Inc. The fair value of this investment is obtained from quoted prices in an inactive market. The Company considers the market for Neuro-Hitech, Inc. shares to be inactive due to its low trading volume and infrequency of trading.

The Company’s available-for-sale and held-to-maturity securities were included in the following captions in its consolidated balance sheets:

	September 30, 2011				December 31, 2010
	Available- for-Sale Securities:		Held-to- Maturity Securities:		Available- for-Sale Securities		Held-to- Maturity Securities:
	(In thousands)
Cash and cash equivalents	$	—	$	—	$	—	$	6,200
Short-term investments		—		47,935		1		13,870
Other long-term assets (including investments and restricted cash)		—		1,280		—		1,280
	$	—	$	49,215	$	1	$	21,350

10

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

At September 30, 2011, all of the Company’s held-to-maturity securities classified as short-term investments had maturity dates of one-year or less. Since available-for-sale securities are made up exclusively of equity securities, there are no maturity dates associated with available-for-sale securities. At September 30, 2011 and December 31, 2010, there was $1,000 and $2,000 of net unrealized losses, respectively, included as a component of accumulated other comprehensive income, net of taxes. Additionally, the amount included as a component of other long-term assets reflects the Company’s office rent-related security deposit, which is secured by a $1.3 million cash deposit.

Note 5—Inventories

At September 30, 2011 and December 31, 2010, inventories at cost, net of reserves, were as follows:

	September 30, 2011			December 31, 2010
	(In thousands)
Raw materials	$	3,776		$	888
Work-in-progress		6,930			2,605
Finished goods		1,713			913
Inventory at cost		12,419			4,406
Inventory reserves		(4,415	)		(1,266	)
Total	$	8,004		$	3,140

An allowance is established when management determines that certain inventories may not be saleable. The Company states inventories at the lower of cost or market. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company records reserves for the difference between the cost and the market value. These reserves are recorded based upon various factors for the Company’s products, including the level of product manufactured by the Company, the level of product in the distribution channel, current and projected product demand, and the expected shelf life of the product. For the three and nine months ended September 30, 2011 the Company recorded a $3.4 million charge against income to reserve for excess KRYSTEXXA inventory that had expiration dates such that it was unlikely the product will be sold.

Note 6—Property and Equipment, Net

Property and equipment, net at September 30, 2011 and December 31, 2010 is summarized below:

	September 30, 2011			December 31, 2010
	(In thousands)
Office equipment	$	2,793		$	2,628
Office equipment—capital leases		332			332
Leasehold improvements		1,546			1,546
		4,671			4,506
Accumulated depreciation and amortization		(3,991	)		(3,697	)
Total	$	680		$	809

Depreciation and amortization expense was approximately $0.1 million for each of the three-month periods ended September 30, 2011 and 2010 and $0.3 million for each of the nine-month periods ended September 30, 2011 and 2010, respectively.

Capital lease obligations associated with capital lease office equipment are included in other current liabilities and non-current other liabilities. See Note 13 to the consolidated financial statements for more details.

11

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

Note 7—Revenue Recognition

The Company generates revenue from product sales. Revenue is not recognized until it is realized or realizable and earned. Revenue is realized or realizable and earned when all revenue recognition criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the Company’s price is fixed and determinable, and (iv) collectability is reasonably assured.

Revenue from sales transactions where the buyer has the right to return the product is recognized at the time of sale only if (i) the seller’s price to the buyer is substantially fixed or determinable at the date of sale, (ii) the buyer has paid the seller, or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product, (iii) the buyer’s obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product, (iv) the buyer acquiring the product for resale has economic substance apart from that provided by the seller, (v) the seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer, and (vi) the amount of future returns can be reasonably estimated.

Given the Company’s limited sales history for KRYSTEXXA, coupled with the products’ new entry into its market, the Company is currently unable to reasonably estimate future product returns. Therefore, the Company has determined that the shipments of KRYSTEXXA made to specialty distributors do not meet the criteria for revenue recognition at the time of shipment, and accordingly, such shipments are accounted for using the sell-through method. Under the sell-through method, the Company does not recognize revenue upon shipment of KRYSTEXXA to specialty distributors. For these product sales, the Company invoices the specialty distributor and records deferred revenue equal to the gross invoice price. The Company then recognizes revenue when the product is sold through, or shipped from the specialty distributors to their customers, including doctors and infusion suites. Because of the price of KRYSTEXXA, the short period from sale of the product to patient infusion and limited product return rights, KRYSTEXXA distributors and their customers generally carry limited inventory. The Company also sells KRYSTEXXA to wholesalers whereby the Company drop-ships the product directly to hospitals. As there is limited risk of returns from hospitals as infusions take place in their facilities, the Company records revenue when KRYSTEXXA has been received at the hospital and title has transferred in accordance with the terms of sale.

Oxandrin product sales are generally recognized when title to the product has transferred to the Company’s customer in accordance with the terms of the sale. The Company ships its authorized generic oxandrolone product to its distributor and accounts for these shipments on a consignment basis until product is sold into the retail market. The Company defers recognition of revenue related to these shipments until it confirms that the product has been sold into the retail market and all other revenue recognition criteria have been met. Deferred revenue at September 30, 2011 and December 31, 2010 was $0.3 million and $0.4 million, respectively. Deferred revenue at September 30, 2011 reflected $0.2 million and $0.1 million for KRYSTEXXA and Oxandrin, respectively.

The Company’s net product revenues represent total product revenues less allowances for returns, Medicaid rebates, other government rebates, other rebates, discounts, and distribution fees.

Allowance for returns

The Company’s product sales in the United States are primarily composed of sales of KRYSTEXXA, Oxandrin and its authorized generic oxandrolone product. In general, the Company provides credit for product returns for KRYSTEXXA that are returned six months after the product expiration date. Additionally, the Company provides credit for product returns for Oxandrin and generic oxandrolone that are returned six months prior to and up to 12 months after the product expiration date. Upon sale, the Company estimates an allowance for future product returns. The Company provides additional reserves for contemporaneous events that were not known or knowable at the time of shipment. In order to reasonably estimate future returns, the Company analyzes both quantitative and qualitative information including, but not limited to, actual return rates by lot production, the level of product manufactured by the Company, the level of product in the distribution channel, expected shelf life of the product, current and projected product demand, the introduction of new or generic products that may erode current demand, and general economic and industry-wide indicators.

The allowance for product returns at September 30, 2011 and December 31, 2010 was $0.9 million and $0.5 million, respectively. This allowance is included in other current liabilities on the Company’s consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

Allowances for Medicaid, other government rebates and other rebates

The Company’s contracts with Medicaid and other government agencies such as the Federal Supply System, commit it to providing those entities with the Company’s most favorable pricing. This ensures that the Company’s products remain eligible for purchase or reimbursement under these programs. Based upon the Company’s contracts and the most recent experience with respect to sales through each of these channels, the Company provides an allowance for rebates. The Company monitors the sales trends and adjusts the rebate percentages on a regular basis to reflect the most recent rebate experience. The allowance for rebates at September 30, 2011 and December 31, 2010 was $0.5 million and $0.3 million, respectively. This allowance is included in other current liabilities within the Company’s consolidated balance sheets.

Commercial discounts

The Company sells directly to drug wholesalers and specialty distributors. Terms of these sales vary, but generally provide for invoice discounts for prompt payment to drug wholesalers only. These discounts are recorded by the Company at the time of sale.

Distribution fees

The Company has a distribution arrangement with a third-party logistics provider which includes payment terms equal to a flat monthly fee plus a per transaction fee for specified services. The Company also records distribution fees as incurred associated with wholesaler distribution services from its three largest wholesaler customers and its five specialty distributors.

Note 8—Research and Development

The Company’s research and development includes costs associated with the research and development of the Company’s KRYSTEXXA product prior to U.S. Food and Drug Administration (“FDA”) approval and FDA-related post-marketing commitments for approved products (KRYSTEXXA post-approval). These costs primarily include pre-clinical and clinical studies and trials, personnel costs, including compensation, consultants and contract research organizations, quality control and assurance costs, regulatory costs and costs related to the development of commercial scale manufacturing capabilities for KRYSTEXXA. These manufacturing capabilities also include the costs of preparing Fujifilm Diosynth Biotechnologies USA LLC (“Fujifilm”) to serve as the Company’s secondary source supplier of pegloticase drug substance for KRYSTEXXA in the United States. Costs associated with the Company’s Medical Affairs function are also currently classified as research and development. Currently, the focus of the Company’s Medical Affairs function is to support the Company’s post-approval clinical trials. Additionally, the Company includes the legal costs associated with new patents and existing patent maintenance for products (KRYSTEXXA) that have not yet been approved in countries outside the United States as research and development. Research and development costs are expensed as incurred.

Prior to the FDA approval of KRYSTEXXA, manufacturing costs associated with third-party contractors for validation and commercial batch production, process technology transfer, quality control and stability testing, raw material purchases, overhead expenses and facilities costs were recorded as research and development and expensed as incurred as future use could not be determined, and there was uncertainty surrounding FDA approval of KRYSTEXXA for marketing in the United States. Following regulatory approval of KRYSTEXXA by the FDA, the Company capitalizes certain manufacturing costs as inventory in cases where the manufacturing costs meet the definition of an inventoriable asset.

Clinical trial costs have been another significant component of research and development expenses and all of the Company’s clinical studies are performed by third-party contract research organizations (“CROs”). The Company accrues costs for clinical studies performed by CROs that are milestone or event driven in nature and based on reports and invoices submitted by the CRO. These expenses are based on patient enrollment as well as costs consisting primarily of payments made to the CRO, clinical sites, investigators, testing facilities and patients for participating in the Company’s clinical trials.

Non-refundable advance payments for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the goods are delivered or the related services are performed. The Company has not deferred any research and development costs as of September 30, 2011 and December 31, 2010 and therefore had no amortization expense for the nine-month periods ended September 30, 2011 and 2010, respectively, based on services performed.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

Note 9—Earnings (Loss) per Share of Common Stock

The Company accounts for and discloses net earnings (loss) per share using the treasury stock method. The dilutive effect of convertible debt is computed using the “as-if” converted method. Net earnings (loss) per common share, or basic earnings (loss) per share, is computed by dividing net earnings (loss) by the weighted-average number of common shares outstanding. Net earnings (loss) per common share assuming dilutions, or diluted earnings (loss) per share, is computed by reflecting the potential dilution from the exercise of in-the-money stock options, non-vested restricted stock and non-vested restricted stock units.

The Company’s basic and diluted weighted-average number of common shares outstanding as of September 30, 2011 and 2010 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(In thousands)
Basic		70,122		67,047		70,037		66,773
Incremental common stock equivalents		—		—		—		—
Diluted		70,122		67,047		70,037		66,773

At September 30, 2011 and 2010, all in-the-money stock options, unvested restricted stock and warrants amounting to 1,851,782 and 7,116,919 shares, respectively, were excluded from the computation of diluted earnings (loss) per share as their effect would have been anti-dilutive, since the Company reported a net loss for these periods. At September 30, 2011, 19,934,997 shares related to the Company’s Convertible Notes, calculated “as-if” the Convertible Notes had been converted, were excluded from the computation of diluted earnings (loss) per share as their effect would have been anti-dilutive, since the Company reported a net loss for the period.

Note 10—Stockholder’s Equity

In February 2011, the Company issued $230 million principal amount of the 2018 Convertible Notes at par that become due on February 1, 2018. As part of the accounting for the 2018 Convertible Notes, the Company bifurcated the conversion feature and recorded $34.4 million to additional paid-in-capital, net of a deferred tax liability of $23.9 million as well as equity issuance costs of $1.9 million. See Note 14 to the consolidated financial statements for more details.

On April 8, 2009, the Company raised $31.0 million from a registered direct offering, which yielded approximately $29.0 million in cash, net of approximately $2.0 million of offering costs which were charged to additional paid-in-capital. The Company issued 5,927,343 shares of its common stock to existing and new institutional investors as part of the offering. The investors also received warrants to purchase up to 5,038,237 shares of the Company’s common stock at an initial exercise price of $10.46 per share. The Company’s warrant liability was marked-to-market each reporting period with the change in fair value recorded as a gain or loss within other expense, net on the Company’s consolidated statement of operations until the warrants were exercised, expire or other facts and circumstances led the warrant liability to be reclassified as an equity instrument. The fair value of the warrant liability was determined at each reporting period by utilizing a Monte Carlo simulation model that takes into account estimated probabilities of possible outcomes provided by the Company. The fair value of the warrant liability on the date of the offering was $12.6 million.

During the year ended December 31, 2010, holders of the Company’s warrants exercised warrants to purchase an aggregate of 5,038,237 shares of the Company’s common stock, either through a cashless exercise or cash exercise. The Company received an aggregate of $8.5 million of cash proceeds from the cash exercises of warrants to purchase an aggregate of 812,617 shares of common stock. The remainder of the warrants were exercised via a cashless net share settlement process, whereby warrants to purchase an aggregate of 4,225,620 shares of common stock were exercised, resulting in the forfeiture of 1,997,657 shares in satisfaction of the warrant exercise price, and the issuance of 2,227,963 shares of common stock. As of December 31, 2010, all of the warrants had been exercised and no warrants to purchase shares of the Company’s common stock remained outstanding. As all of the warrants have been exercised and are no longer outstanding, the Company’s warrant liability was completely converted into stockholders’ equity as of December 31, 2010.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

Note 11—Share-Based Compensation

The Company’s 2004 Incentive Plan expired by its terms on April 30, 2011 and no further awards were granted under this plan. In 2011, the Company adopted its 2011 Incentive Plan, pursuant to which up to an aggregate of 7.75 million shares of the Company’s common stock may be issued. Awards may be granted as incentive and non-statutory stock options, stock appreciation rights, restricted stock awards and restricted stock unit awards, performance-based stock option and restricted stock awards, and other forms of equity-based and cash incentive compensation. Under this plan, 6,387,749 shares remain available for issuance pursuant to future grants at September 30, 2011.

Total compensation cost that has been charged against income related to the above plans was $1.9 million and $3.9 million for the three months ended September 30, 2011 and 2010, respectively, and $5.1 million and $6.2 million for the nine months ended September 30, 2011 and 2010, respectively. The exercise of stock options and the vesting of restricted stock during the three and nine months ended September 30, 2011 generated income tax deductions of approximately $0.2 million and $1.5 million, respectively. The Company does not recognize a tax benefit with respect to an excess stock compensation deduction until the deduction actually reduces the Company’s income tax liability. At such time, the Company utilizes the net operating losses generated by excess stock-based compensation to reduce its income tax payable and the tax benefit is recorded as an increase in additional paid-in-capital. No income tax benefit was recognized in the consolidated statements of operations for share-based compensation arrangements for the nine months ended September 30, 2011 and 2010, respectively.

The following table summarizes stock-based compensation related to the above plans by expense category for the three and nine months ended September 30, 2011 and 2010:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(In thousands)
Research and development	$	375	$	1,674	$	1,028	$	2,673
Selling, general and administrative		1,510		2,208		4,119		3,541
Total non-cash compensation expense related to share-based compensation included in operating expense	$	1,885	$	3,882	$	5,147	$	6,214

Stock Options

The Company grants stock options to employees and directors with exercise prices equal to the fair market value of the underlying shares of the Company’s common stock on the date that the options are granted. Options granted have a term of 10 years from the grant date. Options granted to employees vest over a four-year period and options granted to directors vest in equal quarterly installments over a one-year period from the date of grant. Options to directors are granted on an annual basis and represent compensation for services performed on the Board of Directors. Compensation cost for stock options is charged against income on a straight-line basis between the grant date for the option and each vesting date, except for those options that contain performance and market-based conditions. The Company estimates the fair value of all stock option awards at the closing price on the grant date by applying the Black-Scholes option pricing valuation model. The application of this valuation model involves assumptions that are highly subjective, judgmental and sensitive in the determination of compensation cost.

During the nine months ended September 30, 2011, the Company awarded to employees options to purchase an aggregate of approximately 2.1 million shares of common stock. In addition, on April 29, 2011, the Company made an inducement grant outside of the above mentioned plans, pursuant to the NASDAQ inducement grant exception, for the purchase of 50,000 shares of the Company’s common stock with an exercise price equal to the closing price of the Company’s common stock on the grant date. The option has a ten-year term, will vest and become exercisable as to 12,500 shares on April 29, 2012, and as to an additional 3,125 shares at the end of each successive three-month period thereafter until April 29, 2015. In the event of the termination by the Company without cause or for good reason, the time-based stock option will immediately accelerate and become fully vested.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

The weighted-average key assumptions used in determining the fair value of options granted during the three and nine months ended September 30, 2011 and 2010 were as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2011			2010		2011			2010
Weighted-average volatility		95	%		—		88	%		78	%
Weighted-average risk-free interest rate		1.4	%		—		2.1	%		2.9	%
Weighted-average expected life in years		5.4			—		4.4			6.9
Dividend yield		0.0	%		—		0.0	%		0.0	%
Weighted-average grant date fair value per share	$	3.59			—	$	5.16		$	8.87

Historical information is the primary basis for the selection of the expected volatility and expected dividend yield. The expected terms of options granted prior to December 31, 2007 were based upon the simplified method. The simplified method estimates the expected term as the midpoint between vesting and the grant contractual life. The expected terms of options granted subsequent to December 31, 2007 are based upon the Company’s historical experience for similar types of stock option awards. The risk-free interest rate is selected based upon yields of United States Treasury issues with a term equal to the expected life of the option being valued.

The Company did not issue any shares of common stock upon the exercise of stock options for the three months ended September 30, 2011. During the three months ended September 30, 2010, the Company issued 85,000 shares of common stock upon the exercise of stock options and received proceeds of $0.6 million. For the nine months ended September 30, 2011 and 2010 the Company issued 33,000 and 273,000 shares respectively, of common stock upon the exercise of stock options and received proceeds of $0.2 million and $1.8 million, respectively. For the three months ended September 30, 2011 and 2010, approximately $0.7 million and $0.4 million, respectively, of stock option compensation cost was charged against income. For the nine months ended September 30, 2011 and 2010, approximately $2.3 million and $1.6 million, respectively, of stock option compensation cost was charged against income. As of September 30, 2011, there was $7.0 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to unamortized stock option compensation which is expected to be recognized over a weighted-average period of approximately 2.9 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

Stock option activity during the nine months ended September 30, 2011, was as follows:

	Number of Shares			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in yrs)		Aggregate Intrinsic Value of In-the- Money Options
	(In thousands, except weighted-average data)
Outstanding at December 31, 2010		2,183		$	8.13		7.13	$	8,710
Granted		2,149			8.16		—		—
Exercised		(33	)		5.08		—		—
Cancelled		(314	)		8.37		—		—
Outstanding at September 30, 2011		3,985		$	8.15		7.86	$	363
Exercisable at September 30, 2011		1,584		$	8.14		5.66	$	272

The aggregate intrinsic value in the previous table reflects the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price of the options, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all option holders exercised their options on September 30, 2011. The intrinsic value of the Company’s stock options changes based on the closing price of the Company’s common stock. The total intrinsic value of options exercised (the difference in the market price of the Company’s common stock on the exercise date and the price paid by the optionee to exercise the option) for the nine months ended September 30, 2011 was approximately $0.1 million. The closing price per share of the Company’s common stock was $4.10 and $22.87 on September 30, 2011 and 2010, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

Stock Options that Contain Performance or Market-Based Conditions

Performance or Market Conditions

Compensation cost charged against income related to stock option awards that contain performance or market conditions (“performance awards”) was $0.2 million and $0.8 million for the three months ended September 30, 2011 and 2010, respectively, and $0.4 million and $0.8 million for the nine months ended September 30, 2011 and 2010, respectively. At September 30, 2011, approximately 400,000 performance awards, which encompass performance targets set for senior management personnel through 2013, remain unvested and non-exercisable, and could result in approximately $2.7 million of additional compensation expense if the performance targets are met or expected to be attained. Included in the unvested performance awards total noted above are two inducement grants, described below, that the Company made outside of the above mentioned plans, pursuant to the NASDAQ inducement grant exception, to recruit key positions within the Company during the nine months ended September 30, 2011. The Company made the first of these inducement grants on January 31, 2011, with the Company award of a performance option to purchase 250,000 shares of the Company’s common stock, with an exercise price equal to the closing price of the Company’s common stock on the date of grant, a ten-year term, and that will vest and become exercisable upon the satisfaction of certain performance conditions. In the event that any performance condition is not met, the portion of the option subject to the performance condition will remain outstanding and will vest (subject to the employees’ continued employment by the Company) upon the earlier of the fourth anniversary of the date of grant or a change of control of the Company. The Company made the second of these inducement grants on April 29, 2011, with the award of a performance option, with similar terms as the first to purchase 50,000 shares of the Company’s common stock.

The weighted-average key assumptions used in determining the fair value of stock option awards with performance or market conditions granted during the three and nine months ended September 30, 2011 and 2010 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011			2010
Weighted-average volatility		—		—		83.8	%		—
Weighted-average risk-free interest rate		—		—		3.0	%		—
Weighted-average expected term in years		—		—		7.5			—
Dividend yield		—		—		0.0	%		—
Weighted-average grant date fair value per share		—		—	$	8.10			—

For performance options, the Company utilizes a Monte Carlo simulation model which incorporates the expected exercise and termination behavior of optionees into a model of the Company’s future stock price.

Stock option activity for options that contain performance or market conditions during the nine months ended September 30, 2011, was as follows:

	Number of Shares			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in yrs)		Aggregate Intrinsic Value of In-the- Money Options
	(In thousands, except weighted-average data)
Outstanding at December 31, 2010		117		$	13.57		9.04	$	—
Granted		400			9.21		—		—
Exercised		—			—		—		—
Cancelled		(15	)		11.91		—		—
Outstanding at September 30, 2011		502		$	10.14		9.14	$	—
Exercisable at September 30, 2011		102		$	13.81		8.16	$	—

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

Restricted Stock

The Company grants restricted stock and restricted stock unit (“RSU”) awards to its employees and directors. Restricted stock and RSU awards are recorded as deferred compensation and amortized into compensation expense on a straight-line basis over the vesting period, which ranges from one to four years in duration. Restricted stock and RSU awards to directors are granted on a yearly basis and represent compensation for services performed on the Company’s Board of Directors. Restricted stock awards to directors vest in equal quarterly installments over a one-year period from the grant date and RSU awards vest after one-year and thirty-one days. Compensation cost for restricted stock and RSU awards is based on the award’s grant date fair value, which is the closing market price of the Company’s common stock on the grant date, multiplied by the number of shares awarded. During the three months ended September 30, 2011, the Company issued 105,000 shares of restricted stock with an aggregate fair market value of $0.6 million. The Company did not issue any shares of restricted stock during the three months ended September 30, 2010. During the nine months ended September 30, 2011 and 2010, the Company issued 856,000 shares and 31,000 shares of restricted stock, respectively, with an aggregate fair market value of $7.1 million and $0.4 million, respectively. For the three months ended September 30, 2011 and 2010, approximately $0.8 million and $0.5 million, respectively, of deferred restricted stock compensation cost was charged against income. For the nine months ended September 30, 2011 and 2010, approximately $2.0 million and $1.6 million, respectively, of deferred restricted stock compensation cost was charged against income. At September 30, 2011, approximately 958,000 shares remained unvested and there was approximately $8.4 million of unrecognized compensation cost related to restricted stock and RSUs.

A summary of the status of the Company’s unvested restricted stock and RSUs at December 31, 2010 and changes during the nine months ended September 30, 2011, is presented below:

	Number of Shares			Weighted- Average Grant  Date Fair Value Per Share
	(Shares in thousands)
Unvested at December 31, 2010		315		$	11.56
Granted		856			8.35
Vested		(141	)		11.97
Forfeited		(72	)		9.73
Unvested at September 30, 2011		958		$	8.77

The weighted-average grant date fair value for restricted stock awards granted during the nine months ended September 30, 2011 and 2010 was $8.35 and $11.65 per share, respectively. The total grant date fair value of restricted shares vested during the nine months ended September 30, 2011 and 2010, was $1.7 million for each respective period.

Restricted Stock Awards that Contain Performance or Market Conditions

During the three months ended September 30, 2011 and 2010, the Company recorded $0.3 million and $2.1 million, respectively, of compensation expense related to restricted stock awards that contain performance or market conditions. During the nine months ended September 30, 2011 and 2010, the Company recorded $0.4 million and $2.1 million, respectively, of compensation expense related to restricted stock awards that contain performance or market conditions. At September 30, 2011, approximately 317,000 shares of restricted stock awards with performance or market conditions remain unvested, and could result in approximately $3.1 million of additional compensation expense if the performance targets are met or expected to be attained.

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SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

A summary of the status of the Company’s unvested restricted stock awards that contain performance or market conditions at December 31, 2010 and changes during the nine months ended September 30, 2011, is presented below:

	Number of Shares			Weighted- Average Grant Date Fair Value Per Share
	(Shares in thousands)
Unvested at December 31, 2010		39		$	19.37
Granted		300			9.23
Vested		(7	)		13.95
Forfeited		(15	)		20.59
Unvested at September 30, 2011		317		$	9.82

Employee Stock Purchase Plan

In 1998, the Company adopted its 1998 Employee Stock Purchase Plan (the “1998 ESPP”). The 1998 ESPP is qualified as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended. Under the 1998 ESPP, the Company grants rights to purchase shares of common stock (“Rights”) at prices not less than 85% of the lesser of (i) the fair market value of the shares on the date of grant of such Rights or (ii) the fair market value of the shares on the date such Rights are exercised. Therefore, the 1998 ESPP is considered compensatory since, along with other factors, it includes a purchase discount of greater than 5%. For the three months ended September 30, 2011 and 2010, approximately $0.2 million and $0.1 million, respectively, was charged against income related to participation in the 1998 ESPP. For the nine months ended September 30, 2011 and 2010, approximately $0.5 million and $0.3 million, respectively, was charged against income related to participation in the 1998 ESPP.

Note 12—Other Current Liabilities

The components of other current liabilities at September 30, 2011 and December 31, 2010, were as follows:

	September 30, 2011		December 31, 2010
	(In thousands)
Salaries and related expenses	$	3,870	$	2,460
Legal and professional fees		1,477		1,691
Severance		1,399		271
Selling and marketing expense accrual		1,367		1,317
Accrued interest – tax		962		962
Allowance for product returns		887		469
Accrued taxes		865		733
Manufacturing and technology transfer services		789		5,076
Returned product liability		545		679
Allowance for product rebates		452		318
Other		2,248		2,047
Total	$	14,861	$	16,023

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

Note 13—Other Liabilities

The components of other liabilities at September 30, 2011 and December 31, 2010, were as follows:

	September 30, 2011		December 31, 2010
	(In thousands)
Unrecognized tax benefit (1)	$	3,408	$	10,261
Capital leases		4		38
Total	$	3,412	$	10,299

(1) See Note 15 to the Company’s consolidated financial statements for further discussion of unrecognized tax benefits.

Note 14—Convertible Notes

2018 Convertible Notes

In February 2011, the Company issued the 2018 Convertible Notes at par that become due on February 1, 2018. The Company received cash proceeds from the sale of the Notes of $222.7 million, net of expenses. The aggregate principal amount of the Convertible Notes sold reflects the full exercise by the underwriters of their option to purchase $30 million principal amount of Convertible Notes to cover over-allotments. The 2018 Convertible Notes bear cash interest at a rate of 4.75% per year, payable semiannually in arrears on February 1 and August 1 of each year, beginning on August 1, 2011. The 2018 Convertible Notes may be converted into shares of the Company’s common stock based on an initial conversion rate of 86.6739 shares per $1,000 principal amount of Convertible Notes, which represents a conversion price of approximately $11.54 per share. The Company may not redeem the Convertible Notes prior to February 1, 2015. On or after February 1, 2015 and prior to the maturity date, the Company may redeem for cash all or part of the Convertible Notes at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. This conversion rate will be adjusted if the Company makes specified types of distributions or enter into certain other transactions with respect to the Company’s common stock.

The 2018 Convertible Notes may only be converted: (1) during any calendar quarter commencing after March 31, 2011 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period, or the measurement period, in which the trading price per $1,000 principal amount of Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (3) if the Company calls any or all of the Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. As of September 30, 2011, the 2018 Convertible Notes were not convertible.

As required for cash settled Convertible Notes, the debt and equity components of the 2018 Convertible Notes were bifurcated and accounted for separately. While the 2018 Convertible Notes are outstanding, their discounted carrying values resulting from the bifurcation are accreted back to their principal amounts over periods that end on the scheduled maturity dates, resulting in the recognition of non-cash interest expense. For the three months ended September 30, 2011, total interest expense for the 2018 Convertible Notes was $3.4 million, consisting of $2.9 million of interest based upon the 4.75% coupon rate coupled with $0.5 million of non-cash interest expense related to the accretion of the discount on the Convertible Notes. For the nine months ended September 30, 2011, total interest expense for the 2018 Convertible Notes was $11.4 million, consisting of $7.3 million of accrued interest based upon the 4.75% coupon rate coupled with $4.1 million of non-cash interest expense related to the accretion of the discount on the Note.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

The principal balance, unamortized discount and net carrying amount of the liability components and the equity components of the 2018 Convertible Notes was as follows as of September 30, 2011:

	Liability Component						Equity Component
September 30, 2011	Principal Balance		Unamortized Discount		Net Carrying Amount		Net Carrying Amount
	(In thousands)
2018 Convertible Notes	$	230,000	$	56,155	$	173,845	$	34,427

Debt Discount

The accretion of debt discount expected to be included in the Company’s consolidated financial statements is as follows for each of the following calendar years:

2018 Convertible Notes	(In thousands)
Remainder of 2011	$	1,613
2012	$	6,865
2013	$	7,582
2014	$	8,372
2015	$	9,246
Thereafter	$	22,477

Financing Costs

Deferred financing costs are amortized to interest expense over the seven-year contract term of the debt using the effective-interest method. Amortization of deferred financing costs is included as a component of interest expense and was $0.1 million and $0.4 million for the three and nine months ended September 30, 2011.

Note 15—Income Taxes

The Company recorded a non-cash income tax benefit of $19.1 million for the nine months ended September 30, 2011. This benefit was partially the result of a reduction in a liability for an unrecognized tax benefit of $3.6 million which was considered effectively settled due to the recent completion of a state tax audit in the first quarter of 2011. The remaining $15.5 million of income tax benefit resulted from the allocation of a tax benefit to continuing operations pursuant to ASC 740-30-45, Income Taxes. This guidance requires that amounts credited to capital in excess of par value, other comprehensive income or discontinued operations during the year are considered sources of income that enable a company to recognize a tax benefit on its loss from continuing operations. As discussed in Note 14 – Convertible Notes, the 2018 Convertible Notes were bifurcated into debt and equity components for accounting purposes. As a result, the Company recorded a credit to the capital in excess of par value account of $34.4 million, which caused the allocation of the $15.5 million tax benefit to continuing operations. The Company expects the full year tax benefit allocated to continuing operations for this item to be approximately $23.9 million. A deferred tax liability was also recorded as a result of the 2018 Convertible Notes creating a book carrying value that differs from the tax basis, since tax regulations do not recognize the beneficial conversion feature as an equity element.

	(In thousands)
Deferred tax liability set-up related to the convertible notes (net of finance costs)	$	23,924
Decrease in valuation allowance allowing an income tax benefit on current year net operating losses		(15,455	)
Net deferred tax asset reserved for by a liability for unrecognized tax benefits		(2,700	)
Net deferred tax liability on consolidated balance sheet	$	5,769

The total amount of federal, state and local unrecognized tax benefits was $3.4 million at September 30, 2011 and $10.3 million at December 31, 2010, including accrued penalties and interest. The decrease of $6.9 million in the Company’s liability for unrecognized tax benefits from December 31, 2010 to September 30, 2011 is primarily the result of a recently completed state tax audit during the first quarter of 2011. The Company also decreased a portion of its liability for unrecognized tax benefits due to a change in estimate resulting from a recently settled federal tax audit during the first quarter of 2011.

21

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of other (expense) income, net, in its consolidated statements of operations, which is consistent with the recognition of these items in prior reporting periods. The accrued liability for interest and penalties for unrecognized tax benefits decreased by $1.2 million and $0.5 million during the nine months ended September 30, 2011, respectively, with a corresponding $1.7 million increase to income recorded to other (expense) income, net, within the Company‘s statement of operations for the nine months ended September 30, 2011. The decrease in interest and penalty is primarily the result of a recently completed state tax audit during the first quarter of 2011.

The Company has filed income tax returns in the United States and various state jurisdictions for all tax years through 2010. In January 2011, the Company settled the 2006 through 2008 examination by the Internal Revenue Service for no additional liability, although certain tax attributes were adjusted (i.e. NOL carryforwards, orphan drug credit carryforward and capital loss carryforwards). However, the net results of these adjustments were not material to the Company’s financial statements.

State income tax returns are generally subject to examination for a period of three to five years subsequent to the filing of the respective tax return. In March 2011, the Company settled the examination with the State of New Jersey for an immaterial amount of sales and use tax liability which included interest and penalty expense. The examination encompassed the review of the Company’s 2005 through 2008 corporate income tax returns, the 2007 through 2009 gross employer tax returns and the April 2006 through March 2010 sales and use tax returns.

The initial Irish tax return for the Company’s newly established Irish subsidiary, Savient Pharma Ireland Limited will be filed in 2012.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their basis for income tax purposes and the tax effects of capital loss, net operating loss and tax credit carryforwards. Valuation allowances reduce deferred tax assets to the amounts that are more likely than not to be realized.

At present, the likelihood of the Company being able to fully realize its deferred income tax benefits against future income is uncertain. Accordingly, at September 30, 2011, the Company had a valuation allowance against its deferred income tax assets except for the portion of the deferred tax asset that the Company expects to benefit from in the current year of $15.5 million and for the deferred income tax assets of $2.7 million that were offset by an unrecognized tax benefit reserve. As of December 31, 2010, the Company had a valuation allowance against its deferred income tax assets except for the deferred tax assets of $4.2 million that were offset by an unrecognized tax benefit reserve.

As of September 30, 2011 and December 31, 2010, $2.7 million and $4.2 million, respectively, of the net deferred tax assets remaining were offset by an unrecognized tax benefit reserve recorded as components of long-term liabilities on the Company’s consolidated balance sheets.

22

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

Note 16—Commitments and Contingencies

Commitments

The Company’s corporate headquarters are located in East Brunswick, New Jersey, where it leases approximately 53,000 square feet of office space. The lease has a base average annual rental expense of approximately $1.9 million and expires in March 2013. The Company has two five-year renewal options under the lease. In connection with this lease arrangement, the Company was required to provide a $1.3 million security deposit by way of an irrevocable letter of credit, which is secured by a cash deposit of $1.3 million and is reflected in other assets (as restricted cash) on the Company’s consolidated balance sheets at September 30, 2011 and December 31, 2010. The Company is also obligated to pay its share of operating maintenance and real estate taxes with respect to its leased property.

Rent expense from continuing operations was approximately $0.5 million and $1.5 million for the three and nine months ended September 30, 2011, respectively, and $0.5 million and $1.4 million for the three and nine months ended September 30, 2010, respectively. Rent expense is presented within research and development and selling, general and administrative expense in the consolidated statement of operations.

The future annual minimum rentals (exclusive of amounts for real estate taxes, maintenance, etc.) for each of the following calendar years are:

	(In thousands)
Remainder of 2011	$	467
2012	$	1,867
2013	$	467

At September 30, 2011, the Company had employment agreements with eight senior officers. Under these agreements, the Company has committed to total aggregate base compensation per year of approximately $3.1 million plus other fringe benefits and bonuses. These employment agreements generally have an initial term of three years and are automatically renewed thereafter for successive one-year periods unless either party gives the other notice of non-renewal. In addition, the Company currently has in place severance agreements with four former employees including the Company’s former President, which aggregate to approximately $1.4 million, of which $1.3 million will be paid in equal installments over a the next twelve months and $0.1 million will be paid after one-year.

In 2007, the Company entered into commercial supply and development agreements with Bio-Technology General (Israel) Ltd, (“BTG”), pursuant to which BTG serves as the manufacturer and commercial supplier of the pegloticase drug substance for KRYSTEXXA and provides development, manufacturing and other services in relation to the product. Under the agreements, BTG also provided support with respect to the Company’s biologics license application (“BLA”) for KRYSTEXXA. Pursuant to its terms, the development agreement automatically expired upon the FDA’s approval for marketing of KRYSTEXXA in the United States. Under the commercial supply agreement with BTG, as amended, BTG is obligated to manufacture the Company’s firmly forecasted commercial supply of KRYSTEXXA and the Company is obligated to purchase from BTG at least 80% of its worldwide requirements of pegloticase drug substance. However, if BTG produces specified numbers of failed batches of pegloticase drug substance within one or more calendar quarters, then the Company may purchase all of its KRYSTEXXA requirements from other suppliers until BTG demonstrates to the Company’s reasonable satisfaction that it has remedied its supply failure. In addition, if the Company’s product forecasts are reasonably anticipated to exceed BTG’s processing capacity, then the Company may purchase from other suppliers the KRYSTEXXA requirements that exceed BTG’s capacity. The Company is obligated to provide BTG with a rolling forecast on a monthly basis setting forth the total quantity of pegloticase drug substance it expects to require for commercial supply in the following 18 months. The first six months of each forecast represent a rolling firm irrevocable order, and the Company may only increase or decrease its forecast for the next 12 months within specified limits. As of September 30, 2011, based on the Company’s latest forecast, the Company expected to purchase an aggregate of approximately $4.1 million of pegloticase drug substance over the following 12 months. During 2008, the Company paid to BTG non-refundable fees of $2.2 million to reserve manufacturing capacity relating to the Company’s potential future orders of pegloticase drug substance. The Company recorded these capacity reservation fees, which may be credited as a discount against future orders of pegloticase drug substance, as research and development expenses as they were incurred. Beginning in December 2015, which is the seventh anniversary of BTG’s first delivery of pegloticase drug substance under the commercial supply agreement, either the Company or BTG may provide three years advance notice to terminate the commercial supply agreement, effective not earlier than December 2018. The commercial supply agreement may also be terminated in the event of insolvency or uncured material breach by either party.

23

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

In 2007, the Company entered into a services agreement with Fujifilm, pursuant to which Fujifilm is preparing to serve as the Company’s secondary source supplier in the United States of pegloticase drug substance for KRYSTEXXA. Under the agreement, the Company is obligated to make specified milestone payments related to the technology transfer, and subsequent performance, of the manufacturing and supply process, which was initiated in August 2007 with BTG’s cooperation. In November 2009, the Company entered into a revised services agreement with Fujifilm, pursuant to which the Company delayed the 2009 conformance batch production campaign until 2010. During the first quarter of 2010, the conformance batch production campaign at Fujifilm commenced. As a result of batch failures at Fujifilm based on one manufacturing specification, the 2010 conformance batch production campaign was terminated in December 2010. The Company and Fujifilm renegotiated the agreement in June 2011 and the conformance campaign is planned to re-start during the second half of 2011. The Company expects the additional costs associated with its conformance campaign to approximate $10.0 million, which includes non-refundable fees of $1.0 million to reserve manufacturing capacity for the conformance batch campaign. The Company records the fees for capacity reservation, idle and down-time and other technology transfer services rendered by Fujifilm as research and development expenses as they are incurred. Either the Company or Fujifilm may terminate the services agreement in the event of an uncured material breach by the other party. In addition, the Company may terminate the agreement at any time upon 45 days advance notice. If the Company terminates the agreement other than for Fujifilm’s breach, or if Fujifilm terminates the agreement for our breach, the Company must pay Fujifilm a termination fee based on the value of then remaining unbilled activities under the agreement. Either party may also terminate the agreement within 30 days after any written notice from Fujifilm that, in its reasonable judgment and based on a change in the assumptions or objectives for the project; it cannot continue to perform its obligations without a change in the scope, price or payment schedule for the project.

In 2007, the Company entered into a supply agreement with NOF Corporation of Japan (“NOF”), pursuant to which NOF serves as the Company’s exclusive supplier of mPEG-NPC, which is used in the PEGylation process to produce the pegloticase drug substance for KRYSTEXXA. The Company must purchase its entire supply of mPEG-NPC from NOF unless NOF fails to supply at least 75% of the Company’s firm orders, in which case the Company may obtain mPEG-NPC from a third party until NOF’s supply failure is remedied to the Company’s reasonable satisfaction. Under the agreement, the Company is obligated to make specified minimum purchases of mPEG-NPC from NOF. The Company must provide NOF with a rolling forecast on a quarterly basis setting forth the total quantity of mPEG-NPC that it expects to require in the following 18 months. The first six months of each forecast represent a rolling firm irrevocable order, and the Company may only increase or decrease its forecast for the next 12 months within specified limits. As of September 30, 2011, based on current forecasts, the Company expected to purchase mPEG-NPC at an aggregate cost of approximately $2.8 million in 2013. For any given year, upon three months advance notice, the Company may terminate its minimum purchase obligation for the entire year or the remainder of that year by paying NOF 50% of the minimum purchase obligation for that year or the remainder of that year. NOF is obligated under the supply agreement to use commercially reasonable efforts to submit a Type II Drug Master File, or its equivalent, to the appropriate regulatory agency in one country outside of the United States or in the European Union. The Company’s agreement with NOF has an initial term ending in May 2017 and may be extended for an additional 10 years by mutual agreement of the parties at least 12 months before the expiration of the initial term. Prior to the expiration of the term, either the Company or NOF may terminate the agreement for convenience upon 24 months advance notice. Either the Company or NOF may terminate the agreement in the event of the other party’s insolvency or uncured material breach. In the event that NOF terminates the agreement for convenience or if the Company terminates the agreement for NOF’s breach or bankruptcy, the Company may require NOF to continue to supply mPEG-NPC for up to two years following the termination date. If the Company terminates the agreement for convenience or if NOF terminates the agreement for the Company’s breach, the Company must pay NOF 50% of the minimum purchase obligation for the period from the termination date until the date on which the agreement would have expired.

In 2008, the Company entered into a non-exclusive commercial supply agreement with Sigma-Tau PharmaSource, Inc. (“Sigma-Tau”) (formerly known as Enzon Pharmaceuticals, Inc., which was acquired by Sigma-Tau in January 2010). Under the terms of the commercial supply agreement, Sigma-Tau has agreed to fill, label, package, test and provide specified product support services for the final KRYSTEXXA product. In return, the Company agreed that once KRYSTEXXA received FDA marketing approval, the Company would purchase product support services from Sigma-Tau. As of September 30, 2011, the Company expected to purchase from Sigma-Tau support services at an aggregate cost of approximately $1.1 million over the next 12 months. These purchase obligations are based on a rolling forecast that the Company has agreed to provide to Sigma-Tau on a quarterly basis setting forth the total amount of final product that it expects to require in the following 24 months. The first six months of each forecast will represent a rolling firm irrevocable order, and the Company may only increase or decrease its forecast for the next 18 months within specified limits. If the Company cancels batches subject to a firm order, it must pay Sigma-Tau a fee. Under the agreement, the Company is also obligated to pay Sigma-Tau a rolling, non-refundable capacity reservation fee, which may be credited against the fees for Sigma-Tau’s production of the final product. During the nine months ended September 30, 2011 and 2010, the Company did not incur any capacity reservation fees because such amounts were credited against purchases of final product from Sigma-Tau. Either the Company or Sigma-Tau may terminate the agreement upon 24 months advance notice given 30 days before each year’s

24

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

anniversary date of the agreement. If the Company terminates the agreement, it would be obligated to pay Sigma-Tau a fee based on the previously submitted rolling forecasts. Either the Company or Sigma-Tau may also terminate the agreement in the event of insolvency or uncured material default in performance by either party.

The Company believes that its current arrangements for the supply of clinical and commercial quantities of pegloticase drug substance and finished form KRYSTEXXA will be adequate to satisfy its currently forecasted commercial requirements of KRYSTEXXA and any currently planned future clinical studies.

The Company is a party to an exclusive royalty bearing license agreement with Mountain View Pharmaceuticals (“MVP”) and Duke University (“Duke”), originally entered into in 1997 and amended in 2001, granting the Company rights under technology relating to mammalian and non-mammalian uricases, and MVP’s technology relating to mPEG conjugates of these uricases, as well as patents and pending patent applications covering this technology, to make, use and sell, for human treatment, products that use this technology. These patents and pending patent applications constitute the fundamental composition of matter and underlying manufacturing patents for KRYSTEXXA. Under this agreement, the Company also has the exclusive license to the trademark Puricase^®, which is a registered trademark of MVP and was available for potential use as the proprietary name of the product candidate the Company now refers to as KRYSTEXXA. However, if the Company elects not to use the trademark Puricase, or if the Company otherwise fails to use the trademark Puricase within one-year after the first sale of any product which uses the licensed technology, then MVP would retain all rights to use the trademark Puricase. Under the agreement, the Company is required to use best efforts to diligently market products that use the licensed technology. The agreement requires the Company to pay to MVP and Duke quarterly royalty payments within 60 days after the end of each quarter based on KRYSTEXXA net sales made in that quarter by the Company. The royalty rate for a particular quarter ranges between 8% and 12% of net sales based on the amount of cumulative net sales made by the Company. Also under the agreement, for sales made by sub-licensees and not by the Company, the Company is required to pay royalties of 20% on any revenues or other consideration it receives from sub-licensees during any quarter. During the year ended December 31, 2010, the Company made aggregate milestone payments of approximately $0.8 million to MVP and Duke upon obtaining regulatory approval for KRYSTEXXA in the United States which was one of the five major global markets identified in the agreement. The Company is also required to pay up to an aggregate of approximately $1.8 million to MVP and Duke if it successfully commercializes KRYSTEXXA and attains specified KRYSTEXXA sales targets. As of September 30, 2011, the Company had made aggregate payments of approximately $2.5 million to MVP and Duke for the achievement of milestones under this agreement. The agreement remains in effect, on a country-by-country basis, for the longer of 10 years from the date of first sale of KRYSTEXXA in such country, or the date of expiration of the last-to-expire patent covered by the agreement in such country. The Company may terminate this agreement in one or more countries with six months prior notice, and it may also terminate the agreement with respect to any country in which the licensed patents are infringed by a third party or in which the manufacture, use or sale of KRYSTEXXA infringes a third party’s intellectual property rights. Either the Company or the licensors may also terminate the agreement, with respect to the countries affected, upon the other party’s material breach, if not cured within a specified period of time, or immediately upon the other party’s third or subsequent material breach of the agreement or the other party’s fraud, willful misconduct or illegal conduct. Either party may also terminate the agreement for the other party’s bankruptcy or insolvency. Upon a termination of the agreement in one or more countries, all intellectual property rights conveyed to the Company with respect to the terminated countries under the agreement, including regulatory applications and pre-clinical and clinical data, revert to MVP and Duke and the Company is permitted to sell off any remaining inventory of KRYSTEXXA for such countries.

The Company has received financial grants in support of research and development from the Office of the Chief Scientist of the State of Israel (“OCS”), and the Israel-United States Bi-national Industrial Research and Development Foundation (“BIRD”), of approximately $2.0 million and $0.6 million, respectively, for the development of KRYSTEXXA. These grants plus interest are subject to repayment through royalties on the commercial sale of KRYSTEXXA. The OCS grants were received by the Company’s former subsidiary, BTG, and upon the Company’s divestiture of BTG to Ferring, it agreed to remain obligated to reimburse BTG for its repayments to OCS that relate to the KRYSTEXXA financial grants. In addition, under the Israeli Law of Encouragement of Research and Development in Industry, as amended, as a result of the funding received from OCS, if the Company does not manufacture 100% of its annual worldwide bulk product requirements in Israel, the Company may be subject to total payments ranging from 120% to 300% of the repayment obligation plus interest, based upon the percentage of manufacturing that does not occur in Israel.

25

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

Contingencies

In May 2007, the Company filed a notice of appeal with the New Jersey Division of Taxation contesting a New Jersey Sales & Use Tax assessment of $1.2 million for the tax periods 1999 through 2003. The Company believes it is not subject to taxes on services that were provided to the Company. In May 2010, the Company attended an appeals conference with the Conference and Appeals Branch of the New Jersey Division of Taxation to discuss its case in contesting the Sales & Use Tax assessment. After discussions with the New Jersey appellate division, the Company’s appeal was denied. The previous assessment of $1.2 million was increased by $0.5 million to $1.7 million reflecting additional interest and penalties. The Company filed a timely appeal with the New Jersey Tax Court to continue the appeal process on December 13, 2010.

In a civil action filed in the Fayette Circuit Court in Kentucky on August 31, 2007 ( Joseph R. Berger vs. Savient Pharmaceuticals, Inc.), Dr. Joseph Berger alleged that he had entered into an agreement with the Company in December 1993, under which he assigned an invention and patent rights relating to the use of oxandrolone to treat an HIV-related disorder, the “Invention”, to the Company in exchange for its agreement to use him as a researcher in certain clinical trials relating to the Invention, and that the Company had breached that agreement. Berger’s verified complaint requested disgorgement of profits and assignment to Berger of the patents obtained on the Invention. During fact discovery in the action, the Company uncovered an April 6, 1992 Consulting Agreement between Berger and Savient’s predecessor, Gynex Pharmaceuticals (“Gynex”), wherein Berger assigned the Invention to Gynex in consideration of, among other things, $20,000 from Gynex. After the April 6, 1992 agreement was presented to Berger, he filed an amended verified complaint which acknowledged the April 6, 1992 agreement, but contended that the $20,000 paid to him under the Agreement was not consideration for the assignment of the Invention. The Company filed a motion for summary judgment on Berger’s claims and, on August 17, 2009, the Court issued an order granting the Company’s motion and dismissing Berger’s complaint and amended complaint with prejudice. Berger appealed the decision of the trial court granting the Company’s motion for summary judgment, and the Company filed a notice of cross-appeal solely with respect to the decision of the trial court to apply Kentucky law to the facts of the case. On January 4, 2011, the Kentucky Appellate Court issued an order taking up Berger’s appeal and the Company’s cross-appeal on the papers, and on October 14, 2011, the Court upheld the lower court’s decision.

In November 2008, Richard Sagall, an alleged stockholder, commenced an action in the U.S. District Court for the Southern District of New York seeking to certify a class of shareholders who held Savient securities between December 13, 2007 and October 24, 2008. The suit alleges that the Company made false and misleading statements relating to the GOUT1 and GOUT2 phase 3 clinical trials, and that the Company failed to disclose in a timely manner serious adverse events which occurred in five patients in these trials. In March 2009, the Court issued an order appointing a lead plaintiff and the law firm Pomerantz Haudek Block Grossman & Gross LLP as lead counsel. The action was also re-captioned as Lawrence J. Koncelik vs. Savient Pharmaceuticals, et al . Thereafter, the lead plaintiff filed his amended complaint in April 2009, seeking unspecified monetary damages. In June 2009, Savient and the other named defendants moved to dismiss the complaint. The lead plaintiff subsequently filed an opposition to the Company’s motion to dismiss and the Company filed its reply in October 2009. Oral arguments were heard by the Court in February 2010 relating to our motion to dismiss. On September 29, 2010, the Court issued a memorandum decision and order granting our motion to dismiss the amended complaint in its entirety. On October 28, 2010, the lead plaintiff timely filed a notice of appeal of the Court’s decision with the United States Court of Appeals for the Second Circuit and the briefing on that appeal was completed in June 2011. Oral arguments have been scheduled for November 8, 2011. The Second Circuit is unlikely to issue a decision on the appeal before late 2011. The Company intends to continue to vigorously defend against this action.

From time to time, the Company becomes subject to legal proceedings and claims in the ordinary course of business. Such claims, even if without merit, could result in the significant expenditure of the Company’s financial and managerial resources. The Company is not aware of any legal proceedings or claims that it believes will, individually or in the aggregate, materially harm its business, results of operations, financial condition or cash flows.

The Company is obligated under certain circumstances to indemnify certain customers for certain or all expenses incurred and damages suffered by them as a result of any infringement of third-party patents. In addition, the Company is obligated to indemnify its officers and directors against all reasonable costs and expenses related to stockholder and other claims pertaining to actions taken in their capacity as officers and directors which are not covered by the Company’s directors and officers insurance policy. These indemnification obligations are in the regular course of business and in most cases do not include a limit on maximum potential future payments, nor are there any recourse provisions or collateral that may offset the cost.

26

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

Note 17—Segment Information

The Company currently operates within one “Specialty Pharmaceutical” segment which includes sales of KRYSTEXXA, Oxandrin and oxandrolone and the research and development activities of KRYSTEXXA.

Note 18—Investment Income, Net

The Company’s investment income, net for the three and nine months ended September 30, 2011 and 2010, was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(In thousands)
Interest and dividend income from cash, cash equivalents and short-term investments	$	39	$	33	$	107	$	82

Note 19—Other (Expense) Income, Net

The Company’s other (expense) income, net for three and nine months ended September 30, 2011 and 2010, was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(In thousands)
Realized gain on change in valuation of warrant liability	$	—		$	(43,232	)	$	—		$	(34,905	)
Reversal of interest expense and penalties on unrecognized tax liability		(10	)		—			1,753			—
Amortization of deferred financing costs on convertible debt		(129	)		—			(449	)		—
Other non-operating expenses		(2	)		(497	)		(15	)		(620	)
Total other (expense) income, net	$	(141	)	$	(43,729	)	$	1,289		$	(35,525	)

27

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our management’s discussion and analysis of financial condition and results of operations contains statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements that set forth anticipated results based on management’s plans and assumptions. From time to time, we also provide forward-looking statements in other materials we release to the public as well as oral forward-looking statements. Such statements discuss our strategy, expected future financial position, results of operations, cash flows, financing plans, development of products, strategic alliances, intellectual property, competitive position, plans and objectives of management. We often use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions to identify forward-looking statements. In particular, any statements about our ability to obtain necessary foreign regulatory approvals for KRYSTEXXA^® (pegloticase), our ability to complete the development of and execute upon our commercial strategy for KRYSTEXXA, our ability to achieve profitability and raise additional capital needed to achieve our business objectives, our financing needs and liquidity, and the market size for KRYSTEXXA and its expected degree of market acceptance are forward-looking statements. Additionally, forward-looking statements include those relating to future actions, future performance, sales efforts, expenses, interest rates, and the outcome of contingencies, such as legal proceedings, and financial results.

We cannot guarantee that any forward-looking statement will be realized. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements.

We undertake no obligation to publicly update forward-looking statements. You are advised, however, to consult any further disclosures we make on related subjects in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Overview

We are a specialty biopharmaceutical company focused on commercializing KRYSTEXXA in the United States and completing the development and seeking regulatory approval for the product outside of the United States, particularly in the European Union. Additionally, we are also investigating the expansion of the clinical utility for KRYSTEXXA. KRYSTEXXA was approved for marketing by the U.S. Food and Drug Administration, or FDA, on September 14, 2010 and became commercially available in the United States by prescription on December 1, 2010, when we commenced sales and shipments to our network of specialty and wholesale distributors.

The active pharmaceutical ingredient, or API, in KRYSTEXXA is a PEGylated enzyme that converts uric acid to allantoin. KRYSTEXXA is indicated for the treatment of chronic gout in adult patients refractory to conventional therapy. Chronic gout that is refractory to conventional therapy occurs in patients who have failed to normalize serum uric acid and whose signs and symptoms are inadequately controlled with xanthine oxidase inhibitors at the maximum medically appropriate dose or for whom these drugs are contraindicated. KRYSTEXXA is not recommended for the treatment of an elevation of blood concentration of uric acid that is not accompanied by signs or symptoms of gout. This condition is referred to as asymptomatic hyperuricemia.

Gout develops when urate accumulates in the tissues and joints as a result of elevation of blood concentration of uric acid. Gout is usually associated with bouts of severe joint pain and disability, or gout flares, and tissue deposits of urate, which may occur in concentrated forms, or gout tophi. Patients with severe gout have an associated increased risk of kidney failure and increased risk of cardiovascular disease. Uricase, an enzyme not naturally expressed in humans but present in other mammals, eliminates uric acid from the body by converting uric acid to allantoin, which is easily excreted by the kidney. We believe that treatment with KRYSTEXXA eliminates hyperuricemia and provides clinical benefits by eliminating uric acid in the blood and tissue deposits of urate.

During the first quarter of 2011, we worked together with a leading independent life science consulting firm to conduct a comprehensive market research study to determine the number of patients in the United States who are refractory to conventional therapy, thereby suffering from Refractory Chronic Gout, or RCG. This study was conducted using both secondary data sources and primary market research. The secondary data was used to quantify the diagnosed prevalent gout population and the treated gout population. This included a review of all available published literature, NHANES, the nationally representative survey sponsored by the United States Centers for Disease Control and Prevention, Medicare claims data and commercial claims data. The study was completed in July 2011 and indicated that there are approximately 120,000 RCG patients in the United States, which represents approximately 4.2% of the overall annual treated gout population in the United States. The total available market opportunity for KRYSTEXXA will ultimately depend on, among other things, our marketing and sales efforts, reimbursement and market acceptance by physicians, infusion site personnel, healthcare payors and others in the medical community.

The FDA granted KRYSTEXXA an orphan drug designation in 2001, which we expect will provide the drug with orphan drug marketing exclusivity in the United States until September 2017, seven years from the date of its approval. The composition, manufacture and methods of use and administration of KRYSTEXXA are also the subject of a broad portfolio of patents and patent applications, which we expect will provide patent protection through 2026, assuming issuance of patents from currently pending patent applications.

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We completed a full promotional launch of KRYSTEXXA in the United States during the first quarter of 2011 with our sales force commencing field promotion to physicians on February 28, 2011. To support the commercial launch of KRYSTEXXA, we have hired a 62-person sales force, all with biologics drug experience, six regional business directors, 12 regional medical scientists, six managed care executives, 12 nurse educators and 12 field reimbursement specialists. As we proceed forward through the promotional launch, we may increase the number of sales force professionals in the future, if deemed necessary. This sales force will allow us to target the rheumatologists and nephrologists with access to infusion centers and healthcare institutions, each of which treat adult patients suffering from chronic gout refractory to conventional therapy. To date, our sales force has reached over 90% of our key rheumatologists, and 57% of key nephrologists. On June 20, 2011, the Company implemented the KRYSTEXXA Patient Initiation Program, or KPIP, which provided patients with RCG with two free doses of KRYSTEXXA for a short-term period through September 30, 2011. We believe that this initiative was a way for patients to begin therapy and have the opportunity to experience the potential benefits of KRYSTEXXA. We may re-introduce the KPIP at a future date based upon market conditions.

During August 2011, data from our two pivotal KRYSTEXXA phase 3 clinical trials in patients with RCG was published in the Journal of the American Medical Association, or JAMA. The data that were published in JAMA demonstrated that treatment with KRYSTEXXA resulted in significant and sustained reductions in uric acid levels along with clinical improvements in a substantial proportion of RCG patients for six months, a timeframe for demonstrating clinical improvement that is unique in randomized controlled studies of urate-lowering therapies. In addition, 40% of patients with tophi receiving KRYSTEXXA every two weeks experience complete resolution of one or more tophi, which are deposits of crystalline urate in joints, skin or cartilage, by the final study visit, compared to 7% of patients on placebo. The data published also included a summary of adverse events that occurred in at least 5% of the patients in the trial, including gout flare, infusion reactions, nausea, contusion or ecchymosis, nasopharyngitis, constipation, chest pain, anaphylaxis and vomiting.

We have built an inventory of finished KRYSTEXXA product as of September 30, 2011, that is packaged and labeled for distribution and additional supplies of bulk API drug substance that are scheduled to be packaged and labeled as part of our ongoing FDA approved commercial manufacturing process. We believe our inventory of finished KRYSTEXXA product, excluding the bulk API drug substance currently included in work-in-process inventory, will be sufficient for us to meet internal estimates of market demand at least through the first quarter of 2013. To date, several large private managed care organizations have added KRYSTEXXA as a covered medical benefit and other managed care organizations are actively evaluating medical benefits coverage. In December 2010, we filed for a temporary “C” code and a permanent “J” code application with the U.S. Centers for Medicare & Medicaid Services, or CMS, for reimbursement of the cost of treatment with KRYSTEXXA. On April 1, 2011, we received a notice from CMS that a temporary “C” code was assigned to KRYSTEXXA. Additionally, in November 2011, we received a notice from CMS that a permanent “J” code was assigned for KRYSTEXXA, effective on January 1, 2012. The “J” code should facilitate reimbursement to providers who treat patients suffering with RCG and who rely on Medicare and Medicaid. We also were awarded a contract from the U.S. Department of Veterans Affairs, or the VA, for KRYSTEXXA to be covered for reimbursement for VA member patients. We received this contract award from the VA in March 2011 with the contract effective as of April 1, 2011. The contract calls for us to sell KRYSTEXXA to the VA at an approximate 24% discount to our list selling price.

In support of our efforts to obtain regulatory approval for KRYSTEXXA outside of the United States, in May 2011 we submitted a Marketing Authorization Application, or MAA, for centralized review in the European Union. We received validation of the MAA that was filed with the European Medicines Agency, or EMA, for KRYSTEXXA for the treatment of chronic gout in adult patients refractory to conventional therapy, which resulted in the initiation of the EMA’s regulatory review process. In December 2010, the Pediatric Committee of the European Medicines Agency approved our pediatric investigation plan for the treatment and prevention of hyperuricemia in pediatric patients undergoing chemotherapy for hematologic malignancies, which is a condition to filing for marketing approval in the European Union.

We also sell and distribute branded and generic versions of oxandrolone, a drug used to promote weight gain following involuntary weight loss. We launched our authorized generic version of oxandrolone in December 2006 in response to the approval and launch of generic competition to our branded product, Oxandrin^®. The introduction of oxandrolone generics has led to significant decreases in demand for Oxandrin and our authorized generic version of oxandrolone. We believe that revenues from Oxandrin and our authorized generic version of oxandrolone will continue to decrease in future periods primarily as a result of the expiration of our contract agreement with our third-party manufacturer. We do not plan on seeking a new third-party manufacturer of Oxandrin or oxandrolone.

We currently operate within one “Specialty Pharmaceutical” segment, which includes sales of Oxandrin and oxandrolone and the sales and research and development activities of KRYSTEXXA. Total revenues from continuing operations were $5.9 million for the nine months ended September 30, 2011, an increase of $2.8 million, or 91%, from $3.1 million for the same period in the prior year.

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Recent Changes in Our Senior Management

On September 12, 2011, Kenneth J. Zuerblis was appointed as our Executive Vice President, Chief Financial Officer & Treasurer and principal financial and accounting officer. Mr. Zuerblis replaced David G. Gionco as Chief Financial Officer & Treasurer of the Company. Mr. Gionco remains with the Company as Group Vice President of Finance. Mr. Zuerblis served as Chief Financial Officer and Senior Vice President of ImClone Systems, which develops targeted biologic cancer treatments, from March 2008 through 2009. Prior to joining ImClone, Mr. Zuerblis served as Chief Financial Officer of Enzon Pharmaceuticals Inc., a biotechnology company, from 1994 through 2005, and as Enzon’s Corporate Controller from 1991 through 1994. Mr. Zuerblis currently serves as a director of Immunomedics Inc., a biopharmaceutical company, and sits on its Audit and Compensation Committees, and as a director of Resverlogix Corporation, a biotechnology company, and is chair of its Audit Committee.

On August 1, 2011, we appointed Dr. Kenneth M. Bahrt as our Senior Vice President and Chief Medical Officer. Dr. Bahrt leads the overall management of Savient’s clinical development, drug safety and medical affairs teams. Dr. Bahrt previously served as Therapeutic Area Head for US Medical Affairs (Immunology) at Genentech, a biotechnology company. He also previously served as Global Medical Director (Inflammation and Immunology) for F. Hoffmann - La Roche, Inc, a pharmaceutical and diagnostics company. Additionally, Dr. Bahrt worked in leadership positions of increasing breadth and responsibility at Bristol Meyers Squibb Co., a global biopharmaceutical company, where he was the Executive Director of Global Medical Affairs (Immunology), and Pfizer, a biopharmaceutical company, where he served as Medical Director and Team Leader for rheumatology portfolio products. Prior to joining the pharmaceutical industry, Dr. Bahrt had a rheumatology practice for 15 years. Dr. Bahrt is board certified rheumatologist.

On May 30, 2011, we entered into an agreement with Paul Hamelin, our former President, providing for the termination of his employment on mutually agreed terms. Mr. Hamelin’s termination is deemed an “involuntary termination by us without cause” (as defined in the Employment Agreement dated as of May 23, 2006 between Mr. Hamelin and us, as amended on February 15, 2008 and on December 19, 2008 (as so amended, the “Employment Agreement”)), and as a result, Mr. Hamelin is entitled to receive the compensation and benefits required under the Employment Agreement in the event of an involuntary termination by us without cause. Mr. Hamelin is not entitled to any payments or benefits, except those required by the terms of the Employment Agreement. Mr. Hamelin’s options to purchase shares of our common stock will be exercisable until November 30, 2011, after which their exercisability will terminate. In addition, the vesting of 37,500 stock options previously granted to Mr. Hamelin and scheduled to vest on December 19, 2011 was accelerated and such options vested immediately on May 30, 2011. In consideration for receiving accelerated stock option vesting and extended exercisability, Mr. Hamelin has released us from all claims and causes of action that he may have had against us.

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Results of Operations

During 2010 and the nine months ended September 30, 2011, our operating results were driven by substantial expenses relating to the commercialization of KRYSTEXXA resulting in net operating losses for the periods. We anticipate continued substantial expenses relating to the commercialization and further development of KRYSTEXXA for the remainder of 2011 and into 2012. Our expenses relating to the commercialization and development of KRYSTEXXA will depend on many factors, including:

• the cost of commercialization activities, including product marketing, sales and distribution.

• the cost of manufacturing activities,

• the cost of our post-approval commitments to the FDA, including an observational study and a risk evaluation and mitigation strategy, or REMS, program, and

• the timing of, and the costs involved in, obtaining regulatory approvals for KRYSTEXXA in countries other than the United States,

During the three and nine months ended September 30, 2011 and 2010, the expenses associated with our regulatory, clinical, manufacturing and commercial development of KRYSTEXXA were the most significant factors affecting our results of operations. The following table summarizes our costs and expenses and indicates the significance of selling, general and administrative costs related to our commercialization of KRYSTEXXA, as well as percentage of total cost of expenses for the periods indicated:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2011				2010				2011				2010
	(In thousands)
Cost of goods sold	$	4,584	14.0	%	$	421	2.5	%	$	6,008	7.0	%	$	998	2.5	%
Research and development		5,858	17.9	%		8,958	53.8	%		17,315	20.1	%		22,521	55.9	%
Selling, general & administrative		22,268	68.1	%		7,265	43.7	%		62,761	72.9	%		16,764	41.6	%
Total costs and expenses	$	32,710	100.0	%	$	16,644	100.0	%	$	86,084	100.0	%	$	40,283	100.0	%

Our revenues for the three and nine months ended September 30, 2011 were derived primarily from product sales of KRYSTEXXA and to a lesser extent, sales of Oxandrin and oxandrolone, our authorized generic version of Oxandrin. Following the full commercial launch of KRYSTEXXA in February 2011, we expect sales from KRYSTEXXA to increase for the remainder of 2011 and in future periods. As a result of increased competition from generics and the expiration of our contract agreement with our third-party manufacturer of Oxandrin and oxandrolone, we expect our Oxandrin and oxandrolone revenues to decrease in future periods and diminish in proportion to our total revenues and in significance to our overall results of operations.

Our future revenues depend on our success in the commercialization of KRYSTEXXA. The commercial success of KRYSTEXXA will depend on many factors including:

• whether we are successful in marketing and selling KRYSTEXXA after the full commercial launch of the product,

• market acceptance of KRYSTEXXA by physicians and patients in this largely previously untreated patient population,

• market acceptance of the price that we charge for KRYSTEXXA and under what conditions private and public payors will reimburse patients for KRYSTEXXA,

• whether and to what extent our label expansion activities for KRYSTEXXA are successful,

• whether and when we face generic or other competition with respect to KRYSTEXXA,

• the timing and costs of regulatory approval for KRYSTEXXA in any countries other than the United States, and

• our ability to maintain a sufficient inventory of KRYSTEXXA to meet commercial demand.

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The following table summarizes net product sales of our commercialized products and their percentage of total net product sales for the periods indicated:

	Three Months Ended September 30,									Nine Months Ended September 30,
	2011					2010				2011				2010
	(In thousands)
KRYSTEXXA	$	1,850		71.6	%	$	—	—		$	3,200	54.7	%	$	—	—
Oxandrolone		771		29.9	%		632	64.0	%		2,583	44.1	%		1,933	63.0	%
Oxandrin		(40	)	-1.5	%		356	36.0	%		72	1.2	%		1,135	37.0	%
	$	2,581		100.0	%	$	988	100.0	%	$	5,855	100.0	%	$	3,068	100.0	%

Results of Operations for the Three Months Ended September 30, 2011 and September 30, 2010

Revenues

Total revenues increased $1.6 million, or 161%, to $2.6 million for the three months ended September 30, 2011, from $1.0 million for the three months ended September 30, 2010. The increase is primarily due to incremental KRYSTEXXA sales of $1.9 million resulting from the full commercial launch of KRYSTEXXA in February of 2011. We expect sales of KRYSTEXXA to continue to increase in future periods as a result of our investments in marketing related to the product.

Sales of oxandrolone, our authorized generic version of Oxandrin, increased $0.1 million for the three months ended September 30, 2011 as compared to the three months ended September 30, 2010 offset by a $0.4 million decrease in net sales of our branded product, Oxandrin, for the three months ended September 30, 2011 as compared to the three months ended September 30, 2010. While gross sales of Oxandrin remained consistent from period-to-period, net sales in the prior year quarter benefited from recoveries in our sales allowances resulting in lower sales allowances for the three months ended September 30, 2010 as compared to the three months ended September 30, 2011. We expect that sales of Oxandrin and oxandrolone will decrease in future periods depending on various factors, including the pricing and number of competing products, overall demand in the marketplace and due to the expiration of our contract agreement with our third-party manufacturer which has manufactured both products on our behalf.

Cost of goods sold

Cost of goods sold increased by $4.2 million to $4.6 million for the three months ended September 30, 2011, from $0.4 million for the three months ended September 30, 2010. During the three months ended September 30, 2011, we recorded a $3.4 million charge against income to reserve for excess KRYSTEXXA inventory that had expiration dates such that the product was unlikely to be sold. In addition, royalty payments on commercialized products are recorded as a component of cost of goods sold and these costs increased by $0.4 million as a result of the commencement of sales of KRYSTEXXA.

Research and development expenses

Research and development expenses decreased by $3.1 million, or 35%, to $5.9 million for the three months ended September 30, 2011, from $9.0 million for the three months ended September 30, 2010. The decrease was primarily due to costs related to the manufacture of KRYSTEXXA commercial batches that were included in research and development expenses prior to FDA approval of the product on September 14, 2010.

Selling, general and administrative expenses

Selling, general and administrative expenses increased $15.0 million to $22.3 million for the three months ended September 30, 2011, from $7.3 million for the three months ended September 30, 2010. The increase was primarily due to higher selling and marketing expenses associated with the full commercial launch of KRYSTEXXA as we continue to ramp up our marketing efforts for KRYSTEXXA, and increased headcount as a result of the hiring of our KRYSTEXXA sales force and reimbursement specialists.

Interest expense on convertible notes

Interest expense was $3.4 million for the three months ended September 30, 2011, consisting of $2.9 million of interest expense from the 4.75% coupon on our 2018 Convertible Notes issued in February 2011 and $0.5 million of non-cash accretion of the debt discount, also associated with our 2018 Convertible Notes.

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Other (expense) income, net

Other expense, net decreased by $43.6 million to $0.1 million for the three months ended September 30, 2011 from $43.7 million for the three months ended September 30, 2010. The $0.1 million expense in the current period represents the amortization of deferred financing costs on our 2018 Convertible Notes. The expense for the three months ended September 30, 2010 reflects the mark-to-market adjustment on our previous warrant liability which was settled in its entirety during the fourth quarter of 2010.

Income tax benefit

We recorded an income tax benefit of $6.2 million for the three months ended September 30, 2011, as compared to a zero income tax benefit for the three months ended September 30, 2010. This income tax benefit resulted from the allocation of a tax benefit to continuing operations pursuant to ASC 740-30-45, Income Taxes. As discussed in Note 14 – Convertible Notes, the 2018 Convertible Notes were bifurcated into debt and equity components for accounting purposes. As a result, we recorded a credit to the capital in excess of par value account of $34.4 million, which caused the allocation of the $6.2 million tax benefit to continuing operations. The $6.2 million tax benefit for the three months ended September 30, 2011 does not result in additional cash flow for us.

Results of Operations for the Nine months ended September 30, 2011 and September 30, 2010

Revenues

Total revenues increased $2.8 million, or 91%, to $5.9 million for the nine months ended September 30, 2011, from $3.1 million for the nine months ended September 30, 2010. The increase is primarily due to incremental KRYSTEXXA sales of $3.2 million resulting from the full commercial launch of KRYSTEXXA in February of 2011.

Sales of oxandrolone, our authorized generic version of Oxandrin, increased $0.6 million to $2.6 million for the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010. These higher sales were offset by a $1.0 million decrease in net sales of our branded product Oxandrin as compared to the three months ended September 30, 2010, primarily due to increased generic competition.

Cost of goods sold

Cost of goods sold increased by $5.0 million to $6.0 million for the nine months ended September 30, 2011, from $1.0 million for the nine months ended September 30, 2010, as the current period includes a $3.4 million charge against income to reserve for excess KRYSTEXXA inventory that had expiration dates such that it was unlikely the product will be sold. In addition, royalty payments on commercialized products are recorded as a component of cost of goods sold and these costs increased by $0.8 million as a result of the commercialization of KRYSTEXXA.

Research and development expenses

Research and development expenses decreased by $5.2 million, or 23%, to $17.3 million for the nine months ended September 30, 2011, from $22.5 million for the nine months ended September 30, 2010. The decrease is primarily due to $2.5 million in costs incurred in the prior year related to commercial batches of KRYSTEXXA manufactured prior to the FDA approval of the product on September 14, 2010. Additionally, the lower costs are due to $1.7 million in prior year expenses associated with our conformance batch campaign at our potential secondary source supplier of pegloticase drug substance coupled with a decrease in outside laboratory costs associated with the wind down of our open label extension clinical study in 2010.

Selling, general and administrative expenses

Selling, general and administrative expenses increased $46.0 million to $62.8 million for the nine months ended September 30, 2011, from $16.8 million for the nine months ended September 30, 2010. The increase was primarily due to increased selling and marketing expenses associated with the full commercial launch of KRYSTEXXA as we continue to ramp up our marketing efforts for the product, and increased headcount as a result of the hiring of our KRYSTEXXA sales force and reimbursement specialists.

Interest expense on convertible notes

Interest expense was $11.4 million for the nine months ended September 30, 2011, consisting of $7.3 million of interest expense from the 4.75% coupon on our 2018 Convertible Notes issued in February 2011 and $4.1 million of non-cash accretion of the debt discount, also associated with our 2018 Convertible Notes.

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Other income (expense), net

Other income (expense), net reflects $1.3 million of income for the nine months ended September 30, 2011 as compared to $35.5 million of expense for the nine months ended September 30, 2010, a change of $36.8 million. Other income for the nine months ended September 30, 2011 reflects a current year benefit to income as a result of the reversal of a $1.8 million liability for accrued interest and penalties relating to the reversal of an unrecognized tax benefit liability, partially offset by $0.4 million of expense as a result of the amortization of deferred financing costs on our 2018 Convertible Notes. The expense for the nine months ended September 30, 2010 represents the mark-to-market adjustment on our previous warrant liability, which was settled in its entirety during the fourth quarter of 2010.

Income tax benefit

We recorded an income tax benefit of $19.1 million for the nine months ended September 30, 2011, as compared to a zero income tax benefit for the nine months ended September 30, 2010. This benefit was partially the result of a reduction in a liability for an unrecognized tax benefit of $3.6 million, which was considered effectively settled due to the recent completion of a state tax audit in the first quarter of 2011. The remaining $15.5 million income tax benefit resulted from the allocation of a tax benefit to continuing operations pursuant to ASC 740-30-45, Income Taxes. As discussed in Note 14 – Convertible Notes, the 2018 Convertible Notes were bifurcated into debt and equity components for accounting purposes. As a result, we recorded a credit to the capital in excess of par value account of $34.4 million, which caused the allocation of the $15.5 million tax benefit to continuing operations. The $19.1 million tax benefit for the nine months ended September 30, 2011 does not result in additional cash flow.

Liquidity and Capital Resources

As of September 30, 2011, we had $202.7 million in cash, cash equivalents and short-term investments as compared to $64.9 million as of December 31, 2010. We primarily invest our cash equivalents and short-term investments in highly liquid, interest-bearing, U.S. Treasury money market funds and bank certificates of deposit in order to preserve principal. In February 2011, we completed the sale of $230 million aggregate principal amount of 4.75% Convertible Senior Notes due 2018. We received cash proceeds from the sale of the Convertible Notes of $222.7 million, net of expenses.

We are using the net proceeds of the issuance of the Convertible Notes to commercialize KRYSTEXXA in the United States, including for the recruiting and hiring of our sales force, expanding our marketing organization and completing the establishment of a commercial infrastructure, funding of clinical development activities directed to potential label expansion for KRYSTEXXA in the United States, to further develop and seek regulatory approval for KRYSTEXXA in jurisdictions outside the United States particularly in the European Union, and for general corporate purposes, including working capital. As a result, our management has broad discretion to allocate the net proceeds from the offering. Pending the application of the net proceeds, we invest the net proceeds in short-term U.S. government security money market funds and bank certificates of deposit.

Based on our current plans for completing the commercial launch of KRYSTEXXA, including our anticipated expenses relating to sales and marketing activities, the cost of purchasing additional inventory, the cost of clinical development activities directed to potential label expansion for KRYSTEXXA in the United States, the cost of pursuing regulatory approval in the European Union and the cost of building a commercial infrastructure in the European Union, and assuming that we are able to generate KRYSTEXXA revenues at the level that we are currently expecting, we believe that our available cash, cash equivalents and short-term investments will be sufficient to fund anticipated levels of operations until April 30, 2013.

We believe we have sufficient quantities of KRYSTEXXA to complete a commercial launch in accordance with our launch plan. We also believe that our current inventory, excluding bulk API drug substance currently included in work-in-process inventory, will be sufficient for us to meet market demand at least through the first quarter of 2013.

Tax Benefits

We recorded an income tax benefit of $19.1 million for the nine months ended September 30, 2011 as compared to a zero income tax benefit for the nine months ended September 30, 2010. This benefit was partially the result of a reduction in a liability for an unrecognized tax benefit of $3.6 million, which was considered effectively settled due to the recent completion of a state tax audit in the first quarter of 2011. The remaining $15.5 million income tax benefit resulted from the allocation of a tax benefit to continuing operations pursuant to ASC 740-30-45 Income Taxes. As discussed in Note 14 – Convertible Notes, the 2018 Convertible Notes were bifurcated into debt and equity components for accounting purposes. As a result, we recorded a credit to the capital in excess of par value account of $34.4 million, which caused the allocation of the $15.5 million tax benefit to continuing operations. The $19.1 million tax benefit for the nine months ended September 30, 2011 does not result in additional cash flow. We expect the full year tax benefit allocated to continuing operations for this item to be approximately $23.9 million.

In February 2010, we received an additional $2.0 million refund of federal income taxes paid in prior years. The recovery in February 2010 of prior alternative minimum income taxes is the result of an amendment of Section 172(b)(1)(H) and 810(b) of the Internal Revenue Code, which was amended under Section 13 of the Worker, Homeownership, and Business Assistance Act of 2009.

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Cash Flows

Cash used in operating activities for the nine months ended September 30, 2011 was $85.3 million, which reflects our net loss for the period of $71.2 million, as well as a non-cash gain of $1.8 million as a result of an unrecognized tax benefit. Cash used in investing activities of $28.0 million during the nine months ended September 30, 2011 reflects the purchase of held-to-maturity securities consisting of bank certificates of deposit. Cash provided by financing activities for the nine months ended September 30, 2011 was $223.3 million mainly due to the cash proceeds received from the issuance of our Convertible Notes of $222.7 million.

Cash used in operating activities for the nine months ended September 30, 2010 was $35.9 million, which reflects our net loss for the period of $72.7 million, substantially offset by a non-cash loss of $32.2 million as a result of the mark-to-market valuation of our warrant liability. Partially offsetting the cash outflows above was the $2.0 million refund received in February 2010 of income taxes paid in prior years. The recovery in February 2010 of prior alternative minimum income taxes is the result of an amendment of Section 172(b)(1)(H) and 810(b) of the Internal Revenue Code, which was amended under Section 13 of the Worker, Homeownership and Business Assistance Act of 2009. Cash used in investing activities of $14.8 million during the nine months ended September 30, 2010 reflects the purchase of held-to-maturity securities encompassing bank certificates of deposit. We received $5.8 million in cash proceeds from financing activities due to the issuance of common stock, including $5.1 million from the exercise of warrants.

Funding Requirements

We are now focusing our efforts on commercializing KRYSTEXXA which was made available by prescription in the United States on December 1, 2010, and completing the development and seeking regulatory approval outside of the United States for KRYSTEXXA, particularly in the European Union.

Our future capital requirements will depend on many factors, including:

• whether we are successful in marketing and selling KRYSTEXXA,

• the cost of our post-approval commitments to the FDA, including an observational study and a REMS program,

• the cost of clinical trials directed to potential expansion of clinical utility opportunities for KRYSTEXXA,

• the cost of commercialization activities, including product marketing, sales and distribution,

• the cost of manufacturing activities,

• market acceptance of KRYSTEXXA by physicians and patients in this largely previously untreated patient population,

• market acceptance of the price that we charge for KRYSTEXXA and under what conditions private and public payors will reimburse patients for KRYSTEXXA, and

• the timing and cost involved in obtaining regulatory approvals for KRYSTEXXA in countries other than the United States.

As we continue with the commercialization of KRYSTEXXA, we expect that our cash needs will increase, and we may need to seek additional funding through customary methods, or to explore a strategic licensing or co-promotion transaction in certain territories as a means of raising additional funding. Should we elect to seek additional funding through customary methods, we may not be able to obtain additional funds or, if such funds are available, such funding may not be on terms that are acceptable to us. If we raise additional funds by issuing equity securities, dilution to our then-existing stockholders will result. If we issue preferred stock, it would likely include a liquidation preference and other terms that would adversely affect our stockholders. If we raise additional funds through the issuance of debt securities or borrowings, we may incur substantial interest expense and could become subject to financial and other covenants that could restrict our ability to take specified actions, such as incurring additional debt or making capital expenditures. If we explore a strategic licensing or co-promotion transaction, one may not be available to us or may only be available on terms that are not acceptable to us. If funds are not available on favorable terms, or at all, our business, results of operations and financial condition may be materially adversely affected and we may be required to curtail or cease operations.

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Contractual Obligations

The below table presents our contractual obligations and commitments as of September 30, 2011:

Payments Due by Period

Contractual Obligations	Total		Less Than One Year		1-3 Years		3-5 Years		More Than 5 Years
	(In thousands)
Capital lease obligations	$	57	$	52	$	5	$	—	$	—
Operating lease obligations		2,842		497		2,345				—
Purchase commitment obligations (1)		58,436		42,487		7,417		5,688		2,844
Other commitments (2)		3,151		2,007		1,144		—		—
Total	$	64,486	$	45,043	$	10,911	$	5,688	$	2,844

(1) Purchase commitment obligations represent our contractually obligated minimum purchase requirements based on our current manufacturing and supply and other agreements in place with third parties. The table does not include potential future purchase commitments for which the amounts and timing of payments cannot be reasonably predicted. Our obligation to pay certain of these amounts may be reduced or eliminated based on future events.

(2) Other commitments include an aggregate of approximately $1.8 million in sales-based milestone payments that will become due and payable to Duke University, or Duke, and Mountain View Pharmaceuticals, or MVP, on the attainment of specified KRYSTEXXA sales targets, the timing of which is based on our best estimates and assumptions and could shift from period to period. Other commitments also reflects severance agreements with four former employees including our former President, which aggregate to approximately $1.4 million, of which $1.3 million will be paid in equal installments over a the next twelve months and $0.1 million will be paid after one year.

Excluded from the above table are employment agreements with eight senior officers. Under these agreements, the Company has committed to total aggregate base compensation per year of approximately $3.1 million plus other fringe benefits and bonuses. These employment agreements generally have an initial term of three years and are automatically renewed thereafter for successive one-year periods unless either party gives the other notice of non-renewal.

Also excluded from the above table are sales-based royalty payments to Duke and MVP due to the contingent nature of such obligations. The royalty rate owed to Duke and MVP for any particular quarter ranges between 8% and 12% of net sales based on the amount of cumulative net sales made by us. We are also required to pay royalties of 20% of any milestones, revenues or other consideration we receive from sub-licensees during any quarter.

In addition, we have received financial grants in support of research and development from the Office of the Chief Scientist of the State of Israel, or OCS, and the Bi-national Industrial Research and Development Foundation, or BIRD, of approximately $2.0 million and $0.6 million, respectively, for the development of KRYSTEXXA. These grants are subject to repayment through royalties on the commercial sale of KRYSTEXXA. The OCS grants were received by our former subsidiary, Bio-Technology General (Israel) Ltd, or BTG, and upon our divestiture of BTG to Ferring, we agreed to remain obligated to reimburse BTG for its repayments to OCS that relate to the KRYSTEXXA financial grants. In addition, under the Israeli Law of Encouragement of Research and Development in Industry, as amended, as a result of the funding received from OCS, if we do not manufacture 100% of its annual worldwide bulk product requirements in Israel, we may be subject to total payments ranging from 120% to 300% of the repayment obligation plus interest based upon the percentage of manufacturing that does not occur in Israel. These payments have been excluded from the table above due to the uncertainties surrounding the potential future cash flows from the commercialization of KRYSTEXXA.

We have a liability for unrecognized tax benefits of $3.4 million as of September 30, 2011. We are unable to estimate the amount or the timing of any future payments for this liability, if any.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. Applying these principles requires our judgment in determining the appropriateness of acceptable accounting principles and methods of application in diverse and complex economic activities. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of revenues, expenses, assets and liabilities, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 1 to our consolidated financial statements included in Item 8 of our Annual Report on Form 10-K, for the year ended December 31, 2010, we believe the following accounting policies include management estimates that are most critical to our reported financial results:

Research and Development. Our research and development includes costs associated with the research and development of our KRYSTEXXA product prior to FDA approval and FDA-related post-marketing commitments for approved products (KRYSTEXXA post-approval). These costs primarily include pre-clinical and clinical studies and trials, personnel costs including compensation, consultants and contract research organizations, quality control and assurance costs, regulatory costs and costs related to the development of commercial scale manufacturing capabilities for KRYSTEXXA, which also includes the costs of preparing Fujifilm Diosynth Biotechnologies USA LLC (“Fujifilm”) to serve as our secondary source supplier of pegloticase drug substance for KRYSTEXXA in the United States. Costs associated with our medical affairs function are currently recorded in research and development. Currently the focus of our medical affairs function is the support of our post-marketing trails. Costs within the Medical Affairs function, such as investigator grants that could potentially improve or advance the commercial potential of KRYSTEXXA, are also recorded as research and development. We include the legal costs associated with patents for products (KRYSTEXXA) that have not yet been approved in countries outside the United Sates as research and development. Research and development costs are expensed as incurred.

Prior to the FDA approval of KRYSTEXXA, manufacturing costs associated with third-party contractors for validation and commercial batch production, process technology transfer, quality control and stability testing, raw material purchases, overhead expenses and facilities costs were recorded as research and development and expensed as incurred as future use could not be determined, and there was uncertainty surrounding FDA approval of KRYSTEXXA for marketing in the United States. Following regulatory approval of KRYSTEXXA by the FDA, we capitalize certain manufacturing costs as inventory in cases where the manufacturing costs meet the definition of an inventoriable asset.

Clinical trial costs have been another significant component of research and development expenses and most of our clinical studies are performed by third-party contract research organizations, or CROs. We accrue costs for clinical studies performed by CROs that are milestone or event driven in nature and based on reports and invoices submitted by the CRO. These expenses are based on patient enrollment as well as costs consisting primarily of payments made to the CRO, clinical sites, investigators, testing facilities and patients for participating in our clinical trials.

Non-refundable advance payments for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the goods are delivered or the related services are performed. We have not deferred any research and development costs as of September 30, 2011 and December 31, 2010 and had no amortization expense for the nine-month periods ended September 30, 2011 and 2010, respectively, based on services performed.

Selling, General and Administrative. Our selling, general and administrative expense primarily includes expenses associated with the commercialization of approved products (KRYSTEXXA) and general and administrative costs to support our operations. These expenses include product marketing and sales, operations personnel, corporate facility operating expenses and depreciation and core corporate support functions including human resources, finance and legal, and other external corporate costs such as insurance, audit and legal fees. We also include legal work in connection with patent applications or litigation, and the sale or licensing of patents within general and administrative expenses.

Share-Based Compensation. We have share-based compensation plans in place and record the associated stock-based compensation expense over the requisite service period. The share-based compensation plans are described in Note 11 to the consolidated financial statements.

Compensation cost for stock options that contain service conditions is charged against income on a straight-line basis between the grant date for the option and the vesting period. We estimate the fair value of all stock option awards that contain service conditions as of the grant date by applying the Black-Scholes option pricing valuation model. The application of this valuation model involves assumptions that are highly subjective, judgmental and sensitive in the determination of compensation cost. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. In addition, as future grants are made, we expect to incur additional compensation costs.

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Restricted stock and restricted stock units, or RSU’s, that contain service conditions are recorded as deferred compensation and amortized into compensation expense on a straight-line basis over the vesting period, which ranges from one to four years in duration. Compensation cost for restricted stock and RSU’s that contain service conditions is based on the grant date fair value of the award, which is the closing market price of our common stock on the grant date multiplied by the number of shares awarded.

Compensation cost for restricted stock and stock option awards that contain performance conditions is based on the grant date fair value of the award. Compensation expense is recorded over the implicit or explicit requisite service period. For purposes of recording compensation expense, we consider performance conditions that depend on a change in control event or an FDA approval, once the transaction is consummated or the event occurs. Previously recognized compensation expense is fully reversed if performance targets are not satisfied. We assess the probability of the performance indicators being met on a continuous basis and record compensation expense from that date, over the remainder of the requisite service period.

Compensation cost for restricted stock and stock option awards that contain a market condition is based on the grant date fair value of the award. Compensation expense is recorded over the implicit, explicit requisite or derived service period. Previously recognized compensation expense is not reversed if performance targets are not satisfied.

We grant stock options that contain service conditions to employees and directors with exercise prices equal to the fair market value of the underlying shares of our common stock on the date that the options are granted. Options granted have a term of 10 years from the grant date. Options granted to employees vest over a four-year period and options granted to directors vest in equal quarterly installments over a one-year period, from the date of grant. Options to directors are granted on an annual basis and represent compensation for services performed on the Board of Directors. Compensation cost for stock options is charged against income on a straight-line basis between the grant date for the option and each vesting date. We estimate the fair value of all stock option awards at the closing price of our common stock on the grant date by applying the Black-Scholes pricing valuation model. The application of this valuation model involves assumptions that are highly subjective, judgmental and sensitive in the determination of compensation cost. We did not issue any shares of common stock upon the exercise of stock options for the three months ended September 30, 2011. During the three months ended September 30, 2010, we issued 85,000 shares of common stock upon the exercise of stock options and received proceeds of $0.6 million. For the nine months ended September 30, 2011 and 2010, we issued 33,000 shares and 273,000 shares, respectively, of common stock upon the exercise of stock options and received proceeds of $0.2 million and $1.8 million, respectively. For the three months ended September 30, 2011 and 2010, approximately $0.7 million and $0.4 million, respectively, of stock option compensation cost was charged against income. For the nine months ended September 30, 2011 and 2010, approximately $2.3 million and $1.6 million, respectively, of stock option compensation cost was charged against income. As of September 30, 2011, there was $7.0 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to unamortized stock option compensation expense which is expected to be recognized over a weighted-average period of approximately 2.9 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

Compensation cost charged against income related to stock option awards that contain performance or market conditions, which we refer to as performance awards, was $0.2 million and $0.8 million for the three months ended September 30, 2011 and 2010, respectively, and $0.4 million and $0.8 million for the nine months ended September 30, 2011 and 2010, respectively, the vesting of which was contingent upon the achievement of various specific strategic objectives by September 30, 2011, including the filing of our MAA for KRYSTEXXA in the European Union and other business development objectives. At September 30, 2011, approximately 400,000 performance awards, which encompass performance targets set for senior management through 2013 remained unvested and non-exercisable and could result in approximately $2.7 million of additional compensation expense if the performance targets are met or are expected to be attained.

We grant restricted stock awards that contain service conditions to our employees and directors. Additionally, we also grant RSU’s to directors. Restricted stock and RSU’s are recorded as deferred compensation and amortized into compensation expense on a straight-line basis over the vesting period, which ranges from one to four years in duration. Restricted stock and RSU’s awarded to directors are granted on a yearly basis and represent compensation for services performed on the Board of Directors. Restricted stock awards to directors vest in equal quarterly installments over a one-year period from the grant date and RSU awards vest after one year and thirty-one days. Compensation cost for restricted stock and RSU’s that contain service conditions is based on the award’s grant date fair value, which is the closing market price of our common stock on the grant date, multiplied by the number of shares awarded. For the three months ended September 30, 2011, we issued 105,000 shares of restricted stock with an aggregate fair market value of $0.6 million. We did not issue any shares of restricted stock during the three months ended September 30, 2010. During the nine months ended September 30, 2011 and 2010, we issued 856,000 shares and 31,000 shares of restricted stock, respectively with an aggregate fair market value of $7.1 million and $0.4 million, respectively. For the three months ended September 30, 2011and 2010, approximately $0.8 million and $0.5 million, respectively, of deferred restricted stock compensation cost was charged against income. For the nine months ended September 30, 2011 and 2010, approximately $2.0 million and $1.6 million, respectively, of deferred restricted stock compensation cost was charged against income. At September 30, 2011, approximately 958,000 shares remained unvested and there was approximately $8.4 million of unrecognized compensation cost related to restricted stock and RSUs that contain service conditions.

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During the three months ended September 30, 2011 and 2010, we recorded $0.3 million and $2.1 million, respectively of compensation expense related to restricted stock awards that contain performance or market conditions. During the nine months ended September 30, 2011 and 2010, we recorded $0.4 million and $2.1 million, respectively, of compensation expense related to restricted stock awards to senior management personnel that contain performance or market conditions, the vesting of which is contingent upon the achievement of certain specific strategic objectives and other business development objectives. At September 30, 2011, approximately 317,000 shares of restricted stock with performance or market conditions remained unvested and could result in approximately $3.1 million of additional compensation expense if the performance targets are met or expected to be achieved.

Income Taxes. In the nine months ended September 30, 2011, we recorded an income tax benefit of $19.1 million for the nine months ended September 30, 2011 as compared to a zero income tax benefit for the nine months ended September 30, 2010. This benefit was partially the result of a reduction in a liability for an unrecognized tax benefit of $3.6 million, which was considered effectively settled due to the recent completion of a state tax audit in the first quarter of 2011. The remaining $15.5 million income tax benefit resulted from the allocation of a tax benefit to continuing operations pursuant to ASC 740-30-45, Income Taxes. This guidance requires that amounts credited to capital in excess of par value, other comprehensive income or discontinued operations during the year are considered sources of income that enable a company to recognize a tax benefit on its loss from continuing operations. As discussed in Note 14 – Convertible Notes, the 2018 Convertible Notes were bifurcated into debt and equity components for accounting purposes. As a result, the Company recorded a credit to the capital in excess of par value account of $34.4 million, which caused the allocation of the $15.5 million tax benefit to continuing operations. The $19.1 million tax benefit for the nine months ended September 30, 2011 does not result in additional cash flow for the Company. The Company expects the full year tax benefit allocated to continuing operations for this item to be approximately $23.9 million.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and net operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on historical taxable income, projected future taxable income, applicable tax strategies, and the expected timing of the reversals of existing temporary differences. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In forming our judgment regarding the recoverability of deferred tax assets related to deductible temporary differences and tax attribute carry forwards, we give weight to positive and negative evidence based on the extent to which the forms of evidence can be objectively verified. We attach the most weight to historical earnings due to its verifiable nature. Weight is attached to tax planning strategies if the strategies are prudent and feasible and implementable without significant obstacles. Less weight is attached to forecasted future earnings due to its subjective nature. In 2010, based on the net operating loss generated in 2010 and historical losses and the uncertainty of profitability in the near future, we concluded that we would maintain a full valuation allowance on all of our deferred tax assets except those assets that are reserved by a liability for unrecognized tax benefits. We maintained a valuation allowance as of September 30, 2011 of $212.7 million. The increase in the valuation allowance from December 31, 2010 was primarily due to an increase in net operating loss carry forwards and the uncertainty that these additional deferred tax assets will be realized.

We use judgment in determining income tax provisions and in evaluating our tax positions. Additional provisions for income taxes are established when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet the minimum probability threshold, which is a tax position that is more-likely-than-not to be sustained upon examination by the applicable taxing authority. We are examined by Federal and state tax authorities and we regularly assess the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of our provision for income taxes. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, the current tax liability and deferred taxes in the period in which the facts that give rise to a revision become known.

The total amount of federal, state and local liabilities for unrecognized tax benefits was $3.4 million as of September 30, 2011, including accrued penalties and interest. The decrease of $6.8 million in the Company’s liability for unrecognized tax benefits from December 31, 2010 to September 30, 2011 is primarily the result of a recently completed state tax audit in the first quarter of 2011 which resulted in a decrease to state unrecognized tax positions from prior years that are considered effectively settled. The Company also decreased a portion of its liability for unrecognized tax benefits due to a change in estimate which is the direct result of the recently settled Federal Income Tax Audit in January of 2011

The net decrease of $1.1 million in the liability for unrecognized tax benefits subsequent to adoption of the new accounting guidance on accounting for uncertainties in income taxes as codified under ASC 740-10, Income Taxes, resulted in a corresponding increase to the income tax benefit within our consolidated statements of operations as well as a reduction to the interest and penalty expense in our consolidated statements of operations.

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Disclosures about Fair Values of Financial Instruments. We categorize our financial instruments into a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets recorded at fair value on our consolidated balance sheets are categorized as follows:

Level 1: Unadjusted quoted prices for identical assets in an active market.

Level 2: Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full-term of the asset. Level 2 inputs include the following:

• Quoted prices for similar assets in active markets,

• Quoted prices for identical or similar assets in non-active markets,

• Inputs other than quoted market prices that are observable, and

• Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset.

The carrying amounts of cash and cash equivalents, notes receivable, accounts receivable, accounts payable and other current liabilities approximate fair value. See Note 2 to our consolidated financial statements for further discussion of the fair value of financial instruments.

Other-Than-Temporary Impairment Losses on Investments. We regularly monitor our available-for-sale and held-to-maturity portfolios to evaluate the necessity of recording impairment losses for other-than-temporary, or OTT, decreases in the fair value of investments. The impairment of a debt security is considered OTT if an entity concludes that it intends to sell the impaired security, that it is more likely than not that it will be required to sell the security before the recovery of its cost basis or that it does not otherwise expect to recover the entire cost basis of the security. Management makes determinations relating to recording impairment losses for OTT through the consideration of various factors such as management’s intent to sell an investment before the recovery of its cost basis. OTT impairment losses result in a permanent reduction to the cost basis of the investment. For the nine months ended September 30, 2011 and 2010, we did not experience or record realized investment losses due to OTT declines in fair value.

Product Revenue Recognition. We generate revenue from product sales. Revenue is not recognized until it is realized or realizable and earned. Revenue is realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) our price to the buyer is fixed and determinable, and (iv) collectability is reasonably assured.

Revenue from sales transactions where the buyer has the right to return the product is recognized at the time of sale only if (i) the seller’s price to the buyer is substantially fixed or determinable at the date of sale, (ii) the buyer has paid the seller, or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product, (iii) the buyer’s obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product, (iv) the buyer acquiring the product for resale has economic substance apart from that provided by the seller, (v) the seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer, and (vi) the amount of future returns can be reasonably estimated.

Given our limited sales history for KRYSTEXXA coupled with the product being a new entry into its market, we believe that we are currently unable to reasonably estimate future product returns. Therefore, we have determined that the shipments of KRYSTEXXA made to specialty distributors do not meet the criteria for revenue recognition at the time of shipment, and, accordingly, such shipments are accounted for using the sell-through method. Under the sell-through method, we do not recognize revenue upon shipment of KRYSTEXXA to specialty distributors. For these product sales, we invoice the specialty distributor and record deferred revenue equal to the gross invoice price. We then recognize revenue when KRYSTEXXA is sold through, or upon shipment of the product from the specialty distributors to their customers, including doctors and infusion suites. Because of the price of KRYSTEXXA, the short period from sale of product to patient infusion and limited product return rights, KRYSTEXXA distributors and their customers generally carry limited inventory. We are also selling KRYSTEXXA to wholesalers whereby we drop ship the product directly to hospitals. As there is limited risk of returns from hospitals as infusions will be taking place in their facilities, we are recording revenue when KRYSTEXXA has been received at the hospital and title has transferred in accordance with the terms of sale.

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Oxandrin product sales are generally recognized when title to the product has transferred to our customers in accordance with the terms of the sale. We ship our authorized generic oxandrolone to our distributor and account for these shipments on a consignment basis until product is sold into the retail market. We defer the recognition of revenue related to these shipments until we confirm that the product has been sold into the retail market and all other revenue recognition criteria have been met.

Our net product revenues represent total product revenues less allowances for returns, Medicaid rebates, other government rebates, discounts, and distribution fees.

Allowances for Returns. In general, we provide credit for product returns for KRYSTEXXA that are returned six months after the product expiration date. Additionally, we provide credit for product returns for Oxandrin and generic oxandrolone that are returned six months prior to or up to 12 months after the product expiration date. Our product sales in the United States primarily relate to the following products:

Product	Expiration (in years)
KRYSTEXXA 8mg		2
Oxandrin and oxandrolone 2.5 mg		5
Oxandrin and oxandrolone 10 mg		3-4

Upon sale, we estimate an allowance for future returns. We provide additional reserves for contemporaneous events that were not known or knowable at the time of shipment. In order to reasonably estimate future returns, we analyze both quantitative and qualitative information including, but not limited to, actual return rates by lot productions, the level of product manufactured by us, the level of product in the distribution channel, expected shelf life of the product, current and projected product demand, the introduction of new or generic products that may erode current demand, and general economic and industry-wide indicators. The aggregate net product return allowance reserve was $0.9 million and $0.5 million at of September 30, 2011 and December 31, 2010, respectively.

Allowances for Medicaid and Other Government Rebates. Our contracts with Medicaid and other government agencies such as the Federal Supply System commit us to providing those agencies with our most favorable pricing. This ensures that our products remain eligible for purchase or reimbursement under these government-funded programs. Based upon our contracts and the most recent experience with respect to sales through each of these channels, we provide an allowance for rebates. We monitor the sales trends and adjust the rebate percentages on a regular basis to reflect the most recent rebate experience. The aggregate net rebate accrual balances were $0.5 million as of September 30, 2011 and $0.3 million at of December 31, 2010.

Inventory Valuation. We state inventories at the lower of cost or market. Cost is determined based on actual cost. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, we record reserves for the difference between the cost and market value. We determine these reserves based on estimates. For the three and nine months ended September 30, 2011, we recorded a $3.4 million charge against income to reserve for excess KRYSTEXXA inventory that had expiration dates such that the product was unlikely to be sold. We did not record any such charges against income for the three and nine months ended September 30, 2010.

We continually analyze the impact of generic competition on our inventory reserves considering the Oxandrin inventory currently on hand, inclusive of raw materials and finished goods, and the current demand forecasts. The aggregate net inventory valuation reserves as of September 30, 2011 and December 31, 2010 were $4.4 million and $1.3 million, respectively.

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Recently Issued Accounting Pronouncements

In June 2011, the FASB issued Accounting Standards Update, or ASU, 2011-05, Presentation of Comprehensive Income, which amends Accounting Standards Codification, or ASC, Topic 220, Comprehensive Income. The amendments give an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The amendments eliminate the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 is effective prospectively for our consolidated financial statements for the year beginning January 1, 2012 and is not expected to have a significant impact on our consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standard, or IFRS, which represents clarifications of ASC Topic 820, Fair Value Measurement, and includes some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. The amendments result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the amendments do not result in a change in the application of the requirements in ASC Topic 820. Some of the amendments clarify the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. ASU 2011.04 is effective prospectively for our consolidated financial statements for the year beginning January 1, 2012. We are currently assessing the potential impact from the adoption of ASU 2011-04 on our consolidated financial statements.

In December 2010, the FASB issued ASU 2010-27, Other Expenses (Topic 720): Fees Paid to the Federal Government by Pharmaceutical Manufacturers. ASU 2010-27 addresses questions concerning how pharmaceutical manufacturers should recognize and classify in their income statements fees mandated by the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act (collectively, the Acts). The Acts impose an annual fee on the pharmaceutical manufacturing industry for each calendar year beginning on or after January 1, 2011. The amendments in this update specify that the liability for the fee should be estimated and recorded in full upon the first qualifying sale with a corresponding deferred cost that is amortized to expense using a straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable. ASU 2010-27 is not expected to have a significant effect on our consolidated financial statements. In July 2010, the FASB issued ASU 2010-20, Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. ASU 2010-20 amends ASU 310 to require additional disclosures regarding the credit quality of financing receivables and the related allowance for credit losses. The amended guidance requires entities to disaggregate by segment or class certain existing disclosures and provide certain new disclosures about its financial receivables and related allowance for credit losses. The amended guidance is effective for interim and annual financial periods beginning after December  15, 2010. We do not expect ASU 2010-20 to have a material effect on our consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. To date, our exposure to market risk has been limited. We do not currently hedge any market risk, although we may do so in the future. We do not hold any derivative financial instruments for trading or other speculative purposes.

Our material interest-bearing assets consist of cash and cash equivalents and short-term investments, including investments in U.S. Treasury and other money market funds and bank certificates of deposit. Our investment income is primarily sensitive to changes in U.S. Treasury security interest rates, general interest rates within the U.S. economy and other market conditions.

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ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission, or SEC’s, rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and President, or CEO, and our Chief Financial Officer, or CFO, as appropriate, to allow timely decisions regarding required disclosure.

We do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of control effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Our management, with the participation of our CEO and President and our CFO, evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, our CEO and President and our CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 1. LEGAL PROCEEDINGS

Intellectual Property-Related Litigation

In a civil action filed in the Fayette Circuit Court in Kentucky on August 31, 2007 ( Joseph R. Berger vs. Savient Pharmaceuticals, Inc.), Dr. Joseph Berger alleged that he had entered into an agreement with us in December 1993, under which he assigned to us an invention and patent rights relating to the use of oxandrolone to treat an HIV-related disorder, the Invention, in exchange for our agreement to use him as a researcher in certain clinical trials relating to the Invention, and that we had breached that agreement. Berger’s verified complaint requested disgorgement of profits and assignment to Berger of the patents obtained on the Invention. During fact discovery in the action, we uncovered an April 6, 1992 Consulting Agreement between Berger and our predecessor, Gynex Pharmaceuticals, or Gynex, wherein Berger assigned the Invention to Gynex in consideration of, among other things, $20,000 from Gynex. After the April 6, 1992 Agreement was presented to Berger, he filed an amended verified complaint which acknowledged the April 6, 1992 Agreement, but contended that the $20,000 paid to him under the agreement was not consideration for the assignment of the Invention. We filed a motion for summary judgment on Dr. Berger’s claims and, on August 17, 2009, the Court issued an order granting our motion and dismissing Dr. Berger’s complaint and amended complaint with prejudice. Berger appealed the decision of the trial court granting our motion for summary judgment, and we filed a notice of cross-appeal solely with respect to the decision of the trial court to apply Kentucky law to the facts of the case. On January 4, 2011, the Kentucky Appellate Court issued an order taking up Berger’s appeal and our cross-appeal on the papers and on October 14, 2011, the Court upheld the lower court’s decision.

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Other Litigation

In November 2008, Richard Sagall, an alleged stockholder, commenced an action in the U.S. District Court for the Southern District of New York seeking to certify a class of shareholders who held Savient securities between December 13, 2007 and October 24, 2008. The suit alleges that we made false and misleading statements relating to the GOUT1 and GOUT2 phase 3 clinical trials and that we failed to disclose in a timely manner serious adverse events which occurred in five patients in these trials. In March 2009, the Court issued an order appointing a lead plaintiff and the law firm Pomerantz Haudek Block Grossman & Gross LLP as lead counsel. The action was also re-captioned as Lawrence J. Koncelik vs. Savient Pharmaceuticals, et al. Thereafter, the lead plaintiff filed his amended complaint in April 2009, seeking unspecified monetary damages. In June 2009, we and the other named defendants moved to dismiss the complaint. The lead plaintiff subsequently filed an opposition of the motion to dismiss and we filed our reply in October 2009. Oral arguments were heard by the Court in February 2010 relating to our motion to dismiss. On September 29, 2010, the Court issued a memorandum decision and order granting our motion to dismiss the amended complaint in its entirety. On October 28, 2010, the lead plaintiff timely filed a notice of appeal of the Court’s decision with the United States Court of Appeals for the Second Circuit, and the briefing on that appeal was completed in June 2011. Oral arguments have been scheduled for November 8, 2011. The Second Circuit is unlikely to issue a decision on the appeal before late 2011. We intend to continue to vigorously defend against this action.

From time to time, we are subject to legal proceedings and claims in the ordinary course of business. Such claims, even if without merit, could result in the significant expenditure of our financial and managerial resources.

ITEM 1A. RISK FACTORS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. All statements, other than statements of historical fact, including statements regarding our strategy, future operations, future financial position, future results of operations, future cash flows, projected costs, financing plans, product development, possible strategic alliances, competitive position, prospects, plans and objectives of management, are forward- looking statements. We often use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “predict,” “will,” and “would,” and similar expressions, to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

• the success of our marketing efforts and our ability to commercialize KRYSTEXXA^® (pegloticase),

• market demand and our ability to gain market acceptance for KRYSTEXXA among physicians, patients, health care payors and others in the medical community,

• our market expansion plans, including our Marketing Authorization Application, or MAA, which we filed with the European Medicine Agency, or EMA, earlier this year,

• market acceptance of reimbursement risks with third-party payors during the initial phases of market introduction,

• the risk that the market for KRYSTEXXA is smaller than we have anticipated,

• our reliance on third parties to manufacture KRYSTEXXA, and

• risks associated with stringent government regulation of the biopharmaceutical industry.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. We have included important factors in various cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We undertake no obligation to update any forward-looking statements.

The following risk factors have been updated to reflect developments subsequent to the filing of our Annual Report on Form 10-K for the year ended December 31, 2010, and we have denoted with an asterisk (*) in the following discussion those risk factors that are materially revised.

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* Risks relating to the commercialization and further development of KRYSTEXXA and our ability to accomplish our future business objectives

*Our business focuses primarily on the commercialization of KRYSTEXXA in the United States. Commercializing KRYSTEXXA in the United States is complex and requires substantial capital resources. If our U.S. commercialization strategy is unsuccessful, market acceptance of KRYSTEXXA may be harmed, and we will not achieve the revenues that we anticipate and may need additional funding.

Our business focuses primarily on the commercialization of KRYSTEXXA in the United States. The secondary focus of our business is the pursuit of regulatory approval for KRYSTEXXA in the European Union and other foreign jurisdictions, and the investigation of the expansion of the clinical utility for KRYSTEXXA. We do not have any material assets other than KRYSTEXXA. As a result of our reliance on this single product and our primary focus on the U.S. market in the near-term, much of our near-term results and value as a company depend on our ability to execute our commercial strategy for KRYSTEXXA in the United States.

We completed the full promotional launch of KRYSTEXXA in the United States in the first quarter of 2011. However, the successful execution of our launch strategy is a complex and ongoing process and will require substantial capital resources. We have no prior experience commercializing a biologic drug product. If we are not successful in executing our commercialization strategy, market acceptance of KRYSTEXXA may be harmed, we will not achieve the revenues that we anticipate and we may need additional funding or seek a strategic licensing or co-promotion transaction in certain territories as a means of raising additional funding.

*Our business also focuses on the worldwide clinical development and commercialization of KRYSTEXXA outside of the United States, particularly in the European Union. If we fail to achieve regulatory approval for KRYSTEXXA in the European Union or in other jurisdictions outside of the United States, or if regulatory approval in those jurisdictions is delayed, market acceptance of KRYSTEXXA in those markets will be harmed and we will not achieve the revenues that we anticipate.

We intend to market KRYSTEXXA outside the United States either by ourselves or with third-party collaborators. In order to market KRYSTEXXA in the European Union and other foreign jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. In early May 2011, we submitted our MAA for marketing authorization for KRYSTEXXA in the European Union. In late May 2011, the EMA validated and accepted for review our MAA and initiated the regulatory review process of KRYSTEXXA in the European Union. Our MAA could fail to be approved by the EMA, or such approval could be delayed. If our MAA is not approved, or if such approval is delayed, market acceptance of KRYSTEXXA in the European Union will be harmed and we will not achieve the revenues that we anticipate.

The procedures for obtaining foreign marketing approvals vary among countries and can involve additional clinical trials or other pre-filing requirements. The time required to obtain foreign regulatory approval may differ from that required to obtain U.S. Food and Drug Administration, or FDA, approval. The foreign regulatory approval process may include all the risks associated with obtaining FDA approval, or different or additional risks, and we may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries. If we pursue commercialization of KRYSTEXXA outside the United States through development and commercialization collaborations, third parties may be responsible for obtaining such foreign regulatory approvals. If this occurs, we will depend on such third parties to obtain these approvals. We and our collaborators may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize KRYSTEXXA in any foreign market. If we fail to receive approval in these jurisdictions, we will not generate revenue from sales of KRYSTEXXA in these jurisdictions.

*We have recently re-established our internal sales, marketing and commercialization infrastructure and capabilities directed toward our commercialization of KRYSTEXXA in the United States. If we are not successful in recruiting and retaining sales and marketing personnel in the United States and maintaining an appropriate infrastructure, our ability to commercialize KRYSTEXXA and generate product sales will be impaired.

From December 2006 until recently, we had limited marketing and no sales capabilities. We have recently re-established our internal sales, marketing and commercialization infrastructure and capabilities, directed toward our commercialization of KRYSTEXXA in the United States. These efforts have been and will continue to be difficult, expensive and time consuming. We may not have accurately estimated the size or capabilities of the sales force necessary to successfully commercialize KRYSTEXXA and may not be able to attract, hire, train and retain the qualified sales and marketing personnel necessary to achieve or maintain an effective sales and marketing force for the sale of KRYSTEXXA, or we may have underestimated the time and expense to achieve this objective. Similarly, we may not be successful in establishing necessary commercial infrastructure and capabilities, including managed care, medical affairs and pharmacovigilance teams. If our internal sales, marketing, and commercialization infrastructure proves to be inadequate, our ability to market and sell KRYSTEXXA and generate revenue from sales to customers will be impaired and result in lower than expected revenues.

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*Our business may be harmed if we have inaccurately predicted the market size for KRYSTEXXA.

The market size for KRYSTEXXA is difficult to predict with accuracy. We currently estimate the total addressable market for KRYSTEXXA to be approximately 120,000 patients in the United States, based on a market sizing study that was completed in July 2011. However, the actual number of patients in the U.S. market may be substantially lower than our estimate. In addition, the total addressable market opportunity for KRYSTEXXA will ultimately depend on, among other things, our marketing and sales efforts, the potential success of label expansion activities, reimbursement and market acceptance by physicians, infusion site personnel, healthcare payors and others in the medical community.

If we have overestimated the market size for KRYSTEXXA, we could incur significant unrecoverable costs from creating excess manufacturing capacity or commercial sales and marketing capabilities and commercial infrastructure, and our revenues will be lower than expected, possibly materially so. Alternatively, if we underestimated the market size for KRYSTEXXA, we may not be able to manufacture sufficient quantities of KRYSTEXXA to enable us to realize full revenue potential from sales of KRYSTEXXA. Any of these results could materially harm our business.

*The commercial success of KRYSTEXXA will depend upon the degree of its market acceptance by refractory chronic gout patients, physicians, infusion site personnel, healthcare payors and others in the medical community. If KRYSTEXXA does not achieve an adequate level of market acceptance, we may not generate sufficient revenues to achieve or maintain profitability.

Those patients who suffer from chronic gout and who are refractory to conventional therapy comprise a largely previously untreated patient population. KRYSTEXXA may not gain or maintain market acceptance by these refractory chronic gout patients, or by physicians, infusion site personnel, healthcare payors or others in the medical community. Additionally, we believe that a significant number of potential patients for KRYSTEXXA may be treated by primary care practitioners and we will need to educate these physicians about KRYSTEXXA in order to facilitate referrals of patients to rheumatologists or other infusion providers who will administer KRYSTEXXA. If we are unsuccessful in educating these primary care practitioners about KRYSTEXXA, or if they do not refer patients to sites of care, we do not expect to achieve an appropriate level of market acceptance for KRYSTEXXA. We could incur substantial and unanticipated additional expense in an effort to increase market acceptance, which would increase the cost of commercializing KRYSTEXXA and could limit its commercial success and result in lower than expected revenues. We believe the degree of market acceptance of KRYSTEXXA will depend on a number of factors, including:

• its efficacy and potential advantages over other treatments,

• the extent to which physicians are successful in treating patients with other products or treatments, such as allopurinol and Uloric^® (febuxostat), which, because they are pills, offer greater convenience and ease of administration and are substantially less expensive compared to KRYSTEXXA,

• whether patients remain on KRYSTEXXA or are able to be successfully managed with allopurinol or Uloric following treatment with KRYSTEXXA,

• the extent to which physicians and patients experience similar or improved clinical results to that reported on the approved product labeling.

• market acceptance of the per vial cost at which we sell KRYSTEXXA in the United States of approximately $2,300 for a single dose of treatment once every two weeks,

• the extent to which concern among physicians and patients about anaphylaxis and infusion reactions that affect many patients treated with KRYSTEXXA, and the boxed warning on the approved product labeling for KRYSTEXXA warning of such reactions, limits sales of KRYSTEXXA,

• the prevalence and severity of other side effects that we have observed to date or that we may observe in the future,

• the extent to which the risk evaluation and mitigation strategy, or REMS, program required as part of the FDA’s approval of KRYSTEXXA is perceived by physicians to be burdensome,

• the timing of the release of competitive products or treatments,

• our marketing and sales resources, the quantity of our supplies of KRYSTEXXA and our ability to establish a distribution infrastructure for KRYSTEXXA,

• whether third-party and government payors cover or reimburse for KRYSTEXXA, and if so, to what extent and in what amount, and

• the willingness of the target patient population to be referred by primary care physicians to rheumatologists, nephrologists or infusion centers.

If market acceptance of KRYSTEXXA is adversely affected by any of these or other factors, then sales of KRYSTEXXA may be reduced and our business will be materially harmed.

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*The FDA approved our Biologics License Application or BLA, with a final label that prescribes safety limits and warnings, including a boxed warning, and we are required to implement post-approval commitments and a REMS program to minimize the potential risks of the treatment of KRYSTEXXA. Such additional obligations and commitments may increase the cost of commercializing KRYSTEXXA, limit the commercial success of KRYSTEXXA and result in lower than expected future earnings.

In clinical trials of KRYSTEXXA, anaphylaxis and infusion reactions in patients were reported to occur during and after administration of KRYSTEXXA. In the Phase 3 trial for KRYSTEXXA, anaphylactic reactions were reported in 6.5% of patients treated with KRYSTEXXA, compared to 0% with placebo, and infusion reactions were reported to occur in 26% of patients treated with KRYSTEXXA, compared to 5% of patients treated with placebo. Physicians may be reluctant to treat patients with KRYSTEXXA because of concern regarding the occurrence of these anaphylactic and infusion reactions. In addition, the approved United States full prescribing information, or labeling, for KRYSTEXXA contains safety information, including a prominent warning on the full prescription information, or package insert, referred to as a “black box warning,” regarding anaphylaxis and infusion reactions, as well as contraindications, warnings and precautions. The prevalence and severity of these adverse reactions and the related labeling for KRYSTEXXA may reduce the market for the product and increase the costs associated with the marketing, sale and use of the product.

We are also required to implement a REMS program to minimize the potential risks of KRYSTEXXA treatment. The REMS program includes a Medication Guide for patients, a Communication Plan to healthcare providers and an Assessment Plan to survey patients’ and providers’ understanding of the serious risks of KRYSTEXXA. The FDA may further revise the REMS program at any time, which could impose significant additional obligations and commitments on us in the future or may require post-approval clinical or non-clinical studies. The FDA is also requiring that we conduct an observational trial in 500 patients treated with KRYSTEXXA for one year to further evaluate and identify if there are any other serious adverse events associated with the administration of KRYSTEXXA. In addition, the FDA is requiring us to conduct several post-approval non-clinical and chemistry, manufacturing and control, or CMC, studies. Such additional obligations and commitments may increase the cost of commercializing KRYSTEXXA, limit the commercial success of KRYSTEXXA, result in revised safety labeling or REMS requirements and result in lower than expected future revenues.

*Although a number of private managed care organizations and government payors have added medical benefits coverage for KRYSTEXXA, we are continuing to seek reimbursement arrangements with them and additional third-party payors. If we are unable to obtain adequate reimbursement from third-party payors, or acceptable prices, for KRYSTEXXA, our revenues and prospects for profitability will suffer.

Our future revenues and ability to become profitable will depend heavily upon the availability of adequate reimbursement for the use of KRYSTEXXA from government-funded and private third-party payors. Reimbursement by a third-party payor depends on a number of factors, including the third-party payor’s determination that use of a product is:

• a covered benefit under its health plan,

• safe, effective and medically necessary,

• appropriate for the specific patient,

• cost effective, and

• neither experimental nor investigational.

Obtaining reimbursement approval for KRYSTEXXA from each government-funded and private third-party payor is a time-consuming and costly process, which in some cases requires us to provide to the payor supporting scientific, clinical and cost-effectiveness data for KRYSTEXXA’s use. We may not be able to provide data sufficient to gain acceptance with respect to reimbursement.

For instance, Medicaid coverage for KRYSTEXXA is currently pending. If state-specific Medicaid programs do not provide adequate coverage and reimbursement, if any, for KRYSTEXXA, it may have a negative impact on our operations. Recently enacted legislation has increased the amount that pharmaceutical manufacturers are required to rebate to Medicaid and this may have a negative effect on our revenues. Specifically, the minimum rebate for single-source covered outpatient drugs in the Medicaid program has been increased from 15.1% to 23.1% of average manufacturer price effective January 1, 2010.

In March 2011, we were awarded a contract from the U.S. Department of Veterans Affairs, or the VA, for KRYSTEXXA to be covered for reimbursement for VA member patients. This contract award is effective on April 1, 2011 and calls for us to sell KRYSTEXXA to the VA at an approximate 24% discount to our list price. If we are unable to negotiate smaller discounts to the list price for KRYSTEXXA with other third-party payors, our profitability will be materially and adversely affected.

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Even when a third-party payor determines that a product is generally eligible for reimbursement, third-party payors may impose coverage limitations that preclude payment for some product uses that are approved by the FDA or similar authorities or impose patient co-insurance or co-pay amounts that may result in lower market acceptance and which would lower our revenues. Where third-party payors require substantial co-insurance or co-pay amounts, we subsidize these amounts for some economically disadvantaged patients, which reduces our profit margin on KRYSTEXXA for those patients. Some payors establish prior authorization programs and procedures requiring physicians to document several different parameters, which may impede patient access to therapy. Moreover, eligibility for coverage does not necessarily mean that KRYSTEXXA will be reimbursed in all cases or at a rate that allows us to sell KRYSTEXXA at an acceptable price adequate to make a profit or even cover our costs. If we are not able to obtain coverage and adequate reimbursement promptly from third-party payors for KRYSTEXXA, our ability to generate revenues and become profitable will be compromised.

The scope of coverage and payment policies varies among private third-party payors, including indemnity insurers, employer group health insurance programs and managed care plans. These third-party payors may base their coverage and reimbursement on the coverage and reimbursement rate paid by carriers for Medicare beneficiaries, which are traditionally at a substantially discounted rate. Furthermore, many such payors are investigating or implementing methods for reducing healthcare costs, such as the establishment of capitated or prospective payment systems. Cost containment pressures have led to an increased emphasis on the use of cost-effective products by healthcare providers. If third-party payors do not provide adequate coverage or reimbursement for KRYSTEXXA, it could have a negative effect on our revenues and results of operations.

If we fail to comply with regulatory requirements or experience unanticipated problems with KRYSTEXXA, the product could be subject to restrictions and be withdrawn from the U.S. market and we may be subject to penalties, which would materially harm our business.

The marketing approval for KRYSTEXXA in the Unites States, along with the manufacturing processes, reporting of safety and adverse events, post-approval commitments, product labeling, advertising and promotional activities, and REMS program, are subject to continual requirements of, and review by, the FDA, including thorough inspections of third-party manufacturing and testing facilities.

These requirements include submission of safety and other post-marketing information and reports, registration requirements, current Good Manufacturing Practices, or cGMP, relating to quality control, quality assurance and corresponding maintenance of records and documents, and recordkeeping. The FDA enforces compliance with cGMP and other requirements through periodic unannounced inspections of manufacturing and laboratory facilities. The FDA is authorized to inspect manufacturing and testing facilities, marketing literature, records, files, papers, processes, and controls at reasonable times and within reasonable limits and in a reasonable manner, and we cannot refuse to permit entry or inspection.

If, in connection with any future inspection, the FDA finds that we or any of our third-party manufacturers or testing laboratories are not in substantial compliance with cGMP requirements, the FDA may undertake enforcement action against us.

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In addition, the approval of KRYSTEXXA is subject to limitations on the indicated uses for which it may be marketed. The approval of KRYSTEXXA also contains requirements for post-marketing testing and surveillance to monitor KRYSTEXXA’s safety and/or efficacy, as well as a commitment for an observational trial in 500 patients treated with KRYSTEXXA for one year to further evaluate the identification of any serious adverse events associated with the administration of KRYSTEXXA. Subsequent discovery of previously unknown problems with KRYSTEXXA or its manufacturing processes, such as known or unknown safety or adverse events, or failure to comply with regulatory requirements, may result in, for example:

• revisions of or adjustments to the product labeling,

• restrictions on the marketing or manufacturing of KRYSTEXXA,

• imposition of postmarketing study or postmarketing clinical trial requirements,

• imposition of new or revised REMS requirements, including distribution and use restrictions,

• public notice of regulatory violations,

• costly corrective advertising,

• warning letters,

• withdrawal of KRYSTEXXA from the market,

• refusal to approve pending applications or supplements to approved applications,

• voluntary or mandatory product recall,

• fines or disgorgement of profits or revenue,

• suspension or withdrawal of regulatory approvals, including license revocation,

• shutdown, or substantial limitations on the operations of manufacturing facilities,

• refusal to permit the import or export of products,

• product seizure,

• debarment from submitting certain abbreviated applications, and

• injunctions or the imposition of civil or criminal penalties.

If any of these events were to occur, our business would be materially harmed.

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We may face substantial competition and our competitors may develop or commercialize alternative technologies or products more successfully than we do.

The pharmaceutical and biotechnology industries are intensely competitive. We face competition with respect to KRYSTEXXA from major pharmaceutical companies and biotechnology companies worldwide. Potential competitors also include academic institutions and other public and private research institutions that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. Our competitors may develop products that are safer, are more effective, have fewer side effects, are more convenient or are less costly than KRYSTEXXA.

On September 14, 2010, we received FDA approval for KRYSTEXXA for the treatment of chronic gout in adult patients refractory to conventional therapy, a subset of the broader population of patients with gout. By far, the most prevalent current treatment for gout is allopurinol, which can lower uric acid levels by inhibiting uric acid formation. Allopurinol is a generic and inexpensive treatment which has achieved widespread acceptance by payors, physicians and patients. A small number of patients with gout are treated with probenecid, which can lower uric acid levels by promoting excretion of uric acid. In addition, febuxostat was approved by the FDA in early 2009 for the chronic management of hyperuricemia in patients with gout. Febuxostat lowers uric acid levels by inhibiting uric acid formation through the same mechanism of action as allopurinol. Although febuxostat is labeled for the chronic management of hyperuricemia in patients with gout, in the event febuxostat is used to treat patients who failed on or were contraindicated to allopurinol, or if patients are otherwise treated with febuxostat prior to being treated with KRYSTEXXA, market demand for KRYSTEXXA could be affected. Each of these approved treatments is both less expensive than KRYSTEXXA and available as a pill. Pills are significantly more convenient for patients than KRYSTEXXA, which requires a visit to an infusion center for a four to five-hour treatment. If KRYSTEXXA does not achieve an adequate level of market acceptance, we may not generate sufficient additional revenues to achieve or maintain profitability.

There are also a number of companies developing new treatments for gout. Some of these development stage treatments are currently in late stage clinical trials. Depending on their cost, safety, efficacy and convenience, one or more of these new therapies, if approved, could provide substantial competition for KRYSTEXXA.

Moreover, the Patient Protection and Affordable Care Act of 2010, or the PPACA, among other things, permits the FDA to approve biosimilar or interchangeable versions of biological products like KRYSTEXXA through an abbreviated approval pathway following periods of data and marketing exclusivity. The approval of such versions could result in the earlier entry of similar, competing, and less costly products by our foreign and domestic competitors, including products that may be interchangeable with our own approved biological products. The market entry of these competing products could decrease the revenue we receive for any approved products, which, in turn, could adversely affect our operating results and our overall financial condition.

Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals and marketing and distributing approved products than we do. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel, as well as in acquiring products, product candidates and technologies complementary to, or necessary for, our programs or advantageous to our business.

If we are unable to maintain orphan drug exclusivity for KRYSTEXXA, we may face increased competition.

Under the Orphan Drug Act of 1983, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition affecting fewer than 200,000 people in the United States. A company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drug marketing exclusivity for that drug for a period of seven years from the date of its approval. This orphan drug exclusivity prevents the approval of another drug containing the same active ingredient and used for the same orphan indication except in very limited circumstances, based upon the FDA’s determination that a subsequent drug is safer, more effective or makes a major contribution to patient care, or if the manufacturer is unable to assure that a sufficient quantity of the orphan drug is available to meet the needs of patients with the rare disease or condition. Orphan drug exclusivity may also be lost if the FDA later determines that the initial request for designation was materially defective.

KRYSTEXXA was granted orphan drug designation by the FDA in 2001, which we expect will provide the drug with orphan drug marketing exclusivity in the United States until September 2017, seven years from the date of its approval. However, such exclusivity may not effectively protect the product from competition if the FDA determines that a subsequent pegloticase drug for the same indication is safer, more effective or makes a major contribution to patient care, or if we are unable to assure the FDA that sufficient quantities of KRYSTEXXA are available to meet patient demand. In addition, orphan drug exclusivity does not prevent the FDA from approving competing drugs for the same or similar indication containing a different active ingredient. If a subsequent drug is approved for marketing for the same or similar indication we may face increased competition, and our revenues from the sale of KRYSTEXXA will be adversely affected.

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*We may need to raise additional capital to execute upon our commercial strategy for KRYSTEXXA, including completing the further development and seeking regulatory approval outside of the United States for KRYSTEXXA, particularly in the European Union. Such financing may only be available on terms unacceptable to us, or not at all. If we are unable to obtain financing on favorable terms, our business, results of operations and financial condition may be materially adversely affected.

At September 30, 2011, we had $202.7 million in cash, cash equivalents and short-term investments, as compared to $64.9 million at December 31, 2010. At September 30, 2011, we had an accumulated deficit of $386.7 million. The development and commercialization of pharmaceutical products requires substantial funds and we currently have no committed external sources of capital. Historically, we have satisfied our cash requirements primarily through equity offerings, product sales and the divestiture of assets that were not core to our strategic business plan. Most recently, we have increased our cash position through the offer and sale of our 4.75% Convertible Senior Notes due 2018, which we refer to as the 2018 Convertible Notes. We have been less successful in increasing our cash position in recent years through product sales of Oxandrin^® and our authorized generic Oxandrin brand equivalent product, oxandrolone, due to a substantial decline in sales. Although we may consider divesting Oxandrin and oxandrolone, any proceeds of that divestiture would not significantly improve our capital position and we do not have further non-core assets to divest.

Although our Board of Directors may from time-to-time evaluate strategic alternatives available to us to maximize value, we are proceeding with our commercial launch of KRYSTEXXA in the United States, have submitted and had validated and accepted for review by the EMA our MAA for KRYSTEXXA in the European Union and are pursuing additional regulatory filings in other jurisdictions. Our future capital requirements will depend on many factors, including:

• the cost of manufacturing activities,

• the cost and results of our post-approval commitments to the FDA,

• the cost of clinical development activities directed to potential label expansion for KRYSTEXXA in the United States,

• the cost of commercialization activities, including product marketing, sales and distribution, and

• whether we choose to pursue additional collaborative arrangements relating to the commercialization of KRYSTEXXA in the European Union or in other jurisdictions outside of the United States, and if we choose to do so, our ability to establish and maintain such arrangements.

Based on our current plans for completing the commercial launch of KRYSTEXXA, including our anticipated expenses relating to sales and marketing activities, the cost of purchasing additional inventory, the cost of clinical development activities directed to potential label expansion for KRYSTEXXA in the United States, the cost of pursuing regulatory approval in the European Union and the cost of building a commercial infrastructure in the European Union, and assuming that we are able to generate KRYSTEXXA revenues at the level that we are currently expecting, we believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our anticipated operations until April 30, 2013.

We expect that the cash needed to successfully complete the commercial launch of KRYSTEXXA in the United States and seek regulatory approvals in countries other than the United States will be substantial, and we may require the need to seek additional funding through customary methods or explore a strategic licensing or co-promotion transaction in certain territories as a means of raising additional funding. Should we elect to seek additional funding through customary methods, we may not be able to obtain additional financing or, if such financing is available, such financing may not be on terms that are acceptable to us. If we raise additional funds by issuing equity securities, dilution to our then-existing stockholders will result. If we issue preferred stock, it would likely include a liquidation preference and other terms that would adversely affect our stockholders. If we raise additional funds through the issuance of debt securities or borrowings, we may incur substantial interest expense and could become subject to financial and other covenants that could restrict our ability to take specified actions, such as incurring additional debt or making capital expenditures. If explore a strategic licensing or co-promotion transaction, one may not be available to us or may only be available on terms that are not acceptable to us. If additional funds are not available on favorable terms, or at all, our business, results of operations and financial condition may be materially adversely affected, and we may be required to curtail or cease operations.

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*If we market KRYSTEXXA in a manner that violates healthcare fraud and abuse laws, or if we violate false claims laws or fail to comply with our reporting and payment obligations under the Medicaid rebate program or other governmental pricing programs, we may be subject to civil or criminal penalties or additional reimbursement requirements and sanctions, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

In addition to FDA restrictions on the marketing of pharmaceutical products, several other types of state and federal healthcare fraud and abuse laws have been applied in recent years to restrict certain marketing practices in the pharmaceutical industry. These laws include anti-kickback statutes and false claims statutes. Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of these laws.

The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federally financed healthcare program. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there are several statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly and practices that involve remuneration intended to induce prescribing, purchasing or recommending such healthcare items or services may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability.

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, or causing to be made, a false statement in order to have a claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers, reporting inflated average wholesale prices to pricing services that were then used by federal programs to set reimbursement rates and engaging in off-label promotion that caused claims to be submitted to Medicaid for non-covered, off-label uses. Such activities have been alleged to cause the resulting claims for reimbursement to be “false” claims. Most states also have statutes or regulations similar to the federal anti-kickback and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

We participate in the federal Medicaid Rebate Program established by the Omnibus Budget Reconciliation Act of 1990, as well as several state supplemental rebate programs. Under the Medicaid rebate program, we pay a rebate to each state Medicaid program for our products that are reimbursed by those programs. Federal law requires that any company that participates in the Medicaid rebate program extend comparable discounts to qualified purchasers under the Public Health Service Act pharmaceutical pricing program, which requires us to sell our products to certain customers at prices lower than we otherwise might be able to charge. If products are made available to authorized users of the Federal Supply Schedule, additional pricing laws and requirements apply. Pharmaceutical companies have been prosecuted under federal and state false claims laws in connection with allegedly inaccurate information submitted to the Medicaid Rebate Program, for knowingly submitting or using allegedly inaccurate pricing information in connection with federal pricing and discount programs or for failing to file or timely file periodic drug pricing reports to the Medicaid Rebate Program.

Pricing and rebate calculations vary among products and programs. The calculations are complex and are often subject to interpretation by us or our contractors, governmental or regulatory agencies and the courts. Our methodologies for calculating these prices could be challenged under false claims laws or other laws. We or our contractors could make a mistake in calculating reported prices and required discounts, revisions to those prices and discounts, determining whether a revision is necessary or we or our contractors may fail to timely file such calculations which could result in retroactive rebates (and interest, if any). Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. If this were to occur or if we were to fail to file or timely file periodic drug pricing reports as required, we could face, in addition to prosecution under federal and state false claims laws, substantial liability and civil monetary penalties, exclusion of our products from reimbursement under government programs, criminal fines or imprisonment or the entry into a Corporate Integrity Agreement, Deferred Prosecution Agreement, or similar arrangement.

In addition, federal legislation now imposes additional requirements. For example, as part of the PPACA, a federal physician payment disclosure provision based on the Physician Payments Sunshine Act was enacted, which requires pharmaceutical manufacturers to report certain gifts and payments to physicians beginning in 2013. These reports will then be placed on a public database. Failure to so report could subject companies to significant financial penalties.

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Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations could be costly. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations, including anticipated activities conducted by our sales team in the sale of KRYSTEXXA, are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Our conduct of the observational study in a commercial patient population contemplates that participating clinical sites will bill third-party payors for the cost of KRYSTEXXA and physician and infusion services which are incidental to the normal and ordinary therapeutic use of KRYSTEXXA. The clinical trial sites will separately bill us, and we will pay for, any additional tests and services which are required by the study protocol and not incidental to the normal and ordinary use of KRYSTEXXA. Under certain circumstances a payment being made to a physician or other healthcare provider who is using a commercially available product and billing third parties for its use may be found to be in violation of the federal Anti-Kickback Statute, the federal False Claims Act, and various other federal and state laws. If our conduct of the observational study for KRYSTEXXA is found to be in violation of these laws or any other governmental regulations, we may be subject to significant civil, criminal and administrative penalties, damages, fines, or exclusion from government funded healthcare programs, such as Medicare and Medicaid, which could result in the curtailment or restructuring of our operations.

Foreign governments tend to impose strict price controls, which may adversely affect our revenues.

In some foreign countries, particularly the countries of the European Union and Canada, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take, at a minimum, an additional six to 12 months after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval for KRYSTEXXA in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. The conduct of such a clinical trial would be expensive and result in delays in commercialization of KRYSTEXXA in such markets. If reimbursement is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.

Moreover, the Medicare Prescription Drug, Improvement and Modernization Act of 2003, or MMA, contains provisions that may change U.S. importation laws and expand pharmacists’ and wholesalers’ ability to import lower priced versions of certain drugs from Canada, where there are government price controls. Controlled substances, biological products and certain other drugs that are infused, inhaled or intravenously injected are exempt from these provisions, but it is possible that changes to the law could be made that would impact the ability to import these types of products. These changes to U.S. importation laws will not take effect unless and until the Secretary of Health and Human Services, or HHS, certifies that the changes will pose no additional risk to the public’s health and safety and will result in a significant reduction in the cost of products to consumers. This certification has not yet been made, and the Secretary of HHS has not announced any plans to do so. Even if the importation provisions of the MMA do not become effective, a number of other federal legislative proposals have been offered to implement similar changes to U.S. importation laws and to broaden permissible imports in other ways, such as expanding the number of countries from which importation is allowed. If the MMA importation provisions become effective, or if similar legislation or regulatory changes are enacted, this could permit more widespread importation of drugs from foreign countries into the United States. This may include re-importation from foreign countries where the drugs are sold at lower prices than in the United States. Such legislation, or similar regulatory changes, could decrease the revenue we receive for any approved products, which, in turn, could adversely affect our operating results and our overall financial condition.

We may elect or be required to perform additional clinical trials for other indications or in support of applications for regulatory marketing approval of KRYSTEXXA in jurisdictions outside the United States. These additional trials could be costly and could result in findings inconsistent with or contrary to the data from the clinical trials that supported our U.S. filings with the FDA, which could restrict our marketing approval of KRYSTEXXA.

Before obtaining regulatory approval for the sale of KRYSTEXXA in their respective jurisdictions, we must provide foreign regulatory authorities with clinical data to demonstrate that KRYSTEXXA is safe and effective. Clinical trials of KRYSTEXXA must comply with regulation by numerous regulatory agencies in other countries. We may decide, or be required by regulators, to conduct additional clinical trials or testing of KRYSTEXXA. For example, we have made a post-approval commitment to the FDA that we will conduct an observational trial in patients treated for one year to further evaluate and identify any serious adverse events associated with the administration of KRYSTEXXA therapy. Clinical testing is expensive and difficult to design and implement. Clinical testing can also take many years to complete and the outcome of such testing is uncertain. Success in pre-clinical testing and early clinical trials does not ensure that later clinical trials will be successful and interim results of a clinical trial do not necessarily predict final results.

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We may also be required, or we may elect, to conduct additional clinical trials or pre-clinical animal studies for or in support of our applications for regulatory marketing approval in jurisdictions outside the United States, such as the EMA. Regulatory authorities in jurisdictions outside the United States may require us to submit data from supplemental clinical trials, or pre-clinical animal studies, in addition to data from the clinical trials that supported our United States filings with the FDA. For example, in December 2010, the Pediatric Committee of the EMA approved our pediatric investigation plan for the treatment and prevention of hyperuricemia, which was a condition to our ability to file for marketing approval in the European Union. Any requirements to conduct supplemental trials would add to the cost of developing KRYSTEXXA, and we may not be able to complete such supplemental trials. Additional trials could also produce findings that are inconsistent with the trial results we have previously submitted to the FDA, in which case we would be obligated to report those findings to the FDA. This could result in additional restrictions on the marketing approval of KRYSTEXXA, including new safety labeling. Inconsistent trial results could also lead to delays in obtaining marketing approval in the United States for other indications for KRYSTEXXA and could cause regulators to impose restrictive conditions on marketing approvals, including but not limited to the expansion of our REMS program to include distribution and use restrictions, and could even cause our marketing approval to be revoked.

Any of these results would materially harm our business and impair our ability to generate revenues and achieve or maintain profitability.

If we receive regulatory approval for the sale of KRYSTEXXA in the European Union and other foreign jurisdictions in which we intend to market KRYSTEXXA, our commercial success in these foreign jurisdictions will depend on our ability to either conduct commercial activities in such countries ourselves or enter into collaborative arrangements relating to the commercialization of KRYSTEXXA.

We do not currently have foreign operations, and establishing operations for the sales, marketing and distribution of KRYSTEXXA will be difficult, time consuming, require a significant capital commitment and is subject to foreign regulations. Moreover, our efforts to establish commercial operations in the European Union or other foreign jurisdictions may not be successful.

It will be particularly difficult for us to commercialize KRYSTEXXA outside the United States without entering into collaborative arrangements. Entering into collaborative arrangements for the commercialization of KRYSTEXXA in the European Union and other foreign jurisdictions may also be time consuming, and may not be on terms favorable to us, if we are successful in entering into such arrangements at all.

The commercialization of KRYSTEXXA outside the United States would subject us to additional risks, including:

• potentially reduced protection for intellectual property rights,

• unexpected changes in tariffs, trade barriers and regulatory requirements,

• economic weakness, including inflation, or political instability in particular foreign economies and markets,

• compliance with tax, employment, immigration and labor laws for employees traveling abroad,

• foreign taxes,

• foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country,

• workforce uncertainty in countries where labor unrest is more common than in the United States, and

• business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters, including earthquakes, volcanoes, typhoons, floods, hurricanes and fires.

These and other risks may materially adversely affect our ability to attain or sustain profitable operations or collaborations in jurisdictions outside of the United States.

*If we fail to attract and retain senior management and key personnel, we may not be able to complete the development of or execute upon our commercial strategy for KRYSTEXXA.

We depend on key members of our management team, including John H. Johnson, who was appointed by our Board of Directors as our Chief Executive Officer effective January 31, 2011 and Chief Executive Officer and President effective May 30, 2011. In addition, in recent years, due to challenges we faced and changes in our senior management, we have relied at various times more heavily on our Board of Directors, particularly our Chairman, Stephen O. Jaeger. The loss of the services of Mr. Jaeger, or any member of our senior management team, particularly Mr. Johnson, could harm our ability to complete the development of and execute our commercial strategy for KRYSTEXXA. We have employment agreements with Mr. Johnson and other key members of our management team, but these agreements are terminable by the individuals on short or no notice at any time without penalty. In addition, we do not maintain, and have no current intention of obtaining, “key man” life insurance on any member of our management team.

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Recruiting and retaining qualified scientific and commercial personnel, including clinical development, regulatory, sales and marketing executives and field personnel, is also critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific personnel from universities and research institutions. If we fail to recruit and then retain these personnel, we may not be able to effectively pursue the development of and execute our commercial strategy for KRYSTEXXA.

*As we expand our development and commercialization activities outside of the United States, we will be subject to an increased risk of inadvertently conducting activities in a manner that violates the U.S. Foreign Corrupt Practices Act. If that occurs, we may be subject to civil or criminal penalties which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

We are subject to the U.S. Foreign Corrupt Practices Act, or FCPA, which prohibits corporations and individuals from paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity.

In the course of establishing and expanding our commercial operations and seeking regulatory approvals outside of the United States, we will need to establish and expand business relationships with various third parties, such as consultants, advocacy groups and physicians, and we will interact more frequently with foreign officials, including regulatory authorities and physicians employed by state-run healthcare institutions who may be deemed to be foreign officials under the FCPA. Any interactions with any such parties or individuals where compensation is provided which are found to be in violation of the FCPA could result in substantial fines and penalties and could materially harm our business. If our business practices outside the United States are found to be in violation of the FCPA, we may be subject to significant civil and criminal penalties which could have a material adverse effect on our business, financial condition, results of operation and growth prospects.

Risks relating to our reliance on third parties

We have no manufacturing capabilities and limited manufacturing personnel. We depend on third parties to manufacture KRYSTEXXA. If these manufacturers fail to meet our manufacturing requirements at acceptable quality levels and at acceptable cost, and if we are unable to identify suitable replacements, our commercialization efforts may be materially harmed.

We have limited personnel with experience in, and we do not own facilities for, the manufacturing of any of our products. We depend on third parties to manufacture KRYSTEXXA. We have entered into commercial supply agreements with third-party manufacturers, including:

• Bio-Technology General (Israel) Ltd., or BTG, for the production of the pegloticase drug substance,

• NOF Corporation of Japan, or NOF, for the supply of mPEG-NPC, a key raw material in the manufacture of the pegloticase drug substance, or drug substance, and

• Sigma-Tau PharmaSource, Inc., or Sigma-Tau, for the production of the KRYSTEXXA drug product.

These companies are our sole source suppliers for the mPEG-NPC, the drug substance and the KRYSTEXXA drug product.

Our third-party manufacturers have limited experience manufacturing KRYSTEXXA on a sustained basis and at a capacity that would support our market projections for KRYSTEXXA. In addition, in order to produce KRYSTEXXA in the quantities necessary to meet our long-range anticipated market demand, our contract manufacturers will need to increase the overall manufacturing capacity for the drug substance. If we are unable to increase our manufacturing capacity or qualify an additional supplier, or if the cost of the increased capacity is uneconomical to us, we may not be able to produce KRYSTEXXA in a sufficient quantity to meet future demand, or at a satisfactory cost, either of which would adversely affect our projected revenues and gross margins.

Moreover, the FDA has previously identified manufacturing deficiencies and violations of cGMP at one of our manufacturers. Some of these deficiencies were significant and required substantial capital to remediate. Although we believe that these violations and deficiencies have since been remediated, the FDA may identify further violations or deficiencies in future inspections of our manufacturers’ facilities, which may impede their ability to timely provide us with product, if they are able to do so at all.

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In addition, BTG is located in Israel. Future hostilities in the Middle East could harm BTG’s ability to supply us with the drug substance and could harm our commercialization efforts. Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured products ourselves, including:

• reliance on the third party for regulatory compliance, quality assurance and adequate training in management of manufacturing staff,

• the possible breach of the manufacturing agreement by the third party because of factors beyond our control, and

• the possibility of termination or non-renewal of the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us.

Any of these risks could cause us to be unable to obtain sufficient quantities of KRYSTEXXA to meet future demand, which would adversely affect our projected revenues and gross margins.

We experienced some batch failures of KRYSTEXXA based on one manufacturing specification. If we continue to experience a high rate of batch failures, our gross margin in selling KRYSTEXXA will decrease, we may not have enough product to meet demand and the FDA may require us to take further steps to address these issues, any of which could materially harm our commercialization efforts.

In the second half of 2010, we experienced some batch failures of KRYSTEXXA based on one manufacturing specification. Although we believe that these batch failures are within normal industry failure rates experienced for the commencement of biologic commercial manufacturing, this failure rate is nonetheless above the level that we believe to be acceptable for normal ongoing operations. With the assistance of an outside manufacturing and quality consulting firm, we have completed a review of these batch failures. Although we believe that we have identified the root cause of the batch failures, we may not have done so, or there may be additional factors causing these batch failures. Under our direction, our third-party contract manufacturers are in the process of implementing remediation steps that we believe will minimize or eliminate these failures in the future. However, the remediation steps that we have implemented may fail to minimize or eliminate these batch failures.

Subsequent to the implementation of these remediation steps, we have successfully completed the manufacture of several batches and continue to pursue scheduled manufacturing. However, if we continue to experience a high rate of batch failures, then our cost of producing KRYSTEXXA will increase and our gross margin in selling KRYSTEXXA will therefore decrease. We also may not have enough product to meet demand. In addition, the FDA could require us to take further steps to reduce this batch failure rate, which could be costly and could require us to stop manufacturing KRYSTEXXA in order to implement these further remediation steps. Any reduction in our gross margin, inability to meet demand or FDA requirement to implement further remediation steps could materially harm our commercialization efforts.

The manufacture and packaging of pharmaceutical products such as KRYSTEXXA are subject to the requirements of the FDA and similar foreign regulatory bodies. If we, or our third-party manufacturers, fail to satisfy these requirements, our product development and commercialization efforts may be materially harmed.

The manufacture and packaging of pharmaceutical products, such as KRYSTEXXA, are regulated by the FDA and similar foreign regulatory bodies and must be conducted in accordance with the FDA’s cGMPs and comparable requirements of foreign regulatory bodies. Our third-party manufacturers, including BTG, Sigma-Tau and NOF, are subject to periodic inspection by the FDA and similar foreign regulatory bodies. If our third-party manufacturers do not pass such periodic FDA or other regulatory inspections for any reason, including equipment failures, labor difficulties, failure to meet stringent manufacturing, quality control or quality assurance practices, or natural disaster, our ability to execute upon our commercial strategy for KRYSTEXXA will be jeopardized. Failure by us, or our third-party manufacturers, to comply with applicable regulations, requirements, or guidelines could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant approval of pending marketing applications for our product, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business.

*Qualifying a global secondary source supplier of drug substance, any other change to any of our third-party manufacturers for KRYSTEXXA or any change in the location where KRYSTEXXA is manufactured would require prior FDA review, approval of the manufacturing process and procedures for KRYSTEXXA manufacture. This qualification and FDA review and approval will be costly and time consuming and could delay or prevent the manufacture of KRYSTEXXA at such facility.

We have engaged a secondary source supplier of the drug substance used in the manufacture of KRYSTEXXA. In connection with the FDA’s consideration of this secondary source supplier of drug substance, this supplier is required to produce validation batches of the drug substance to demonstrate to the FDA that the materials produced by this supplier are comparable to those produced at BTG. If we cannot establish to the satisfaction of the FDA that the drug substance manufactured by the secondary source supplier is comparable to the drug substance manufactured at BTG, we will not be permitted to use the drug substance manufactured by the secondary source supplier in the formulation of KRYSTEXXA for marketing in the United States. During the first quarter of 2010, the performance batch production campaign commenced, and as a result of batch failures, based on one manufacturing specification, the campaign was terminated in December 2010. The Company renegotiated the agreement in June 2011 and the conformance campaign is planned to re-start during the second half of 2011. The

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Company expects the additional costs associated with its conformance campaign to approximate $10.0 million, which includes non-refundable fees of $1.0 million to reserve manufacturing capacity for the conformance batch campaign. We do not expect FDA approval of the secondary source manufacturing facility to be completed until the first quarter of 2013, at the earliest. If the FDA requires that we conduct clinical or non-clinical trials to demonstrate that the drug substance manufactured by the secondary source supplier is equivalent to the drug substance manufactured by BTG, we could incur significant additional costs or delays in qualifying the secondary source supplier for the drug substance. If we elect to manufacture the drug substance used in KRYSTEXXA at the facility of another third-party supplier, if we elect to utilize a new facility to fill and finish KRYSTEXXA or if we change the location where KRYSTEXXA is manufactured, we would need to ensure that the new facility and the manufacturing process are in substantial compliance with the FDA’s cGMPs and obtain prior FDA approval. Any such new facility could also be subject to a pre-approval inspection by the FDA, and a successful technology transfer and subsequent validation of the manufacturing process would be required by the FDA, all of which are expensive and time-consuming endeavors. Any delays or failures in satisfying these requirements could delay our ability to manufacture KRYSTEXXA in quantities sufficient to satisfy market demand and our needs for any future clinical trials or other development purposes.

If the company from which we source our mPEG-NPC is unable to supply us with product, our business may suffer.

We procure mPEG-NPC, a key raw material in the manufacture of drug substance, from a single supplier, NOF, whose manufacturing facilities are in Japan. Our contract with NOF requires us to purchase this material on an exclusive basis from NOF. Although we have a contractual right to procure this material from another supplier in the event of a supply failure, procuring this material from another source would require time and effort which may interrupt the supply of mPEG-NPC and thereby cause an interruption of the supply of drug substance and KRYSTEXXA to the marketplace and for any future clinical trials or other development purposes. For example, the FDA could require that we conduct additional clinical or non-clinical trials in support of the change to a new manufacturer, which could result in significant additional costs or delays. Any interruption of supply of mPEG-NPC could cause harm to our business.

If the company on which we rely for fill and finish services for KRYSTEXXA is unable to perform these services for us, our business may suffer.

We have outsourced the operation for KRYSTEXXA fill and finish services to a single company, Sigma-Tau. We have commenced efforts to engage a secondary third-party fill and finish manufacturer for KRYSTEXXA. However, at this time, we do not have redundancy in our supply chain for these fill and finish functions and currently have no substitute that can provide these services. If Sigma-Tau is unable to perform these services for us, we would need to identify and engage an alternative company or develop our own fill and finish capabilities. Any new contract fill and finish manufacturer or capabilities that we acquire or develop will need to obtain FDA approval. Identifying and engaging a new contract fill and finish manufacturer or developing our own capabilities and obtaining FDA approval could involve significant cost and delay. As a result, we might not be able to deliver KRYSTEXXA orders on a timely basis, and we might not have sufficient supply to meet our needs for any future clinical trials or other development purposes, any of which would harm our business.

We rely on third parties to conduct our clinical activities and non-clinical studies for KRYSTEXXA and those third parties may not perform satisfactorily, which could impair our ability to satisfy our post-approval commitments to the FDA and any clinical development activities that we may undertake in the future.

We do not independently conduct clinical activities for KRYSTEXXA. We rely on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators, to perform these activities, including the observational study for serious adverse events associated with the administration of KRYSTEXXA therapy that the FDA is requiring that we implement as part of its approval of KRYSTEXXA, any additional clinical trials that may be required in the future by the FDA or similar foreign regulatory bodies, and any other clinical studies that we may elect to conduct. We also will rely on these third parties to perform the post-approval non-clinical studies that the FDA is requiring us to conduct for KRYSTEXXA. We use multiple CROs to coordinate the efforts of our clinical investigators and to accumulate the results of our trials. Our reliance on these third parties for clinical activities and non-clinical studies reduces our control over these activities. We are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocol for the trial. Moreover, the FDA requires us and third parties acting on our behalf to comply with good clinical practices, or cGCPs, for conducting, recording and reporting the results of clinical trials to ensure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors.

If these third parties do not successfully carry out their contractual obligations, meet expected deadlines or conduct our clinical development activities in accordance with regulatory requirements or our stated protocols, we may not be able to, or may be delayed in our efforts to, successfully execute upon our commercial strategy, and obtain additional regulatory approvals, for KRYSTEXXA. We also may be subject to fines and other penalties for failure to comply with requirements applicable to the conduct and completion of post-marketing studies and clinical trials within specified timeframes and to the public reporting of clinical trial information on the registry and results database maintained by the National Institutes of Health.

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We also rely on third parties to store and distribute drug supplies for our clinical development activities. Any performance failure on the part of such third parties could delay the commercialization of KRYSTEXXA, causing us to incur additional expenses and harming our ability to generate additional revenue.

We may seek a collaborator for the further development and commercialization of KRYSTEXXA outside the United States. However, we may be unsuccessful in identifying such a transaction on favorable terms or consummating such a transaction. If we are not successful in these efforts, we may fail to meet our business objectives.

We may seek a development and commercialization collaborator for KRYSTEXXA outside the United States. We face significant competition in seeking appropriate collaborators. In addition, such collaboration arrangements may not be scientifically or commercially successful or we may not be able to consummate such a transaction on favorable terms. If we are unable to reach agreement with a development and commercialization collaborator on favorable terms, or if such an arrangement is terminated, our ability to develop, commercialize and market KRYSTEXXA may be harmed and we may fail to meet our business objectives for KRYSTEXXA.

The success of any collaboration arrangement will depend heavily on the efforts and activities of any potential collaborators. Any potential collaborators will have significant discretion in determining the efforts and resources that they will apply to such collaborations. The risks that we face in connection with potential collaborations include the following:

• collaboration agreements are generally for fixed terms and subject to termination under various circumstances, including, in many cases, on short notice without cause,

• we expect that any collaboration agreement will require that we not conduct specified types of research and development in the field that is the subject of the collaboration, which may have the effect of limiting the areas of research and development that we may pursue, either alone or in cooperation with third parties,

• collaborators may develop and commercialize, either alone or with others, products and services that are similar to or competitive with our products that are the subject of the collaboration with us, and

• collaborators may change the focus of their development and commercialization efforts.

Pharmaceutical and biotechnology companies historically have re-evaluated their priorities following mergers and consolidations, which have been common in recent years in our industry. The ability of KRYSTEXXA to reach its potential could be limited if any potential collaborators decrease or fail to increase spending related to any collaboration.

Collaborations with pharmaceutical companies and other third parties often are terminated or allowed to expire by the other party. Such terminations or expirations can adversely affect us financially as well as harm our business reputation.

Risks relating to intellectual property

If we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights that are important to our business.

We are party to various license agreements and we may enter into additional license agreements in the future. For example, we license exclusive worldwide rights to patents and pending patent applications that constitute the fundamental composition of matter and underlying manufacturing patents for KRYSTEXXA from Mountain View Pharmaceuticals, Inc., or MVP, and Duke University, or Duke. Under the agreement, we are required to use best efforts to bring to market and diligently market products that use the licensed technology. We also must provide MVP and Duke with specified information relating to the development of KRYSTEXXA. The agreement requires us to pay to MVP and Duke quarterly royalty payments within 60 days after the end of each quarter based on KRYSTEXXA net sales we make in that quarter. The royalty rate for a particular quarter ranges between 8% and 12% of net sales based on the amount of cumulative net sales made by us. Under the agreement, we are also required to pay royalties of 20% of any milestones, revenues or other consideration we receive from sub-licensees during any quarter. As of September 30, 2011 we had made aggregate payments of approximately $2.5 million to MVP and Duke for the achievement of milestones under this agreement, including the approval of our BLA for KRYSTEXXA.

The agreement with MVP and Duke remains in effect, on a country-by-country basis, for the longer of 10 years from the date of first sale of KRYSTEXXA in such country or the date of expiration of the last-to-expire patent covered by the agreement in such country. The licensors may terminate the agreement with respect to the countries affected upon our material breach, if not cured within a specified period of time, immediately after our third or subsequent material breach of the agreement or our fraud, willful

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misconduct or illegal conduct. The licensors may also terminate the agreement in the event of our bankruptcy or insolvency. Upon a termination of the agreement in one or more countries, all intellectual property rights conveyed to us under the agreement with respect to the terminated countries, including regulatory applications and pre-clinical and clinical data, revert to MVP and Duke and we are permitted to sell off any remaining inventory of KRYSTEXXA for such countries.

In addition, we could have disputes with our current and future licensors regarding, for example, the interpretation of terms in our agreements. Any such disagreements could lead to delays in the development or commercialization of any potential products or could result in time-consuming and expensive litigation or arbitration, which may not be resolved in our favor.

If we fail to comply with our obligations under the agreement, we could lose the ability to commercialize KRYSTEXXA, which could require us to curtail or cease our operations.

If we are unable to obtain and maintain protection for the intellectual property relating to our technology and products, the value of our technology and products will be adversely affected.

Our success will depend in large part on our ability to obtain and maintain protection in the United States and other countries for the intellectual property covering or incorporated into our technology and products. The patent situation in the field of biotechnology and pharmaceuticals is highly uncertain and involves complex legal and scientific questions. We may not be able to obtain additional issued patents relating to our technology or products. Even if issued, patents may be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length or term of patent protection we may have for our products. Generic forms of our product Oxandrin were introduced to the market in late 2006. As a result, our results of operations have been harmed. The composition of matter, methods of manufacturing and methods of use patents expire and, if issued, patent applications relating to KRYSTEXXA would expire between 2019 and 2026. Changes in either patent laws or in the interpretations of patent laws in the United States or other countries may diminish the value of our intellectual property or narrow the scope of our patent protection. For example, the PPACA allows applicants seeking approval of biosimilar or interchangeable versions of biological products like KRYSTEXXA to initiate a process for challenging some or all of the patents covering the innovator biological product used as the reference product. This process is complicated and could result in the limitation or loss of certain patent rights. In addition, such patent litigation is costly and time-consuming and may adversely affect our overall financial condition.

Our patents also may not afford us protection against numerous competitors with similar technology. Patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing and in some cases not at all. Therefore, because publications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to develop the inventions claimed in issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in these patent applications. Even in the event that our patents are upheld as valid and enforceable, they may not foreclose potential competitors from developing new technologies or “workarounds” that circumvent our patent rights. This means that our patent portfolio may not prevent the entry of a competitive product into the market. In addition, patents generally expire, regardless of their date of issue, 20 years from the earliest claimed non-provisional filing date. As a result, the time required to obtain regulatory approval for a product candidate may consume part or all of the patent term. We are not able to accurately predict the remaining length of the applicable patent term following regulatory approval of any of our product candidates.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected.

In addition to patented technology, we rely upon unpatented proprietary technology, processes and know-how. We seek to protect this information in part through confidentiality agreements with our employees, consultants and third parties. If any of these agreements are breached, we may not have adequate remedies for any such breach. In addition, any remedies we may seek may prove costly. Furthermore, our trade secrets may otherwise become known or be independently developed by competitors. If we are unable to protect the confidentiality of our proprietary information and know-how, competitors may be able to use this information to develop products that compete with our products, which could adversely affect our business.

If we infringe or are alleged to infringe intellectual property rights of third parties, our business may be adversely affected.

Our development and commercialization activities, as well as any product candidates or products resulting from these activities, may infringe or be claimed to infringe patents or patent applications under which we do not hold licenses or other rights. We are aware of patent applications filed by, and patents issued to, other entities with respect to technology potentially useful to us and, in some cases, related to products and processes being developed by us. Third parties may own or control these patents and patent applications in the United States and abroad. These third parties could bring claims against us, our licensors or our collaborators that would cause us to incur substantial expenses. If such third-party claims are successful, we could be liable for substantial damages. Further, if a patent infringement suit were brought against us, our licensors or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

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As a result of patent infringement claims, or in order to avoid potential claims, we, our licensors or our collaborators may choose or be required to seek a license from the third party and be required to pay license fees, royalties or both. These licenses may not be available on acceptable terms or at all. Even if we, our licensors or our collaborators were able to obtain a license, our rights may be non-exclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations if, as a result of actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on acceptable terms. This could harm our business significantly.

The pharmaceutical and biotechnology industries have experienced substantial litigation and other proceedings regarding patent and other intellectual property rights. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the U.S. Patent and Trademark Office and opposition proceedings in the European Patent Office or in another patent office, regarding intellectual property rights with respect to our products and technology. The costs to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources.

Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could adversely affect our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.

In the future, we may be involved in costly legal proceedings to enforce or protect our intellectual property rights or to defend against claims that we infringe the intellectual property rights of others.

Litigation is inherently uncertain and an adverse outcome could subject us to significant liability for damages or invalidate our proprietary rights and adversely impact our ability to market and further develop KRYSTEXXA. Legal proceedings that we initiate to protect our intellectual property rights could also result in counterclaims or countersuits against us. Any litigation, regardless of its outcome, could be time consuming and expensive to resolve and could divert our management’s time and attention. Any intellectual property litigation also could force us to take specific actions, including any of the following:

• cease selling products or undertaking processes that are claimed to be infringing a third party’s intellectual property,

• obtain licenses to make, use, sell, offer for sale or import the relevant technologies from the intellectual property’s owner, which licenses may not be available on reasonable terms or at all,

• redesign products or processes that are claimed to be infringing a third party’s intellectual property, or

• pursue legal remedies with third parties to enforce our indemnification rights, which may not adequately protect our interests.

We have been involved in several lawsuits and disputes regarding intellectual property in the past. We could be involved in similar disputes or litigation in the future. An adverse decision in any intellectual property litigation could have a material adverse effect on our business, results of operations and financial condition.

Risks relating to our results of operations and our common stock

We have incurred losses from continuing operations since 2004 and we have incurred and anticipate that we will continue to incur substantial expenses in connection with our commercial launch of KRYSTEXXA in the United States and further development and efforts to obtain regulatory approval for KRYSTEXXA outside of the United States. If we do not generate significant revenues from the sale of KRYSTEXXA, we will not be able to achieve profitability.

Our ability to achieve operating profitability in the future depends on the successful commercialization and further development of KRYSTEXXA. We have incurred and expect to continue to incur significant expenditures in connection with the commercialization of KRYSTEXXA in the United States and further development and effort to seek regulatory approval for KRYSTEXXA outside of the United States. If sales revenue from KRYSTEXXA is insufficient, we may never achieve operating profitability. Even if we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis.

We expect sales of Oxandrin and oxandrolone to remain flat or continue to decrease, which may continue to harm our results of operations.

Sales of Oxandrin and oxandrolone have declined substantially in recent years due to generic competition. Our sales of Oxandrin and oxandrolone in the United States are also affected by fluctuations in the buying patterns of the three major drug wholesalers to which we principally sell these products. In the past, wholesalers have reduced their inventories of Oxandrin and oxandrolone. We expect that wholesalers will keep their inventory levels flat or continue to reduce them as a result of generic competition, which could further decrease our revenues from these products.

Sales of Oxandrin and oxandrolone have also decreased as a result of the elimination of reimbursement, or limited reimbursement practices, by some states under their AIDS Drug Assistance Programs via their state Medicaid programs for HIV/AIDS prescription drugs, including Oxandrin and oxandrolone. Other state formularies may follow suit.

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We have considered the demand deterioration of Oxandrin and oxandrolone in estimating future product returns. However, our demand forecasts are based upon our management’s best estimates. Future product returns in excess of our historical reserves could reduce our revenues even further and adversely affect our results of operations.

In addition, we do not have the ability to independently distribute our oxandrolone tablets and depend on our distribution partner, Watson Pharma, Inc., or Watson, to distribute this product for us. If Watson fails to carry out its contractual obligations, does not devote sufficient resources to the distribution of oxandrolone, or does not carry out its responsibilities in the manner we expect, our oxandrolone product may not compete successfully against other generics, and our results of operations could be further harmed. In addition, we no longer have an effective agreement with a third-party manufacturer to produce Oxandrin and oxandrolone tablets and therefore our ability to supply the market with Oxandrin and oxandrolone may be materially diminished and our existing market share may decrease.

Our stock price is volatile, which could adversely affect your investment.

Our stock price has been, and will likely continue to be, volatile. Since January 1, 2009, our common stock has traded as high as $23.46 per share and as low as $3.45 per share. The stock market in general, and the market for biotechnology companies in particular, has recently experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The market price of our common stock may be influenced by many factors, including:

• the cost of commercialization activities, including product marketing, sales and distribution,

• whether we are successful in marketing and selling KRYSTEXXA,

• market acceptance of KRYSTEXXA by physicians and patients in this largely previously untreated patient population,

• the cost of our post-approval commitments to the FDA, including an observational study and a REMS program,

• the price that we charge for KRYSTEXXA and under what conditions private and public payors will reimburse patients for KRYSTEXXA,

• whether and when we face generic or other competition with respect to KRYSTEXXA,

• our ability to maintain a sufficient inventory of KRYSTEXXA to meet commercial demand,

• the timing and costs of regulatory approval for KRYSTEXXA in any countries other than the United States,

• the timing of any future capital raising transactions by us, and the structure of such transactions and amount of capital raised,

• announcements of technological innovations or developments relating to competitive products or product candidates,

• market conditions in the pharmaceutical and biotechnology industries and the issuance of new or revised securities analyst reports or recommendations,

• period-to-period fluctuations in our financial results,

• legal and regulatory developments in the United States and foreign countries, and

• other factors described in this “Risk Factors” section.

The volatility of our common stock imposes a greater risk of capital losses for our stockholders than a less volatile stock would. In addition, volatility makes it difficult to ascribe a stable valuation to a stockholder’s holdings of our common stock. This volatility may affect the price at which you could sell the common stock, if any, you receive upon conversion of your notes, and the sale of substantial amounts of our common stock could adversely affect the price of our common stock.

We are a party to a stockholder lawsuit regarding the adequacy of our public disclosure, which could have a material adverse affect on our business, results of operations and financial condition.

In November 2008, Richard Sagall, an alleged stockholder, commenced an action in the U.S. District Court for the Southern District of New York seeking to certify a class of shareholders who held Savient securities between December 13, 2007 and October 24, 2008. The suit alleges that we made false and misleading statements relating to the GOUT1 and GOUT2 Phase 3 clinical trials and that we failed to disclose in a timely manner serious adverse events which occurred in five patients in these trials. In March 2009, the Court issued an order appointing Lawrence J. Koncelik, Jr. as lead plaintiff and the law firm Pomerantz Haudek Block Grossman & Gross LLP as lead counsel. Thereafter the lead plaintiff filed his amended complaint in April 2009, seeking unspecified monetary damages. In June 2009, we and the other named defendants moved to dismiss the complaint. The Court heard oral arguments on the motion on February 24, 2010. On September 29, 2010, the Court issued a memorandum decision and order granting our motion to dismiss the amended complaint in its entirety. On October 28, 2010, the lead plaintiff timely filed a notice of appeal of the Court’s decision with the United States Court of Appeals for the Second Circuit. The briefing on that appeal was completed June 2011 and oral arguments have been scheduled for November 8, 2011. The second circuit is unlikely to issue a decision for this appeal before late 2011. We intend to continue to vigorously defend against this action.

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We expect that the costs related to this suit will continue to be significant and we can provide no assurance as to its outcome. If we are not successful in defending this action, we may be required to pay substantial damages to the plaintiffs. As a result, our business, results of operations and financial condition could be materially adversely affected. In addition, even if we are successful, the defense of this action will continue to divert the attention of our management and other resources that would otherwise be engaged or utilized in operating our business.

Effecting a change of control of our company could be difficult, which may discourage offers for shares of our common stock.

Our certificate of incorporation and the Delaware General Corporation Law, or the DGCL, contain provisions that may delay or prevent a merger, acquisition or other change of control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions include the requirements of Section 203 of the DGCL. Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination with an “interested stockholder,” generally deemed a person that, together with its affiliates, owns or within the last three years has owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:

• our Board of Directors approves the transaction before the third party acquires 15% of our stock,

• the third party acquires at least 85% of our stock at the time its ownership exceeds the 15% level, or

• our Board of Directors and the holders of two-thirds of the shares of our common stock not held by the third-party vote in favor of the transaction.

Our certificate of incorporation also authorizes us to issue up to 4,000,000 shares of preferred stock in one or more different series with terms fixed by our Board of Directors. Stockholder approval is not necessary to issue preferred stock in this manner. Issuance of these shares of preferred stock could have the effect of making it more difficult for a person or group to acquire control of our company. No shares of our preferred stock are currently outstanding. Although our Board of Directors has no current intention or plan to issue any preferred stock, issuance of these shares could also be used as an anti-takeover device.

Product liability lawsuits could cause us to incur substantial liabilities.

We face an inherent risk of product liability exposure related to product sales of Oxandrin, oxandrolone and KRYSTEXXA. We also face the risk of product liability exposure related to the testing of KRYSTEXXA. If we cannot successfully defend ourselves against claims that our products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

• decreased demand for KRYSTEXXA,

• injury to our reputation,

• withdrawal of clinical trial participants,

• withdrawal or recall of a product from the market,

• modification to product labeling that may be unfavorable to us,

• costs to defend the related litigation,

• substantial monetary awards to trial participants or patients, and

• loss of revenue.

We currently have product liability insurance coverage in place, which is subject to coverage limits and deductibles. The amount of insurance that we currently hold may not be adequate to cover all liabilities that may occur. Product liability insurance is difficult to obtain and increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost and we may not be able to obtain insurance coverage with policy limits that will be adequate to satisfy any liability that may arise.

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We recently incurred indebtedness that may adversely affect our cash flow and otherwise negatively affect our operations.

In February 2011, we issued $230 million aggregate principal amount of 4.75% 2018 Convertible Senior Notes. The Convertible Notes are convertible, under certain circumstances and during certain periods, based on an initial conversion rate of 86.6739 shares of common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of approximately $11.54 per share of common stock, subject to adjustment in certain circumstances. Upon conversion, the Convertible Notes may be settled, at our election, in cash, shares of our common stock or a combination of cash and shares of our common stock. We may redeem some or all of the Convertible Notes for cash under certain circumstances on or after February 1, 2015. The Convertible Notes bear interest at a rate of 4.75% per year.

We may in the future incur additional indebtedness, including long-term debt, credit lines and property and equipment financings to finance capital expenditures. We intend to satisfy our current and future debt service obligations from cash generated by our operations, our existing cash and investments and, in the case of principal payments at maturity, funds from external sources. We may not have sufficient funds and we may be unable to arrange for additional financing to satisfy our principal or interest payment obligations when those obligations become due. Funds from external sources may not be available on acceptable terms, or at all.

Our indebtedness could have significant additional negative consequences, including:

• increasing our vulnerability to general adverse economic and industry conditions;

• limiting our ability to obtain additional financing;

• requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing the amount of our expected cash flow available for other purposes, including capital expenditures and research and development;

• limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and

• placing us at a possible competitive disadvantage to less leveraged competitors and competitors that have better access to capital resources.

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ITEM 6. EXHIBITS

a) Exhibits

The exhibits listed in the Exhibit Index are included in this report.

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SIGNATURES

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

SAVIENT PHARMACEUTICALS, INC.
(Registrant)
By:	/S/    JOHN H. JOHNSON
	John H. Johnson
	Chief Executive Officer & President
	(Principal Executive Officer)
By:	/s/    KENNETH J. ZUERBLIS
	Kenneth J. Zuerblis
	Executive Vice President, Chief Financial Officer & Treasurer
	(Principal Financial and Accounting Officer)

Dated: November 8, 2011

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EXHIBIT INDEX

Exhibit No.	Description
31.1	Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended
31.2	Certification of the principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended
32.1	Statement pursuant to 18 U.S.C. §1350
32.2	Statement pursuant to 18 U.S.C. §1350
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, John H. Johnson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Savient Pharmaceuticals, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/S/ JOHN H. JOHNSON
	Chief Executive Officer & President

November 8, 2011

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Kenneth J. Zuerblis, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Savient Pharmaceuticals, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/S/ KENNETH J. ZUERBLIS
	Executive Vice President, Chief Financial Officer & Treasurer

November 8, 2011

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Savient Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John H. Johnson, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/S/ JOHN H. JOHNSON
	Chief Executive Officer & President

November 8, 2011

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Savient Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kenneth J. Zuerblis, Executive Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/S/ KENNETH J. ZUERBLIS
	Executive Vice President, Chief Financial Officer & Treasurer

November 8, 2011

XML

Earnings (Loss) Per Share Of Common Stock (Schedule Of Weighted-Average Number Of Basic and Diluted Shares) (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Basic	70,122,000	67,047,000	70,037,000	66,773,000
Incremental common stock equivalents
Diluted	70,122,000	67,047,000	70,037,000	66,773,000
Convertible Notes [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from the computation of diluted earnings (loss) per share			19,934,997
Stock Options And Unvested Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from the computation of diluted earnings (loss) per share			1,851,782	7,116,919

XML

Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data	Sep. 30, 2011	Dec. 31, 2010
Consolidated Balance Sheets [Abstract]
Discount of convertible notes	$ 56,155
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	4,000,000	4,000,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	71,473,000	70,259,000
Common stock, shares outstanding	71,473,000	70,259,000

XML

Consolidated Statements Of Operations (USD $) In Thousands, except Per Share data	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Revenues:
Product sales, net	$ 2,581	$ 988	$ 5,855	$ 3,068
Cost and expenses:
Cost of goods sold	4,584	421	6,008	998
Research and development	5,858	8,958	17,315	22,521
Selling, general and administrative	22,268	7,265	62,761	16,764
Operating expenses	32,710	16,644	86,084	40,283
Operating loss	(30,129)	(15,656)	(80,229)	(37,215)
Investment income, net	39	33	107	82
Interest expense on convertible notes	(3,406)		(11,393)
Other (expense) income, net	(141)	(43,729)	1,289	(35,525)
Loss before income taxes	(33,637)	(59,352)	(90,226)	(72,658)
Income tax benefit	(6,245)		(19,055)
Net loss	$ (27,392)	$ (59,352)	$ (71,171)	$ (72,658)
Loss per common share:
Basic and diluted	$ (0.39)	$ (0.89)	$ (1.02)	$ (1.09)
Weighted-average number of common and common equivalent shares:
Basic and diluted	70,122	67,047	70,037	66,773

XML

Share-Based Compensation (Schedule Of Stock-Based Compensation By Expense Category) (Details) (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Share-based Compensation Arrangement By Share-based Payment Award [Line Items]
Stock compensation expense			$ 3,211	$ 2,680
Research And Development [Member] | 2011 Incentive Plan [Member]
Share-based Compensation Arrangement By Share-based Payment Award [Line Items]
Stock compensation expense	375	1,674	1,028	2,673
Selling, General And Administrative [Member] | 2011 Incentive Plan [Member]
Share-based Compensation Arrangement By Share-based Payment Award [Line Items]
Stock compensation expense	1,510	2,208	4,119	3,541
2011 Incentive Plan [Member]
Share-based Compensation Arrangement By Share-based Payment Award [Line Items]
Stock compensation expense	$ 1,885	$ 3,882	$ 5,147	$ 6,214

XML

Commitments And Contingencies

9 Months Ended

Sep. 30, 2011

Commitments And Contingencies [Abstract]

Commitments And Contingencies

Note 16—Commitments and Contingencies

Commitments

The Company's corporate headquarters are located in East Brunswick, New Jersey, where it leases approximately 53,000 square feet of office space. The lease has a base average annual rental expense of approximately $1.9 million and expires in March 2013. The Company has two five-year renewal options under the lease. In connection with this lease arrangement, the Company was required to provide a $1.3 million security deposit by way of an irrevocable letter of credit, which is secured by a cash deposit of $1.3 million and is reflected in other assets (as restricted cash) on the Company's consolidated balance sheets at September 30, 2011 and December 31, 2010. The Company is also obligated to pay its share of operating maintenance and real estate taxes with respect to its leased property.

Rent expense from continuing operations was approximately $0.5 million and $1.5 million for the three and nine months ended September 30, 2011, respectively, and $0.5 million and $1.4 million for the three and nine months ended September 30, 2010, respectively. Rent expense is presented within research and development and selling, general and administrative expense in the consolidated statement of operations.

The future annual minimum rentals (exclusive of amounts for real estate taxes, maintenance, etc.) for each of the following calendar years are:

	(In thousands)
Remainder of 2011	$	467
2012	$	1,867
2013	$	467

At September 30, 2011, the Company had employment agreements with eight senior officers. Under these agreements, the Company has committed to total aggregate base compensation per year of approximately $3.1 million plus other fringe benefits and bonuses. These employment agreements generally have an initial term of three years and are automatically renewed thereafter for successive one-year periods unless either party gives the other notice of non-renewal. In addition, the Company currently has in place severance agreements with four former employees including the Company's former President, which aggregate to approximately $1.4 million, of which $1.3 million will be paid in equal installments over a the next twelve months and $0.1 million will be paid after one-year.

In 2007, the Company entered into commercial supply and development agreements with Bio-Technology General (Israel) Ltd, ("BTG"), pursuant to which BTG serves as the manufacturer and commercial supplier of the pegloticase drug substance for KRYSTEXXA and provides development, manufacturing and other services in relation to the product. Under the agreements, BTG also provided support with respect to the Company's biologics license application ("BLA") for KRYSTEXXA. Pursuant to its terms, the development agreement automatically expired upon the FDA's approval for marketing of KRYSTEXXA in the United States. Under the commercial supply agreement with BTG, as amended, BTG is obligated to manufacture the Company's firmly forecasted commercial supply of KRYSTEXXA and the Company is obligated to purchase from BTG at least 80% of its worldwide requirements of pegloticase drug substance. However, if BTG produces specified numbers of failed batches of pegloticase drug substance within one or more calendar quarters, then the Company may purchase all of its KRYSTEXXA requirements from other suppliers until BTG demonstrates to the Company's reasonable satisfaction that it has remedied its supply failure. In addition, if the Company's product forecasts are reasonably anticipated to exceed BTG's processing capacity, then the Company may purchase from other suppliers the KRYSTEXXA requirements that exceed BTG's capacity. The Company is obligated to provide BTG with a rolling forecast on a monthly basis setting forth the total quantity of pegloticase drug substance it expects to require for commercial supply in the following 18 months. The first six months of each forecast represent a rolling firm irrevocable order, and the Company may only increase or decrease its forecast for the next 12 months within specified limits. As of September 30, 2011, based on the Company's latest forecast, the Company expected to purchase an aggregate of approximately $4.1 million of pegloticase drug substance over the following 12 months. During 2008, the Company paid to BTG non-refundable fees of $2.2 million to reserve manufacturing capacity relating to the Company's potential future orders of pegloticase drug substance. The Company recorded these capacity reservation fees, which may be credited as a discount against future orders of pegloticase drug substance, as research and development expenses as they were incurred. Beginning in December 2015, which is the seventh anniversary of BTG's first delivery of pegloticase drug substance under the commercial supply agreement, either the Company or BTG may provide three years advance notice to terminate the commercial supply agreement, effective not earlier than December 2018. The commercial supply agreement may also be terminated in the event of insolvency or uncured material breach by either party.

In 2007, the Company entered into a services agreement with Fujifilm, pursuant to which Fujifilm is preparing to serve as the Company's secondary source supplier in the United States of pegloticase drug substance for KRYSTEXXA. Under the agreement, the Company is obligated to make specified milestone payments related to the technology transfer, and subsequent performance, of the manufacturing and supply process, which was initiated in August 2007 with BTG's cooperation. In November 2009, the Company entered into a revised services agreement with Fujifilm, pursuant to which the Company delayed the 2009 conformance batch production campaign until 2010. During the first quarter of 2010, the conformance batch production campaign at Fujifilm commenced. As a result of batch failures at Fujifilm based on one manufacturing specification, the 2010 conformance batch production campaign was terminated in December 2010. The Company and Fujifilm renegotiated the agreement in June 2011 and the conformance campaign is planned to re-start during the second half of 2011. The Company expects the additional costs associated with its conformance campaign to approximate $10.0 million, which includes non-refundable fees of $1.0 million to reserve manufacturing capacity for the conformance batch campaign. The Company records the fees for capacity reservation, idle and down-time and other technology transfer services rendered by Fujifilm as research and development expenses as they are incurred. Either the Company or Fujifilm may terminate the services agreement in the event of an uncured material breach by the other party. In addition, the Company may terminate the agreement at any time upon 45 days advance notice. If the Company terminates the agreement other than for Fujifilm's breach, or if Fujifilm terminates the agreement for our breach, the Company must pay Fujifilm a termination fee based on the value of then remaining unbilled activities under the agreement. Either party may also terminate the agreement within 30 days after any written notice from Fujifilm that, in its reasonable judgment and based on a change in the assumptions or objectives for the project; it cannot continue to perform its obligations without a change in the scope, price or payment schedule for the project.

In 2007, the Company entered into a supply agreement with NOF Corporation of Japan ("NOF"), pursuant to which NOF serves as the Company's exclusive supplier of mPEG-NPC, which is used in the PEGylation process to produce the pegloticase drug substance for KRYSTEXXA. The Company must purchase its entire supply of mPEG-NPC from NOF unless NOF fails to supply at least 75% of the Company's firm orders, in which case the Company may obtain mPEG-NPC from a third party until NOF's supply failure is remedied to the Company's reasonable satisfaction. Under the agreement, the Company is obligated to make specified minimum purchases of mPEG-NPC from NOF. The Company must provide NOF with a rolling forecast on a quarterly basis setting forth the total quantity of mPEG-NPC that it expects to require in the following 18 months. The first six months of each forecast represent a rolling firm irrevocable order, and the Company may only increase or decrease its forecast for the next 12 months within specified limits. As of September 30, 2011, based on current forecasts, the Company expected to purchase mPEG-NPC at an aggregate cost of approximately $2.8 million in 2013. For any given year, upon three months advance notice, the Company may terminate its minimum purchase obligation for the entire year or the remainder of that year by paying NOF 50% of the minimum purchase obligation for that year or the remainder of that year. NOF is obligated under the supply agreement to use commercially reasonable efforts to submit a Type II Drug Master File, or its equivalent, to the appropriate regulatory agency in one country outside of the United States or in the European Union. The Company's agreement with NOF has an initial term ending in May 2017 and may be extended for an additional 10 years by mutual agreement of the parties at least 12 months before the expiration of the initial term. Prior to the expiration of the term, either the Company or NOF may terminate the agreement for convenience upon 24 months advance notice. Either the Company or NOF may terminate the agreement in the event of the other party's insolvency or uncured material breach. In the event that NOF terminates the agreement for convenience or if the Company terminates the agreement for NOF's breach or bankruptcy, the Company may require NOF to continue to supply mPEG-NPC for up to two years following the termination date. If the Company terminates the agreement for convenience or if NOF terminates the agreement for the Company's breach, the Company must pay NOF 50% of the minimum purchase obligation for the period from the termination date until the date on which the agreement would have expired.

In 2008, the Company entered into a non-exclusive commercial supply agreement with Sigma-Tau PharmaSource, Inc. ("Sigma-Tau") (formerly known as Enzon Pharmaceuticals, Inc., which was acquired by Sigma-Tau in January 2010). Under the terms of the commercial supply agreement, Sigma-Tau has agreed to fill, label, package, test and provide specified product support services for the final KRYSTEXXA product. In return, the Company agreed that once KRYSTEXXA received FDA marketing approval, the Company would purchase product support services from Sigma-Tau. As of September 30, 2011, the Company expected to purchase from Sigma-Tau support services at an aggregate cost of approximately $1.1 million over the next 12 months. These purchase obligations are based on a rolling forecast that the Company has agreed to provide to Sigma-Tau on a quarterly basis setting forth the total amount of final product that it expects to require in the following 24 months. The first six months of each forecast will represent a rolling firm irrevocable order, and the Company may only increase or decrease its forecast for the next 18 months within specified limits. If the Company cancels batches subject to a firm order, it must pay Sigma-Tau a fee. Under the agreement, the Company is also obligated to pay Sigma-Tau a rolling, non-refundable capacity reservation fee, which may be credited against the fees for Sigma-Tau's production of the final product. During the nine months ended September 30, 2011 and 2010, the Company did not incur any capacity reservation fees because such amounts were credited against purchases of final product from Sigma-Tau. Either the Company or Sigma-Tau may terminate the agreement upon 24 months advance notice given 30 days before each year's anniversary date of the agreement. If the Company terminates the agreement, it would be obligated to pay Sigma-Tau a fee based on the previously submitted rolling forecasts. Either the Company or Sigma-Tau may also terminate the agreement in the event of insolvency or uncured material default in performance by either party.

The Company believes that its current arrangements for the supply of clinical and commercial quantities of pegloticase drug substance and finished form KRYSTEXXA will be adequate to satisfy its currently forecasted commercial requirements of KRYSTEXXA and any currently planned future clinical studies.

The Company is a party to an exclusive royalty bearing license agreement with Mountain View Pharmaceuticals ("MVP") and Duke University ("Duke"), originally entered into in 1997 and amended in 2001, granting the Company rights under technology relating to mammalian and non-mammalian uricases, and MVP's technology relating to mPEG conjugates of these uricases, as well as patents and pending patent applications covering this technology, to make, use and sell, for human treatment, products that use this technology. These patents and pending patent applications constitute the fundamental composition of matter and underlying manufacturing patents for KRYSTEXXA. Under this agreement, the Company also has the exclusive license to the trademark Puricase^®, which is a registered trademark of MVP and was available for potential use as the proprietary name of the product candidate the Company now refers to as KRYSTEXXA. However, if the Company elects not to use the trademark Puricase, or if the Company otherwise fails to use the trademark Puricase within one-year after the first sale of any product which uses the licensed technology, then MVP would retain all rights to use the trademark Puricase. Under the agreement, the Company is required to use best efforts to diligently market products that use the licensed technology. The agreement requires the Company to pay to MVP and Duke quarterly royalty payments within 60 days after the end of each quarter based on KRYSTEXXA net sales made in that quarter by the Company. The royalty rate for a particular quarter ranges between 8% and 12% of net sales based on the amount of cumulative net sales made by the Company. Also under the agreement, for sales made by sub-licensees and not by the Company, the Company is required to pay royalties of 20% on any revenues or other consideration it receives from sub-licensees during any quarter. During the year ended December 31, 2010, the Company made aggregate milestone payments of approximately $0.8 million to MVP and Duke upon obtaining regulatory approval for KRYSTEXXA in the United States which was one of the five major global markets identified in the agreement. The Company is also required to pay up to an aggregate of approximately $1.8 million to MVP and Duke if it successfully commercializes KRYSTEXXA and attains specified KRYSTEXXA sales targets. As of September 30, 2011, the Company had made aggregate payments of approximately $2.5 million to MVP and Duke for the achievement of milestones under this agreement. The agreement remains in effect, on a country-by-country basis, for the longer of 10 years from the date of first sale of KRYSTEXXA in such country, or the date of expiration of the last-to-expire patent covered by the agreement in such country. The Company may terminate this agreement in one or more countries with six months prior notice, and it may also terminate the agreement with respect to any country in which the licensed patents are infringed by a third party or in which the manufacture, use or sale of KRYSTEXXA infringes a third party's intellectual property rights. Either the Company or the licensors may also terminate the agreement, with respect to the countries affected, upon the other party's material breach, if not cured within a specified period of time, or immediately upon the other party's third or subsequent material breach of the agreement or the other party's fraud, willful misconduct or illegal conduct. Either party may also terminate the agreement for the other party's bankruptcy or insolvency. Upon a termination of the agreement in one or more countries, all intellectual property rights conveyed to the Company with respect to the terminated countries under the agreement, including regulatory applications and pre-clinical and clinical data, revert to MVP and Duke and the Company is permitted to sell off any remaining inventory of KRYSTEXXA for such countries.

The Company has received financial grants in support of research and development from the Office of the Chief Scientist of the State of Israel ("OCS"), and the Israel-United States Bi-national Industrial Research and Development Foundation ("BIRD"), of approximately $2.0 million and $0.6 million, respectively, for the development of KRYSTEXXA. These grants plus interest are subject to repayment through royalties on the commercial sale of KRYSTEXXA. The OCS grants were received by the Company's former subsidiary, BTG, and upon the Company's divestiture of BTG to Ferring, it agreed to remain obligated to reimburse BTG for its repayments to OCS that relate to the KRYSTEXXA financial grants. In addition, under the Israeli Law of Encouragement of Research and Development in Industry, as amended, as a result of the funding received from OCS, if the Company does not manufacture 100% of its annual worldwide bulk product requirements in Israel, the Company may be subject to total payments ranging from 120% to 300% of the repayment obligation plus interest, based upon the percentage of manufacturing that does not occur in Israel.

Contingencies

In May 2007, the Company filed a notice of appeal with the New Jersey Division of Taxation contesting a New Jersey Sales & Use Tax assessment of $1.2 million for the tax periods 1999 through 2003. The Company believes it is not subject to taxes on services that were provided to the Company. In May 2010, the Company attended an appeals conference with the Conference and Appeals Branch of the New Jersey Division of Taxation to discuss its case in contesting the Sales & Use Tax assessment. After discussions with the New Jersey appellate division, the Company's appeal was denied. The previous assessment of $1.2 million was increased by $0.5 million to $1.7 million reflecting additional interest and penalties. The Company filed a timely appeal with the New Jersey Tax Court to continue the appeal process on December 13, 2010.

In a civil action filed in the Fayette Circuit Court in Kentucky on August 31, 2007 ( Joseph R. Berger vs. Savient Pharmaceuticals, Inc.), Dr. Joseph Berger alleged that he had entered into an agreement with the Company in December 1993, under which he assigned an invention and patent rights relating to the use of oxandrolone to treat an HIV-related disorder, the "Invention", to the Company in exchange for its agreement to use him as a researcher in certain clinical trials relating to the Invention, and that the Company had breached that agreement. Berger's verified complaint requested disgorgement of profits and assignment to Berger of the patents obtained on the Invention. During fact discovery in the action, the Company uncovered an April 6, 1992 Consulting Agreement between Berger and Savient's predecessor, Gynex Pharmaceuticals ("Gynex"), wherein Berger assigned the Invention to Gynex in consideration of, among other things, $20,000 from Gynex. After the April 6, 1992 agreement was presented to Berger, he filed an amended verified complaint which acknowledged the April 6, 1992 agreement, but contended that the $20,000 paid to him under the Agreement was not consideration for the assignment of the Invention. The Company filed a motion for summary judgment on Berger's claims and, on August 17, 2009, the Court issued an order granting the Company's motion and dismissing Berger's complaint and amended complaint with prejudice. Berger appealed the decision of the trial court granting the Company's motion for summary judgment, and the Company filed a notice of cross-appeal solely with respect to the decision of the trial court to apply Kentucky law to the facts of the case. On January 4, 2011, the Kentucky Appellate Court issued an order taking up Berger's appeal and the Company's cross-appeal on the papers, and on October 14, 2011, the Court upheld the lower court's decision.

In November 2008, Richard Sagall, an alleged stockholder, commenced an action in the U.S. District Court for the Southern District of New York seeking to certify a class of shareholders who held Savient securities between December 13, 2007 and October 24, 2008. The suit alleges that the Company made false and misleading statements relating to the GOUT1 and GOUT2 phase 3 clinical trials, and that the Company failed to disclose in a timely manner serious adverse events which occurred in five patients in these trials. In March 2009, the Court issued an order appointing a lead plaintiff and the law firm Pomerantz Haudek Block Grossman & Gross LLP as lead counsel. The action was also re-captioned as Lawrence J. Koncelik vs. Savient Pharmaceuticals, et al . Thereafter, the lead plaintiff filed his amended complaint in April 2009, seeking unspecified monetary damages. In June 2009, Savient and the other named defendants moved to dismiss the complaint. The lead plaintiff subsequently filed an opposition to the Company's motion to dismiss and the Company filed its reply in October 2009. Oral arguments were heard by the Court in February 2010 relating to our motion to dismiss. On September 29, 2010, the Court issued a memorandum decision and order granting our motion to dismiss the amended complaint in its entirety. On October 28, 2010, the lead plaintiff timely filed a notice of appeal of the Court's decision with the United States Court of Appeals for the Second Circuit and the briefing on that appeal was completed in June 2011. Oral arguments have been scheduled for November 8, 2011. The Second Circuit is unlikely to issue a decision on the appeal before late 2011. The Company intends to continue to vigorously defend against this action.

From time to time, the Company becomes subject to legal proceedings and claims in the ordinary course of business. Such claims, even if without merit, could result in the significant expenditure of the Company's financial and managerial resources. The Company is not aware of any legal proceedings or claims that it believes will, individually or in the aggregate, materially harm its business, results of operations, financial condition or cash flows.

The Company is obligated under certain circumstances to indemnify certain customers for certain or all expenses incurred and damages suffered by them as a result of any infringement of third-party patents. In addition, the Company is obligated to indemnify its officers and directors against all reasonable costs and expenses related to stockholder and other claims pertaining to actions taken in their capacity as officers and directors which are not covered by the Company's directors and officers insurance policy. These indemnification obligations are in the regular course of business and in most cases do not include a limit on maximum potential future payments, nor are there any recourse provisions or collateral that may offset the cost.

XML

Document And Entity Information	9 Months Ended
	Sep. 30, 2011	Nov. 05, 2011
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Trading Symbol	svnt
Entity Registrant Name	SAVIENT PHARMACEUTICALS INC
Entity Central Index Key	0000722104
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		71,471,431

XML

Revenue Recognition (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2011	Dec. 31, 2010
Revenue Recognition [Line Items]
Deferred revenue	$ 0.3	$ 0.4
Allowance for product returns	0.9	0.5
General sales returns terms, months	6
Sales returns terms prior to product expiration date, months	6
Sales returns terms after product expiration date, months	12
Allowance for rebates	0.5	0.3
KRYSTEXXA [Member]
Revenue Recognition [Line Items]
Deferred revenue	0.2
Oxandrin [Member]
Revenue Recognition [Line Items]
Deferred revenue	$ 0.1

XML

Other (Expense) Income, Net

9 Months Ended

Sep. 30, 2011

Other (Expense) Income, Net [Abstract]

Other (Expense) Income, Net

Note 19—Other (Expense) Income, Net

The Company's other (expense) income, net for three and nine months ended September 30, 2011 and 2010, was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(In thousands)
Realized gain on change in valuation of warrant liability	$	—		$	(43,232	)	$	—		$	(34,905	)
Reversal of interest expense and penalties on unrecognized tax liability		(10	)		—			1,753			—
Amortization of deferred financing costs on convertible debt		(129	)		—			(449	)		—
Other non-operating expenses		(2	)		(497	)		(15	)		(620	)
Total other (expense) income, net	$	(141	)	$	(43,729	)	$	1,289		$	(35,525	)

XML

Property And Equipment, Net (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010	Dec. 31, 2010
Property And Equipment, Net [Abstract]
Office equipment	$ 2,793,000		$ 2,793,000		$ 2,628,000
Office equipment-capital leases	332,000		332,000		332,000
Leasehold improvements	1,546,000		1,546,000		1,546,000
Property, plant and equipment, gross	4,671,000		4,671,000		4,506,000
Accumulated depreciation and amortization	(3,991,000)		(3,991,000)		(3,697,000)
Total	680,000		680,000		809,000
Depreciation and amortization expense	$ 100,000	$ 100,000	$ 300,000	$ 300,000

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Inventories

9 Months Ended

Sep. 30, 2011

Inventories [Abstract]

Inventories

Note 5—Inventories

At September 30, 2011 and December 31, 2010, inventories at cost, net of reserves, were as follows:

	September 30, 2011			December 31, 2010
	(In thousands)
Raw materials	$	3,776		$	888
Work-in-progress		6,930			2,605
Finished goods		1,713			913
Inventory at cost		12,419			4,406
Inventory reserves		(4,415	)		(1,266	)
Total	$	8,004		$	3,140

An allowance is established when management determines that certain inventories may not be saleable. The Company states inventories at the lower of cost or market. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company records reserves for the difference between the cost and the market value. These reserves are recorded based upon various factors for the Company's products, including the level of product manufactured by the Company, the level of product in the distribution channel, current and projected product demand, and the expected shelf life of the product. For the three and nine months ended September 30, 2011 the Company recorded a $3.4 million charge against income to reserve for excess KRYSTEXXA inventory that had expiration dates such that it was unlikely the product will be sold.

XML

Basis Of Presentation (Policy)

9 Months Ended

Sep. 30, 2011

Basis Of Presentation [Abstract]

Consolidation

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Savient Pharma Holdings, Inc. and Savient Pharma Ireland Limited.

Use Of Estimates

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to investments, accounts receivable, reserve for product returns, inventories, rebates, property and equipment, share-based compensation and income taxes. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Results may differ from these estimates due to actual outcomes differing from those on which the Company bases its assumptions.

Investments

Investments

The Company classifies investments as "available-for-sale securities," "held-to-maturity securities" or "trading securities." Investments that are purchased and held principally for the purpose of selling them in the near-term are classified as trading securities and marked to fair value through earnings. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity securities. Investments not classified as trading securities or held-to-maturity securities are considered to be available-for-sale securities. Changes in the fair value of available-for-sale securities are reported as a component of accumulated other comprehensive income in the consolidated statements of stockholders' equity and are not reflected in the consolidated statements of operations until a sale transaction occurs or when declines in fair value are deemed to be other-than-temporary ("OTT").

Inventories, Net

Inventories, net

Inventories are stated at the lower of cost or market. Cost is determined based on actual cost. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, reserves are recorded for the difference between cost and market value. These reserves are determined based on estimates.

Convertable Debt

Convertible debt

The debt and equity components of the Company's 4.75% Convertible Senior Notes ("the 2018 Convertible Notes") due on February 1, 2018 are bifurcated and accounted for separately. The debt component of the 2018 Convertible Notes, which excludes the associated equity conversion feature, is recorded at fair value as of the issuance date. The equity component, representing the difference between the amount allocated to the debt component and the proceeds received upon issuance of the 2018 Convertible Notes, is recorded in additional paid-in-capital in the consolidated balance sheets. The carrying value of the 2018 Convertible Notes resulting from bifurcation is subsequently accreted back to its principal amount through the recognition of non-cash interest expense. See Note 14 to the consolidated financial statements for more details.

Deferred Financing Costs, Net

Deferred Financing Costs, net

The Company incurred $7.3 million in financing costs related to the issuance of $230 million principal amount of the 2018 Convertible Notes, which is allocated to the debt and equity components of the Company's convertible debt instruments. The Company allocated $5.4 million to the debt component and recorded it as deferred finance costs. The Company allocated the remaining $1.9 million to the equity component and recorded it against additional paid-in-capital. At September 30, 2011, the Company had $4.9 million of net deferred financing costs recorded with respect to the Convertible Notes on the consolidated balance sheets, $4.2 million of which was recorded as a long-term asset. These costs are being amortized using the effective interest rate method over the seven-year contract term that the 2018 Convertible Notes are outstanding.

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Investments (Narrative) (Details) (USD $)	9 Months Ended
	Sep. 30, 2011	Dec. 31, 2010
Investments [Abstract]
Net unrealized losses included in accumulated other comprehensive income, net of taxes	$ 1,000	$ 2,000
Cash deposit used as security for office rent-related security deposit	$ 1,300,000

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Commitments And Contingencies (Tables)

9 Months Ended

Sep. 30, 2011

Commitments And Contingencies [Abstract]

Future Annual Minimum Rentals

	(In thousands)
Remainder of 2011	$	467
2012	$	1,867
2013	$	467

XML

Investment Income, Net

9 Months Ended

Sep. 30, 2011

Investment Income, Net [Abstract]

Investment Income, Net

Note 18—Investment Income, Net

The Company's investment income, net for the three and nine months ended September 30, 2011 and 2010, was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(In thousands)
Interest and dividend income from cash, cash equivalents and short-term investments	$	39	$	33	$	107	$	82

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Stockholder's Equity

9 Months Ended

Sep. 30, 2011

Stockholder's Equity [Abstract]

Stockholder's Equity

Note 10—Stockholder's Equity

In February 2011, the Company issued $230 million principal amount of the 2018 Convertible Notes at par that become due on February 1, 2018. As part of the accounting for the 2018 Convertible Notes, the Company bifurcated the conversion feature and recorded $34.4 million to additional paid-in-capital, net of a deferred tax liability of $23.9 million as well as equity issuance costs of $1.9 million. See Note 14 to the consolidated financial statements for more details.

On April 8, 2009, the Company raised $31.0 million from a registered direct offering, which yielded approximately $29.0 million in cash, net of approximately $2.0 million of offering costs which were charged to additional paid-in-capital. The Company issued 5,927,343 shares of its common stock to existing and new institutional investors as part of the offering. The investors also received warrants to purchase up to 5,038,237 shares of the Company's common stock at an initial exercise price of $10.46 per share. The Company's warrant liability was marked-to-market each reporting period with the change in fair value recorded as a gain or loss within other expense, net on the Company's consolidated statement of operations until the warrants were exercised, expire or other facts and circumstances led the warrant liability to be reclassified as an equity instrument. The fair value of the warrant liability was determined at each reporting period by utilizing a Monte Carlo simulation model that takes into account estimated probabilities of possible outcomes provided by the Company. The fair value of the warrant liability on the date of the offering was $12.6 million.

During the year ended December 31, 2010, holders of the Company's warrants exercised warrants to purchase an aggregate of 5,038,237 shares of the Company's common stock, either through a cashless exercise or cash exercise. The Company received an aggregate of $8.5 million of cash proceeds from the cash exercises of warrants to purchase an aggregate of 812,617 shares of common stock. The remainder of the warrants were exercised via a cashless net share settlement process, whereby warrants to purchase an aggregate of 4,225,620 shares of common stock were exercised, resulting in the forfeiture of 1,997,657 shares in satisfaction of the warrant exercise price, and the issuance of 2,227,963 shares of common stock. As of December 31, 2010, all of the warrants had been exercised and no warrants to purchase shares of the Company's common stock remained outstanding. As all of the warrants have been exercised and are no longer outstanding, the Company's warrant liability was completely converted into stockholders' equity as of December 31, 2010.

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Basis Of Presentation

9 Months Ended

Sep. 30, 2011

Basis Of Presentation [Abstract]

Basis Of Presentation

Note 1—Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary for a fair presentation of Savient Pharmaceuticals, Inc.'s ("Savient" or the "Company") financial position at September 30, 2011, the results of its operations for the nine months ended September 30, 2011 and 2010, and cash flows for the nine months ended September 30, 2011 and 2010. Interim financial statements are prepared on a basis consistent with the Company's annual financial statements. Results of operations for the nine months ended September 30, 2011 are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2011.

The consolidated balance sheet as of December 31, 2010 was derived from the audited financial statements at that date and does not include all of the information and notes required by GAAP for complete financial statements. The interim statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Savient Pharma Holdings, Inc. and Savient Pharma Ireland Limited.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to investments, accounts receivable, reserve for product returns, inventories, rebates, property and equipment, share-based compensation and income taxes. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Results may differ from these estimates due to actual outcomes differing from those on which the Company bases its assumptions.

Investments

The Company classifies investments as "available-for-sale securities," "held-to-maturity securities" or "trading securities." Investments that are purchased and held principally for the purpose of selling them in the near-term are classified as trading securities and marked to fair value through earnings. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity securities. Investments not classified as trading securities or held-to-maturity securities are considered to be available-for-sale securities. Changes in the fair value of available-for-sale securities are reported as a component of accumulated other comprehensive income in the consolidated statements of stockholders' equity and are not reflected in the consolidated statements of operations until a sale transaction occurs or when declines in fair value are deemed to be other-than-temporary ("OTT").

Inventories, net

Inventories are stated at the lower of cost or market. Cost is determined based on actual cost. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, reserves are recorded for the difference between cost and market value. These reserves are determined based on estimates.

Convertible debt

The debt and equity components of the Company's 4.75% Convertible Senior Notes ("the 2018 Convertible Notes") due on February 1, 2018 are bifurcated and accounted for separately. The debt component of the 2018 Convertible Notes, which excludes the associated equity conversion feature, is recorded at fair value as of the issuance date. The equity component, representing the difference between the amount allocated to the debt component and the proceeds received upon issuance of the 2018 Convertible Notes, is recorded in additional paid-in-capital in the consolidated balance sheets. The carrying value of the 2018 Convertible Notes resulting from bifurcation is subsequently accreted back to its principal amount through the recognition of non-cash interest expense. See Note 14 to the consolidated financial statements for more details.

 

Deferred Financing Costs, net

The Company incurred $7.3 million in financing costs related to the issuance of $230 million principal amount of the 2018 Convertible Notes, which is allocated to the debt and equity components of the Company's convertible debt instruments. The Company allocated $5.4 million to the debt component and recorded it as deferred finance costs. The Company allocated the remaining $1.9 million to the equity component and recorded it against additional paid-in-capital. At September 30, 2011, the Company had $4.9 million of net deferred financing costs recorded with respect to the Convertible Notes on the consolidated balance sheets, $4.2 million of which was recorded as a long-term asset. These costs are being amortized using the effective interest rate method over the seven-year contract term that the 2018 Convertible Notes are outstanding.

 

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Other Liabilities (Tables) (Noncurrent [Member])

9 Months Ended

Sep. 30, 2011

Noncurrent [Member]

Schedule Of Components Of Other Liabilities

	September 30, 2011		December 31, 2010
	(In thousands)
Unrecognized tax benefit (1)	$	3,408	$	10,261
Capital leases		4		38
Total	$	3,412	$	10,299

(1) See Note 15 to the Company's consolidated financial statements for further discussion of unrecognized tax benefits.

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Revenue Recognition

9 Months Ended

Sep. 30, 2011

Revenue Recognition [Abstract]

Revenue Recognition

Note 7—Revenue Recognition

The Company generates revenue from product sales. Revenue is not recognized until it is realized or realizable and earned. Revenue is realized or realizable and earned when all revenue recognition criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the Company's price is fixed and determinable, and (iv) collectability is reasonably assured.

Revenue from sales transactions where the buyer has the right to return the product is recognized at the time of sale only if (i) the seller's price to the buyer is substantially fixed or determinable at the date of sale, (ii) the buyer has paid the seller, or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product, (iii) the buyer's obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product, (iv) the buyer acquiring the product for resale has economic substance apart from that provided by the seller, (v) the seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer, and (vi) the amount of future returns can be reasonably estimated.

Given the Company's limited sales history for KRYSTEXXA, coupled with the products' new entry into its market, the Company is currently unable to reasonably estimate future product returns. Therefore, the Company has determined that the shipments of KRYSTEXXA made to specialty distributors do not meet the criteria for revenue recognition at the time of shipment, and accordingly, such shipments are accounted for using the sell-through method. Under the sell-through method, the Company does not recognize revenue upon shipment of KRYSTEXXA to specialty distributors. For these product sales, the Company invoices the specialty distributor and records deferred revenue equal to the gross invoice price. The Company then recognizes revenue when the product is sold through, or shipped from the specialty distributors to their customers, including doctors and infusion suites. Because of the price of KRYSTEXXA, the short period from sale of the product to patient infusion and limited product return rights, KRYSTEXXA distributors and their customers generally carry limited inventory. The Company also sells KRYSTEXXA to wholesalers whereby the Company drop-ships the product directly to hospitals. As there is limited risk of returns from hospitals as infusions take place in their facilities, the Company records revenue when KRYSTEXXA has been received at the hospital and title has transferred in accordance with the terms of sale.

Oxandrin product sales are generally recognized when title to the product has transferred to the Company's customer in accordance with the terms of the sale. The Company ships its authorized generic oxandrolone product to its distributor and accounts for these shipments on a consignment basis until product is sold into the retail market. The Company defers recognition of revenue related to these shipments until it confirms that the product has been sold into the retail market and all other revenue recognition criteria have been met. Deferred revenue at September 30, 2011 and December 31, 2010 was $0.3 million and $0.4 million, respectively. Deferred revenue at September 30, 2011 reflected $0.2 million and $0.1 million for KRYSTEXXA and Oxandrin, respectively.

The Company's net product revenues represent total product revenues less allowances for returns, Medicaid rebates, other government rebates, other rebates, discounts, and distribution fees.

Allowance for returns

The Company's product sales in the United States are primarily composed of sales of KRYSTEXXA, Oxandrin and its authorized generic oxandrolone product. In general, the Company provides credit for product returns for KRYSTEXXA that are returned six months after the product expiration date. Additionally, the Company provides credit for product returns for Oxandrin and generic oxandrolone that are returned six months prior to and up to 12 months after the product expiration date. Upon sale, the Company estimates an allowance for future product returns. The Company provides additional reserves for contemporaneous events that were not known or knowable at the time of shipment. In order to reasonably estimate future returns, the Company analyzes both quantitative and qualitative information including, but not limited to, actual return rates by lot production, the level of product manufactured by the Company, the level of product in the distribution channel, expected shelf life of the product, current and projected product demand, the introduction of new or generic products that may erode current demand, and general economic and industry-wide indicators.

The allowance for product returns at September 30, 2011 and December 31, 2010 was $0.9 million and $0.5 million, respectively. This allowance is included in other current liabilities on the Company's consolidated balance sheets.

Allowances for Medicaid, other government rebates and other rebates

The Company's contracts with Medicaid and other government agencies such as the Federal Supply System, commit it to providing those entities with the Company's most favorable pricing. This ensures that the Company's products remain eligible for purchase or reimbursement under these programs. Based upon the Company's contracts and the most recent experience with respect to sales through each of these channels, the Company provides an allowance for rebates. The Company monitors the sales trends and adjusts the rebate percentages on a regular basis to reflect the most recent rebate experience. The allowance for rebates at September 30, 2011 and December 31, 2010 was $0.5 million and $0.3 million, respectively. This allowance is included in other current liabilities within the Company's consolidated balance sheets.

Commercial discounts

The Company sells directly to drug wholesalers and specialty distributors. Terms of these sales vary, but generally provide for invoice discounts for prompt payment to drug wholesalers only. These discounts are recorded by the Company at the time of sale.

Distribution fees

The Company has a distribution arrangement with a third-party logistics provider which includes payment terms equal to a flat monthly fee plus a per transaction fee for specified services. The Company also records distribution fees as incurred associated with wholesaler distribution services from its three largest wholesaler customers and its five specialty distributors.

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Other Current Liabilities

9 Months Ended

Sep. 30, 2011

Other Current Liabilities [Abstract]

Other Current Liabilities

Note 12—Other Current Liabilities

The components of other current liabilities at September 30, 2011 and December 31, 2010, were as follows:

	September 30, 2011		December 31, 2010
	(In thousands)
Salaries and related expenses	$	3,870	$	2,460
Legal and professional fees		1,477		1,691
Severance		1,399		271
Selling and marketing expense accrual		1,367		1,317
Accrued interest – tax		962		962
Allowance for product returns		887		469
Accrued taxes		865		733
Manufacturing and technology transfer services		789		5,076
Returned product liability		545		679
Allowance for product rebates		452		318
Other		2,248		2,047
Total	$	14,861	$	16,023

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Research And Development

9 Months Ended

Sep. 30, 2011

Research And Development [Abstract]

Research And Development

Note 8—Research and Development

The Company's research and development includes costs associated with the research and development of the Company's KRYSTEXXA product prior to U.S. Food and Drug Administration ("FDA") approval and FDA-related post-marketing commitments for approved products (KRYSTEXXA post-approval). These costs primarily include pre-clinical and clinical studies and trials, personnel costs, including compensation, consultants and contract research organizations, quality control and assurance costs, regulatory costs and costs related to the development of commercial scale manufacturing capabilities for KRYSTEXXA. These manufacturing capabilities also include the costs of preparing Fujifilm Diosynth Biotechnologies USA LLC ("Fujifilm") to serve as the Company's secondary source supplier of pegloticase drug substance for KRYSTEXXA in the United States. Costs associated with the Company's Medical Affairs function are also currently classified as research and development. Currently, the focus of the Company's Medical Affairs function is to support the Company's post-approval clinical trials. Additionally, the Company includes the legal costs associated with new patents and existing patent maintenance for products (KRYSTEXXA) that have not yet been approved in countries outside the United States as research and development. Research and development costs are expensed as incurred.

Prior to the FDA approval of KRYSTEXXA, manufacturing costs associated with third-party contractors for validation and commercial batch production, process technology transfer, quality control and stability testing, raw material purchases, overhead expenses and facilities costs were recorded as research and development and expensed as incurred as future use could not be determined, and there was uncertainty surrounding FDA approval of KRYSTEXXA for marketing in the United States. Following regulatory approval of KRYSTEXXA by the FDA, the Company capitalizes certain manufacturing costs as inventory in cases where the manufacturing costs meet the definition of an inventoriable asset.

Clinical trial costs have been another significant component of research and development expenses and all of the Company's clinical studies are performed by third-party contract research organizations ("CROs"). The Company accrues costs for clinical studies performed by CROs that are milestone or event driven in nature and based on reports and invoices submitted by the CRO. These expenses are based on patient enrollment as well as costs consisting primarily of payments made to the CRO, clinical sites, investigators, testing facilities and patients for participating in the Company's clinical trials.

Non-refundable advance payments for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the goods are delivered or the related services are performed. The Company has not deferred any research and development costs as of September 30, 2011 and December 31, 2010 and therefore had no amortization expense for the nine-month periods ended September 30, 2011 and 2010, respectively, based on services performed.

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Earnings (Loss) Per Share Of Common Stock (Tables)

9 Months Ended

Sep. 30, 2011

Earnings (Loss) Per Share Of Common Stock [Abstract]

Schedule Of Weighted-Average Number Of Basic And Diluted Shares

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(In thousands)
Basic		70,122		67,047		70,037		66,773
Incremental common stock equivalents		—		—		—		—
Diluted		70,122		67,047		70,037		66,773

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Property And Equipment, Net

9 Months Ended

Sep. 30, 2011

Property And Equipment, Net [Abstract]

Property And Equipment, Net

Note 6—Property and Equipment, Net

Property and equipment, net at September 30, 2011 and December 31, 2010 is summarized below:

	September 30, 2011			December 31, 2010
	(In thousands)
Office equipment	$	2,793		$	2,628
Office equipment—capital leases		332			332
Leasehold improvements		1,546			1,546
		4,671			4,506
Accumulated depreciation and amortization		(3,991	)		(3,697	)
Total	$	680		$	809

Depreciation and amortization expense was approximately $0.1 million for each of the three-month periods ended September 30, 2011 and 2010 and $0.3 million for each of the nine-month periods ended September 30, 2011 and 2010, respectively.

Capital lease obligations associated with capital lease office equipment are included in other current liabilities and non-current other liabilities. See Note 13 to the consolidated financial statements for more details.

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Share-Based Compensation (Narrative) (Details) (USD $)	3 Months Ended		9 Months Ended						3 Months Ended		9 Months Ended						3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended			3 Months Ended		9 Months Ended		1 Months Ended					9 Months Ended	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011 Director [Member]	Sep. 30, 2011 Employees [Member]	Sep. 30, 2011 Stock Options [Member]	Sep. 30, 2010 Stock Options [Member]	Sep. 30, 2011 Restricted Stock [Member]	Sep. 30, 2010 Restricted Stock [Member]	Sep. 30, 2011 Restricted Stock [Member]	Sep. 30, 2010 Restricted Stock [Member]	Sep. 30, 2011 Unvested Restricted Stock and RSUs [Member]	Dec. 31, 2010 Unvested Restricted Stock and RSUs [Member]	Sep. 30, 2011 Unvested Restricted Stock Awards [Member]	Dec. 31, 2010 Unvested Restricted Stock Awards [Member]	Sep. 30, 2011 2004 Incentive Plan [Member]	Sep. 30, 2010 2004 Incentive Plan [Member]	Sep. 30, 2011 2004 Incentive Plan [Member]	Sep. 30, 2010 2004 Incentive Plan [Member]	Sep. 30, 2011 Stock Options That Contain Performance And Market-Based Conditions [Member]	Sep. 30, 2010 Stock Options That Contain Performance And Market-Based Conditions [Member]	Sep. 30, 2011 Stock Options That Contain Performance And Market-Based Conditions [Member]	Sep. 30, 2010 Stock Options That Contain Performance And Market-Based Conditions [Member]	Sep. 30, 2011 Restricted Stock Awards That Contain Performance Or Market Conditions [Member]	Sep. 30, 2010 Restricted Stock Awards That Contain Performance Or Market Conditions [Member]	Sep. 30, 2011 Restricted Stock Awards That Contain Performance Or Market Conditions [Member]	Sep. 30, 2010 Restricted Stock Awards That Contain Performance Or Market Conditions [Member]	Sep. 30, 2011 Restricted Stock Awards That Contain Performance Or Market Conditions Awarded In 2009 and 2008 [Member]	Sep. 30, 2011 Employee Stock Purchase Plan [Member]	Sep. 30, 2010 Employee Stock Purchase Plan [Member]	Sep. 30, 2011 Employee Stock Purchase Plan [Member]	Sep. 30, 2010 Employee Stock Purchase Plan [Member]	Apr. 29, 2011 Stock Options For Executive Officer [Member]	Apr. 29, 2012 Stock Options For Executive Officer [Member]	Apr. 29, 2012 Stock Options For Executive Officer Exercisable Each Three Month Period Until 2015 [Member]	Jan. 31, 2011 Performance Or Market Condition Options For CEO [Member]	Apr. 29, 2011 Performance Or Market Condition Options For Vice President [Member]	Sep. 30, 2010 Stock Options For Employees [Member]	Sep. 30, 2011 2011 Incentive Plan [Member]	Sep. 30, 2010 2011 Incentive Plan [Member]	Sep. 30, 2011 2011 Incentive Plan [Member]	Sep. 30, 2010 2011 Incentive Plan [Member]
Share-based Compensation Arrangement By Share-based Payment Award [Line Items]
Shares authorized to purchase upon grant of options																																					250,000	50,000		7,750,000		7,750,000
Award vesting period					one-year	four-year	ten
Minimum vesting period											one
Maximum vesting period											four
Income tax benefit recognized for share-based compensation			$ 0	$ 0
Shares vested and exercisable																																			12,500	3,125
Shares remain available for future grant																	6,387,749		6,387,749
Stock compensation expense			3,211,000	2,680,000													1,900,000	3,900,000	5,100,000	6,200,000	200,000	800,000	400,000	800,000	300,000	2,100,000	400,000	2,100,000												1,885,000	3,882,000	5,147,000	6,214,000
Exercise of stock options and the vesting of restricted stock, income tax deduction	200,000		1,500,000
Term of options granted from grant date, years			10
Employee options to purchase shares of common stock			2,149,000																															50,000					2,100,000
Common stock issued upon exercise of outstanding stock options	0	85,000	33,000	273,000
Common stock issued upon exercise of outstanding stock options, proceeds		600,000	200,000	1,800,000
Stock option compensation cost charged against income	700,000	400,000					2,300,000	1,600,000	800,000	500,000	2,000,000	1,600,000																		200,000	100,000	500,000	300,000
Unrecognized compensation cost	7,000,000		7,000,000						8,400,000		8,400,000
Unamortized stock option compensation, expected to be recognized over a weighted-average period, years			2.9
Total intrinsic value of options exercised							100,000
Closing price of common stock							$ 4.10	$ 22.87
Options remain unvested									958,000		958,000		958,000	315,000	317,000	39,000					400,000		400,000						317,000
Additional compensation expense if the performance targets are met or expected to be attained																							2,700,000						3,100,000
Shares of restricted stock issued									105,000		856,000	31,000
Total aggregate fair market value of restricted stock issued									600,000		7,100,000	400,000
Weighted-average grant date fair value for restricted stock awards granted									$ 8.35	$ 11.65	$ 8.35	$ 11.65	$ 8.77	$ 11.56	$ 9.82	$ 19.37
Total grant date fair value of restricted shares vested											$ 1,700,000
Rights purchase price, percentage of fair value of rights granted or exercised, not less than																																85.00%
Employee stock purchase plan maximum purchase discount percentage			5.00%

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Consolidated Statement Of Changes In Stockholders' Equity (Parenthetical) (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011
Consolidated Statement Of Changes In Stockholders' Equity [Abstract]
Convertible note conversion option, tax	$ 23,924

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Recently Issued Accounting Pronouncements

9 Months Ended

Sep. 30, 2011

Recently Issued Accounting Pronouncements [Abstract]

Recently Issued Accounting Pronouncements

Note 2—Recently Issued Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-05, Presentation of Comprehensive Income, which amends Accounting Standards Codification ("ASC") Topic 220, Comprehensive Income. The amendments give an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The amendments eliminate the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 is effective prospectively for the Company's consolidated financial statements for the year beginning January 1, 2012 and is not expected to have a significant impact on the Company's consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ("IFRS"), which represents clarifications of ASC Topic 820, Fair Value Measurement, and includes some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. The amendments result in common fair value measurement and disclosure requirements in GAAP and IFRS. Consequently, the amendments change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the amendments do not result in a change in the application of the requirements in ASC Topic 820. Some of the amendments clarify the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. ASU 2011–04 is effective prospectively for the Company's consolidated financial statements for the year beginning January 1, 2012. The Company is currently assessing the potential impact from its future adoption of ASU 2011-04 on its consolidated financial statements.

In December 2010, the FASB issued ASU 2010-27, Other Expenses (Topic 720): Fees Paid to the Federal Government by Pharmaceutical Manufacturers. ASU 2010-27 addresses questions concerning how pharmaceutical manufacturers should recognize and classify in their income statements fees mandated by the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act (collectively, the Acts). The Acts impose an annual fee on the pharmaceutical manufacturing industry for each calendar year beginning on or after January 1, 2011. The amendments in this update specify that the liability for the fee should be estimated and recorded in full upon the first qualifying sale with a corresponding deferred cost that is amortized to expense using a straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable. ASU 2010-27 is not expected to have a significant effect on the Company's consolidated financial statements.

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Other (Expense) Income, Net (Tables)

9 Months Ended

Sep. 30, 2011

Other (Expense) Income, Net [Abstract]

Schedule Of Other (Expense) Income, Net

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(In thousands)
Realized gain on change in valuation of warrant liability	$	—		$	(43,232	)	$	—		$	(34,905	)
Reversal of interest expense and penalties on unrecognized tax liability		(10	)		—			1,753			—
Amortization of deferred financing costs on convertible debt		(129	)		—			(449	)		—
Other non-operating expenses		(2	)		(497	)		(15	)		(620	)
Total other (expense) income, net	$	(141	)	$	(43,729	)	$	1,289		$	(35,525	)

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Property And Equipment, Net (Tables)

9 Months Ended

Sep. 30, 2011

Property And Equipment, Net [Abstract]

Schedule Of Property And Equipment, Net

	September 30, 2011			December 31, 2010
	(In thousands)
Office equipment	$	2,793		$	2,628
Office equipment—capital leases		332			332
Leasehold improvements		1,546			1,546
		4,671			4,506
Accumulated depreciation and amortization		(3,991	)		(3,697	)
Total	$	680		$	809

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Other Liabilities (Schedule Of Components Of Other Liabilities) (Details) (USD $) In Thousands	Sep. 30, 2011		Dec. 31, 2010
Other Liabilities [Abstract]
Unrecognized tax benefit	$ 3,408	[1]	$ 10,261	[1]
Capital leases	4		38
Total	$ 3,412		$ 10,299

[1] See Note 15 to the Company's consolidated financial statements for further discussion of unrecognized tax benefits.

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Convertible Notes (Principal Balance, Unamortized Discount And Net Carrying Amount Of The Liability Components And Equity Components) (Details) (USD $) In Thousands	Sep. 30, 2011
Debt Instrument [Line Items]
Liability component, Unamortized Discount	$ 56,155
4.75% Convertible Senior Notes Due On 2018 [Member]
Debt Instrument [Line Items]
Liability component, Principal Balance	230,000
Liability component, Unamortized Discount	56,155
Liability component, Net Carrying Amount	173,845
Equity component, Net Carrying Amount	$ 34,427

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Stockholder's Equity (Details) (USD $)	0 Months Ended	9 Months Ended	12 Months Ended	1 Months Ended	9 Months Ended		0 Months Ended	12 Months Ended
	Apr. 08, 2009	Sep. 30, 2011	Dec. 31, 2010	Feb. 28, 2011 4.75% Convertible Senior Notes Due On 2018 [Member]	Sep. 30, 2011 4.75% Convertible Senior Notes Due On 2018 [Member]	Sep. 30, 2011 Common Stock [Member]	Apr. 08, 2009 Common Stock [Member]	Dec. 31, 2010 Warrants [Member]
Stockholder's Equity [Line Items]
Principal amount		$ 1,000		$ 230,000,000	$ 230,000,000
Convertible senior notes, maturity date		Feb. 01, 2018		Feb. 01, 2018	Feb. 01, 2018
Conversion feature of convertible notes		34,427,000		34,400,000
Deferred tax liability set-up related to the convertible notes (net of finance costs)		(23,924,000)
Issuance costs				1,900,000			2,000,000
Registered direct offering common stock, raised		500,000				1,000	31,000,000
Registered direct offering common stock yield for cash							29,000,000
Common stock, shares issued		71,473,000	70,259,000				5,927,343	2,227,963
Shares purchasable with issued warrants	5,038,237
Initial exercise price of warrants	$ 10.46
Fair value of warrant liabilities	12,600,000
Proceeds from warrant exercises								8,500,000
Warrant exercised to purchase common stock, shares			5,038,237					812,617
Warrants to purchase common stock on cashless settlement process								4,225,620
Common stock were exercised resulting in forfeiture								1,997,657
Warrants and rights outstanding			$ 0

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Commitments And Contingencies (Narrative) (Details) (USD $)	1 Months Ended				3 Months Ended		9 Months Ended
	May 31, 2017	May 31, 2010	Nov. 30, 2008	May 31, 2007	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011 years sqft	Sep. 30, 2010	Dec. 31, 2010
Commitments And Contingencies [Line Items]
Number of clinical trials			3
Office space under lease, square feet							53,000
Average annual rental expense							$ 1,900,000
Rental agreement expiration date							March 2013
Number of lease renewal options							2
Number of years lease agreement, renewal option							5
Security deposit					1,300,000		1,300,000
Cash deposit					1,280,000		1,280,000		1,284,000
Rent expense from continuing operations					500,000	500,000	1,500,000	1,400,000
Number of senior officers with employment agreements							8
Annual employee benefits compensation committed							3,100,000
Severance agreements, aggregate amount							1,400,000
Severance agreement costs, next twelve months							1,300,000
Severance agreement costs, next two years							100,000
Annual product world wide manufacturing requirement percentage							100.00%
Advance notice period for termination of purchase contract, period							3
Initial advance notice period ending, date	May 2017						December 2018
Termination of agreement after any written notice, period					30		30
Additional increase in term on renewal of purchase contract, period	10
Advance notice period for termination of contract prior expiration of term, period							45
Additional period of continuous supply to be made by supplier on breach of contract, period							1
Tax contingencies		1,700,000		1,200,000
Increase in tax contingencies due to additional interest and penalties		500,000
Consideration payment per consulting agreement							20,000
Minimum [Member]
Commitments And Contingencies [Line Items]
Possible project payment percentage exceeding repayment obligation							120.00%
Minimum [Member] | Mountain View Pharmaceuticals And Duke University [Member]
Commitments And Contingencies [Line Items]
Percentage of royalty rate payable on net sales					8.00%		8.00%
Maximum [Member]
Commitments And Contingencies [Line Items]
Possible project payment percentage exceeding repayment obligation							300.00%
Maximum [Member] | Mountain View Pharmaceuticals And Duke University [Member]
Commitments And Contingencies [Line Items]
Percentage of royalty rate payable on net sales					12.00%		12.00%
Bio-Technology General (Israel) Ltd, [Member]
Commitments And Contingencies [Line Items]
Minimum percentage of purchase committed							80.00%
Expected future purchases, 12 months outlook					4,100,000		4,100,000
Non-refundable fees paid for potential future purchases							2,200,000
Fujifilm Diosynth Biotechnologies USA LLC [Member]
Commitments And Contingencies [Line Items]
Non-refundable fees paid for potential future purchases							1,000,000
Additional cost for re-execution of campaign					10,000,000		10,000,000
NOF Corporation [Member]
Commitments And Contingencies [Line Items]
Expected future purchases, 12 months outlook					2,800,000		2,800,000
Minimum percentage of supply to be made by supplier							75.00%
Percentage of minimum purchase obligation payable on termination					50.00%		50.00%
Percentage of minimum purchase obligation payable on breach of purchase contract					50.00%		50.00%
Sigma-Tau PharmaSource, Inc [Member]
Commitments And Contingencies [Line Items]
Expected future purchases, 12 months outlook					1,100,000		1,100,000
Mountain View Pharmaceuticals And Duke University [Member]
Commitments And Contingencies [Line Items]
Percentage of royalty payable on any revenue or other consideration receives from sub-licensees					20.00%		20.00%
Aggregate milestone payments made on obtaining regulatory approval									800,000
Aggregate payment to be made on attaining sales target					1,800,000		1,800,000
Aggregate payments made on achievement of milestones							2,500,000
Chief Scientist Of The State Of Israel [Member]
Commitments And Contingencies [Line Items]
Financial grants in support of research and development							2,000,000
Israel-United States Bi-National Industrial Research And Development [Member]
Commitments And Contingencies [Line Items]
Financial grants in support of research and development							$ 600,000

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Fair Value Of Financial Instruments

9 Months Ended

Sep. 30, 2011

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

Note 3—Fair Value of Financial Instruments

The Company categorizes its financial instruments into a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets recorded at fair value on the Company's consolidated balance sheets are categorized as follows:

Level 1: Unadjusted quoted prices for identical assets in an active market.

Level 2: Quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full-term of the asset. Level 2 inputs include the following:

• quoted prices for similar assets in active markets,

• quoted prices for identical or similar assets in non-active markets,

• inputs other than quoted market prices that are observable, and

• inputs that are derived principally from or corroborated by observable market data through correlation or other means.

Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management's own assumptions about the assumptions a market participant would use in pricing the asset.

The following table presents the Company's cash and cash equivalents, and investments, including the hierarchy for its financial instruments measured at fair value on a recurring basis as of September 30, 2011:

	Carrying Amount		Estimated Fair Value		Assets and Liabilities Measured at Fair Value		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Cash and cash equivalents:
Cash	$	6,640	$	6,640	$	6,640	$	6,640	$	—	$	—
Money market funds		148,133		148,133		148,133		148,133		—		—
Total cash and cash equivalents		154,773		154,773		154,773		154,773		—		—
Short-term investments (available-for-sale):
Equity securities		—		—		—		—		—		—
Short-term investments (held-to-maturity):
Certificates of deposit		47,935		47,935		—		—		—		—
Total short-term investments		47,935		47,935		—		—		—		—
Total cash and cash equivalents and short-term investments		202,708		202,708		154,773		154,773		—		—
Long-term investments (held-to-maturity)
Certificates of deposit		1,280		1,280		—		—		—		—
Total long-term investments		1,280		1,280		—		—		—		—
Total	$	203,988	$	203,988	$	154,773	$	154,773	$	—	$	—

The $169.7 million debt component of the 2018 Convertible Notes was recorded at fair value as of the issuance date of February 4, 2011 based on a Level 3 input. The carrying value of the 2018 Convertible Notes is subsequently accreted back to its principal. The $173.8 million carrying amount of the 2018 Convertible Notes at September 30, 2011 includes accretion of the discount on the Convertible Notes subsequent to the issuance date of $4.1 million. See Note 14 to the consolidated financial statements for more details.

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Fair Value Of Financial Instruments (Details) (USD $)	9 Months Ended
	Sep. 30, 2011	Dec. 31, 2010	Sep. 30, 2010	Dec. 31, 2009
Derivatives, Fair Value [Line Items]
Cash and cash equivalents, Carrying Amount	$ 154,773,000	$ 44,791,000	$ 63,307,000	$ 108,172,000
Short-term investments (held-to-maturity), Carrying Amount	47,935,000	13,870,000
Total short-term investments, Carrying Amount	47,935,000	20,070,000
Long-term investments (held-to-maturity), Carrying Amount	1,280,000	1,280,000
Total cash and cash equivalents and investments, Carrying Amount	203,988,000
Total cash and cash equivalents and investments, Estimated Fair Value	203,988,000
Assets and Liabilities Measured at Fair Value	154,773,000
Carrying amount of the convertible notes	173,800,000
Accretion of discount on convertible notes	4,109,000
4.75% Convertible Senior Notes Due On 2018 [Member] | Level 3 [Member]
Derivatives, Fair Value [Line Items]
Convertible notes at fair value	169,700,000
Cash And Cash Equivalents [Member]
Derivatives, Fair Value [Line Items]
Cash and cash equivalents, Carrying Amount	154,773,000
Cash and cash equivalents, Estimated Fair Value	154,773,000
Assets and Liabilities Measured at Fair Value	154,773,000
Cash And Cash Equivalents [Member] | Level 1 [Member]
Derivatives, Fair Value [Line Items]
Assets and Liabilities Measured at Fair Value	154,773,000
Cash And Cash Equivalents [Member] | Level 1 [Member] | Cash [Member]
Derivatives, Fair Value [Line Items]
Assets and Liabilities Measured at Fair Value	6,640,000
Cash And Cash Equivalents [Member] | Level 1 [Member] | Money Market Funds [Member]
Derivatives, Fair Value [Line Items]
Assets and Liabilities Measured at Fair Value	148,133,000
Cash And Cash Equivalents [Member] | Cash [Member]
Derivatives, Fair Value [Line Items]
Cash and cash equivalents, Carrying Amount	6,640,000
Cash and cash equivalents, Estimated Fair Value	6,640,000
Assets and Liabilities Measured at Fair Value	6,640,000
Cash And Cash Equivalents [Member] | Money Market Funds [Member]
Derivatives, Fair Value [Line Items]
Cash and cash equivalents, Carrying Amount	148,133,000
Cash and cash equivalents, Estimated Fair Value	148,133,000
Assets and Liabilities Measured at Fair Value	148,133,000
Short-Term Investments (Held-To-Maturity) [Member] | Certificates Of Deposit [Member]
Derivatives, Fair Value [Line Items]
Short-term investments (held-to-maturity), Carrying Amount	47,935,000
Short-term investments (held-to-maturity), Estimated Fair Value	47,935,000
Total Short-Term Investments [Member]
Derivatives, Fair Value [Line Items]
Total short-term investments, Carrying Amount	47,935,000
Short-term investments (held-to-maturity), Estimated Fair Value	47,935,000
Total Cash And Cash Equivalents And Short-Term Investments [Member]
Derivatives, Fair Value [Line Items]
Total cash and cash equivalents and short-term investments, Carrying Amount	202,708,000
Total cash and cash equivalents and short term investments, Estimated Fair Value	202,708,000
Assets and Liabilities Measured at Fair Value	154,773,000
Total Cash And Cash Equivalents And Short-Term Investments [Member] | Level 1 [Member]
Derivatives, Fair Value [Line Items]
Assets and Liabilities Measured at Fair Value	154,773,000
Long-Term Investments (Held-To-Maturity) [Member]
Derivatives, Fair Value [Line Items]
Long-term investments (held-to-maturity), Carrying Amount	1,280,000
Long-term investments (held-to-maturity), Estimated Fair Value	1,280,000
Long-Term Investments (Held-To-Maturity) [Member] | Certificates Of Deposit [Member]
Derivatives, Fair Value [Line Items]
Long-term investments (held-to-maturity), Carrying Amount	1,280,000
Long-term investments (held-to-maturity), Estimated Fair Value	1,280,000
Level 1 [Member]
Derivatives, Fair Value [Line Items]
Assets and Liabilities Measured at Fair Value	$ 154,773,000

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Fair Value Of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2011

Fair Value Of Financial Instruments [Abstract]

Financial Instruments Measured At Fair Value On Recurring Basis

	Carrying Amount		Estimated Fair Value		Assets and Liabilities Measured at Fair Value		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Cash and cash equivalents:
Cash	$	6,640	$	6,640	$	6,640	$	6,640	$	—	$	—
Money market funds		148,133		148,133		148,133		148,133		—		—
Total cash and cash equivalents		154,773		154,773		154,773		154,773		—		—
Short-term investments (available-for-sale):
Equity securities		—		—		—		—		—		—
Short-term investments (held-to-maturity):
Certificates of deposit		47,935		47,935		—		—		—		—
Total short-term investments		47,935		47,935		—		—		—		—
Total cash and cash equivalents and short-term investments		202,708		202,708		154,773		154,773		—		—
Long-term investments (held-to-maturity)
Certificates of deposit		1,280		1,280		—		—		—		—
Total long-term investments		1,280		1,280		—		—		—		—
Total	$	203,988	$	203,988	$	154,773	$	154,773	$	—	$	—

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Investment Income, Net (Schedule Of Investment Income (Expense), Net) (Details) (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Investment Income, Net [Abstract]
Interest and dividend income from cash, cash equivalents and short-term investments	$ 39	$ 33	$ 107	$ 82

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Income Taxes (Narrative) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011		Sep. 30, 2011		Sep. 30, 2010	Dec. 31, 2010
Income Taxes [Line Items]
Income tax benefit	$ (6,245,000)		$ (19,055,000)
Reduction in liability for unrecognized tax benefit			3,600,000
Unrecognized tax benefit	3,408,000	[1]	3,408,000	[1]		10,261,000	[1]
Allocation of tax benefit to continuing operations	23,900,000		23,900,000
Decrease in liability for unrecognized tax benefits			(6,853,000)		196,000
Decrease in accrued liability for interest, for unrecognized tax benefits	1,200,000		1,200,000
Decrease in accrued liability for penalties, for unrecognized tax benefits	500,000		500,000
Unrecognized tax benefits, increase recorded to other income, net			1,700,000
Deferred tax asset that expects to benefit in the current year	15,500,000		15,500,000
Valuation allowance against its deferred income tax assets except for the deferred tax assets	2,700,000		2,700,000			4,200,000
4.75% Convertible Senior Notes Due On 2018 [Member]
Income Taxes [Line Items]
Income tax benefit			15,500,000
Capital in excess of par value account	$ 34,427,000		$ 34,427,000

[1] See Note 15 to the Company's consolidated financial statements for further discussion of unrecognized tax benefits.

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Share-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2011

Schedule Of Stock-Based Compensation By Expense Category

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(In thousands)
Research and development	$	375	$	1,674	$	1,028	$	2,673
Selling, general and administrative		1,510		2,208		4,119		3,541
Total non-cash compensation expense related to share-based compensation included in operating expense	$	1,885	$	3,882	$	5,147	$	6,214

Schedule Of Stock Option Activity

	Number of Shares			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in yrs)		Aggregate Intrinsic Value of In-the- Money Options
	(In thousands, except weighted-average data)
Outstanding at December 31, 2010		2,183		$	8.13		7.13	$	8,710
Granted		2,149			8.16		—		—
Exercised		(33	)		5.08		—		—
Cancelled		(314	)		8.37		—		—
Outstanding at September 30, 2011		3,985		$	8.15		7.86	$	363
Exercisable at September 30, 2011		1,584		$	8.14		5.66	$	272

Schedule Of Weighted-Average Key Assumptions Used In Determining Fair Value Of Stock Option Awards

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011			2010
Weighted-average volatility		—		—		83.8	%		—
Weighted-average risk-free interest rate		—		—		3.0	%		—
Weighted-average expected term in years		—		—		7.5			—
Dividend yield		—		—		0.0	%		—
Weighted-average grant date fair value per share		—		—	$	8.10			—

Stock Options [Member]

Schedule Of Weighted-Average Key Assumptions Used In Determining Fair Value Of Stock Option Awards

	Three Months Ended September 30,					Nine Months Ended September 30,
	2011			2010		2011			2010
Weighted-average volatility		95	%		—		88	%		78	%
Weighted-average risk-free interest rate		1.4	%		—		2.1	%		2.9	%
Weighted-average expected life in years		5.4			—		4.4			6.9
Dividend yield		0.0	%		—		0.0	%		0.0	%
Weighted-average grant date fair value per share	$	3.59			—	$	5.16		$	8.87

Unvested Restricted Stock and RSUs [Member]

Schedule Of Unvested Stock Option Awards

	Number of Shares			Weighted- Average Grant  Date Fair Value Per Share
	(Shares in thousands)
Unvested at December 31, 2010		315		$	11.56
Granted		856			8.35
Vested		(141	)		11.97
Forfeited		(72	)		9.73
Unvested at September 30, 2011		958		$	8.77

Unvested Restricted Stock Awards [Member]

Schedule Of Unvested Stock Option Awards

	Number of Shares			Weighted- Average Grant Date Fair Value Per Share
	(Shares in thousands)
Unvested at December 31, 2010		39		$	19.37
Granted		300			9.23
Vested		(7	)		13.95
Forfeited		(15	)		20.59
Unvested at September 30, 2011		317		$	9.82

Stock Option Activity For Options That Contain Performance Or Market Conditions [Member]

Schedule Of Stock Option Activity

	Number of Shares			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in yrs)		Aggregate Intrinsic Value of In-the- Money Options
	(In thousands, except weighted-average data)
Outstanding at December 31, 2010		117		$	13.57		9.04	$	—
Granted		400			9.21		—		—
Exercised		—			—		—		—
Cancelled		(15	)		11.91		—		—
Outstanding at September 30, 2011		502		$	10.14		9.14	$	—
Exercisable at September 30, 2011		102		$	13.81		8.16	$	—

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Basis Of Presentation (Details) (USD $)	1 Months Ended	9 Months Ended
	Feb. 28, 2011	Sep. 30, 2011
Basis Of Presentation [Line Items]
Principal amount		$ 1,000
Convertible senior notes, interest rate		4.75%
Convertible senior notes, maturity date		Feb. 01, 2018
Deferred finance costs		4,900,000
Deferred finance costs recorded as a long-term asset		4,246,000
Deferred financing costs amortization period		7
Debt Component [Member]
Basis Of Presentation [Line Items]
Financing costs		5,400,000
Equity Component [Member]
Basis Of Presentation [Line Items]
Financing costs		1,900,000
4.75% Convertible Senior Notes Due On 2018 [Member]
Basis Of Presentation [Line Items]
Financing costs		7,300,000
Principal amount	$ 230,000,000	$ 230,000,000
Convertible senior notes, interest rate		4.75%
Convertible senior notes, maturity date	Feb. 01, 2018	Feb. 01, 2018

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Inventories (Tables)

9 Months Ended

Sep. 30, 2011

Inventories [Abstract]

Schedule Of Inventories

	September 30, 2011			December 31, 2010
	(In thousands)
Raw materials	$	3,776		$	888
Work-in-progress		6,930			2,605
Finished goods		1,713			913
Inventory at cost		12,419			4,406
Inventory reserves		(4,415	)		(1,266	)
Total	$	8,004		$	3,140

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Share-Based Compensation

9 Months Ended

Sep. 30, 2011

Share-Based Compensation [Abstract]

Share-Based Compensation

Note 11—Share-Based Compensation

The Company's 2004 Incentive Plan expired by its terms on April 30, 2011 and no further awards were granted under this plan. In 2011, the Company adopted its 2011 Incentive Plan, pursuant to which up to an aggregate of 7.75 million shares of the Company's common stock may be issued. Awards may be granted as incentive and non-statutory stock options, stock appreciation rights, restricted stock awards and restricted stock unit awards, performance-based stock option and restricted stock awards, and other forms of equity-based and cash incentive compensation. Under this plan, 6,387,749 shares remain available for issuance pursuant to future grants at September 30, 2011.

Total compensation cost that has been charged against income related to the above plans was $1.9 million and $3.9 million for the three months ended September 30, 2011 and 2010, respectively, and $5.1 million and $6.2 million for the nine months ended September 30, 2011 and 2010, respectively. The exercise of stock options and the vesting of restricted stock during the three and nine months ended September 30, 2011 generated income tax deductions of approximately $0.2 million and $1.5 million, respectively. The Company does not recognize a tax benefit with respect to an excess stock compensation deduction until the deduction actually reduces the Company's income tax liability. At such time, the Company utilizes the net operating losses generated by excess stock-based compensation to reduce its income tax payable and the tax benefit is recorded as an increase in additional paid-in-capital. No income tax benefit was recognized in the consolidated statements of operations for share-based compensation arrangements for the nine months ended September 30, 2011 and 2010, respectively.

The following table summarizes stock-based compensation related to the above plans by expense category for the three and nine months ended September 30, 2011 and 2010:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(In thousands)
Research and development	$	375	$	1,674	$	1,028	$	2,673
Selling, general and administrative		1,510		2,208		4,119		3,541
Total non-cash compensation expense related to share-based compensation included in operating expense	$	1,885	$	3,882	$	5,147	$	6,214

Stock Options

The Company grants stock options to employees and directors with exercise prices equal to the fair market value of the underlying shares of the Company's common stock on the date that the options are granted. Options granted have a term of 10 years from the grant date. Options granted to employees vest over a four-year period and options granted to directors vest in equal quarterly installments over a one-year period from the date of grant. Options to directors are granted on an annual basis and represent compensation for services performed on the Board of Directors. Compensation cost for stock options is charged against income on a straight-line basis between the grant date for the option and each vesting date, except for those options that contain performance and market-based conditions. The Company estimates the fair value of all stock option awards at the closing price on the grant date by applying the Black-Scholes option pricing valuation model. The application of this valuation model involves assumptions that are highly subjective, judgmental and sensitive in the determination of compensation cost.

During the nine months ended September 30, 2011, the Company awarded to employees options to purchase an aggregate of approximately 2.1 million shares of common stock. In addition, on April 29, 2011, the Company made an inducement grant outside of the above mentioned plans, pursuant to the NASDAQ inducement grant exception, for the purchase of 50,000 shares of the Company's common stock with an exercise price equal to the closing price of the Company's common stock on the grant date. The option has a ten-year term, will vest and become exercisable as to 12,500 shares on April 29, 2012, and as to an additional 3,125 shares at the end of each successive three-month period thereafter until April 29, 2015. In the event of the termination by the Company without cause or for good reason, the time-based stock option will immediately accelerate and become fully vested.

The weighted-average key assumptions used in determining the fair value of options granted during the three and nine months ended September 30, 2011 and 2010 were as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2011			2010		2011			2010
Weighted-average volatility		95	%		—		88	%		78	%
Weighted-average risk-free interest rate		1.4	%		—		2.1	%		2.9	%
Weighted-average expected life in years		5.4			—		4.4			6.9
Dividend yield		0.0	%		—		0.0	%		0.0	%
Weighted-average grant date fair value per share	$	3.59			—	$	5.16		$	8.87

Historical information is the primary basis for the selection of the expected volatility and expected dividend yield. The expected terms of options granted prior to December 31, 2007 were based upon the simplified method. The simplified method estimates the expected term as the midpoint between vesting and the grant contractual life. The expected terms of options granted subsequent to December 31, 2007 are based upon the Company's historical experience for similar types of stock option awards. The risk-free interest rate is selected based upon yields of United States Treasury issues with a term equal to the expected life of the option being valued.

The Company did not issue any shares of common stock upon the exercise of stock options for the three months ended September 30, 2011. During the three months ended September 30, 2010, the Company issued 85,000 shares of common stock upon the exercise of stock options and received proceeds of $0.6 million. For the nine months ended September 30, 2011 and 2010 the Company issued 33,000 and 273,000 shares respectively, of common stock upon the exercise of stock options and received proceeds of $0.2 million and $1.8 million, respectively. For the three months ended September 30, 2011 and 2010, approximately $0.7 million and $0.4 million, respectively, of stock option compensation cost was charged against income. For the nine months ended September 30, 2011 and 2010, approximately $2.3 million and $1.6 million, respectively, of stock option compensation cost was charged against income. As of September 30, 2011, there was $7.0 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to unamortized stock option compensation which is expected to be recognized over a weighted-average period of approximately 2.9 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

Stock option activity during the nine months ended September 30, 2011, was as follows:

	Number of Shares			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in yrs)		Aggregate Intrinsic Value of In-the- Money Options
	(In thousands, except weighted-average data)
Outstanding at December 31, 2010		2,183		$	8.13		7.13	$	8,710
Granted		2,149			8.16		—		—
Exercised		(33	)		5.08		—		—
Cancelled		(314	)		8.37		—		—
Outstanding at September 30, 2011		3,985		$	8.15		7.86	$	363
Exercisable at September 30, 2011		1,584		$	8.14		5.66	$	272

The aggregate intrinsic value in the previous table reflects the total pre-tax intrinsic value (the difference between the Company's closing stock price on the last trading day of the period and the exercise price of the options, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all option holders exercised their options on September 30, 2011. The intrinsic value of the Company's stock options changes based on the closing price of the Company's common stock. The total intrinsic value of options exercised (the difference in the market price of the Company's common stock on the exercise date and the price paid by the optionee to exercise the option) for the nine months ended September 30, 2011 was approximately $0.1 million. The closing price per share of the Company's common stock was $4.10 and $22.87 on September 30, 2011 and 2010, respectively.

Stock Options that Contain Performance or Market-Based Conditions

Performance or Market Conditions

Compensation cost charged against income related to stock option awards that contain performance or market conditions ("performance awards") was $0.2 million and $0.8 million for the three months ended September 30, 2011 and 2010, respectively, and $0.4 million and $0.8 million for the nine months ended September 30, 2011 and 2010, respectively. At September 30, 2011, approximately 400,000 performance awards, which encompass performance targets set for senior management personnel through 2013, remain unvested and non-exercisable, and could result in approximately $2.7 million of additional compensation expense if the performance targets are met or expected to be attained. Included in the unvested performance awards total noted above are two inducement grants, described below, that the Company made outside of the above mentioned plans, pursuant to the NASDAQ inducement grant exception, to recruit key positions within the Company during the nine months ended September 30, 2011. The Company made the first of these inducement grants on January 31, 2011, with the Company award of a performance option to purchase 250,000 shares of the Company's common stock, with an exercise price equal to the closing price of the Company's common stock on the date of grant, a ten-year term, and that will vest and become exercisable upon the satisfaction of certain performance conditions. In the event that any performance condition is not met, the portion of the option subject to the performance condition will remain outstanding and will vest (subject to the employees' continued employment by the Company) upon the earlier of the fourth anniversary of the date of grant or a change of control of the Company. The Company made the second of these inducement grants on April 29, 2011, with the award of a performance option, with similar terms as the first to purchase 50,000 shares of the Company's common stock.

The weighted-average key assumptions used in determining the fair value of stock option awards with performance or market conditions granted during the three and nine months ended September 30, 2011 and 2010 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011			2010
Weighted-average volatility		—		—		83.8	%		—
Weighted-average risk-free interest rate		—		—		3.0	%		—
Weighted-average expected term in years		—		—		7.5			—
Dividend yield		—		—		0.0	%		—
Weighted-average grant date fair value per share		—		—	$	8.10			—

For performance options, the Company utilizes a Monte Carlo simulation model which incorporates the expected exercise and termination behavior of optionees into a model of the Company's future stock price.

Stock option activity for options that contain performance or market conditions during the nine months ended September 30, 2011, was as follows:

	Number of Shares			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in yrs)		Aggregate Intrinsic Value of In-the- Money Options
	(In thousands, except weighted-average data)
Outstanding at December 31, 2010		117		$	13.57		9.04	$	—
Granted		400			9.21		—		—
Exercised		—			—		—		—
Cancelled		(15	)		11.91		—		—
Outstanding at September 30, 2011		502		$	10.14		9.14	$	—
Exercisable at September 30, 2011		102		$	13.81		8.16	$	—

Restricted Stock

The Company grants restricted stock and restricted stock unit ("RSU") awards to its employees and directors. Restricted stock and RSU awards are recorded as deferred compensation and amortized into compensation expense on a straight-line basis over the vesting period, which ranges from one to four years in duration. Restricted stock and RSU awards to directors are granted on a yearly basis and represent compensation for services performed on the Company's Board of Directors. Restricted stock awards to directors vest in equal quarterly installments over a one-year period from the grant date and RSU awards vest after one-year and thirty-one days. Compensation cost for restricted stock and RSU awards is based on the award's grant date fair value, which is the closing market price of the Company's common stock on the grant date, multiplied by the number of shares awarded. During the three months ended September 30, 2011, the Company issued 105,000 shares of restricted stock with an aggregate fair market value of $0.6 million. The Company did not issue any shares of restricted stock during the three months ended September 30, 2010. During the nine months ended September 30, 2011 and 2010, the Company issued 856,000 shares and 31,000 shares of restricted stock, respectively, with an aggregate fair market value of $7.1 million and $0.4 million, respectively. For the three months ended September 30, 2011 and 2010, approximately $0.8 million and $0.5 million, respectively, of deferred restricted stock compensation cost was charged against income. For the nine months ended September 30, 2011 and 2010, approximately $2.0 million and $1.6 million, respectively, of deferred restricted stock compensation cost was charged against income. At September 30, 2011, approximately 958,000 shares remained unvested and there was approximately $8.4 million of unrecognized compensation cost related to restricted stock and RSUs.

A summary of the status of the Company's unvested restricted stock and RSUs at December 31, 2010 and changes during the nine months ended September 30, 2011, is presented below:

	Number of Shares			Weighted- Average Grant  Date Fair Value Per Share
	(Shares in thousands)
Unvested at December 31, 2010		315		$	11.56
Granted		856			8.35
Vested		(141	)		11.97
Forfeited		(72	)		9.73
Unvested at September 30, 2011		958		$	8.77

The weighted-average grant date fair value for restricted stock awards granted during the nine months ended September 30, 2011 and 2010 was $8.35 and $11.65 per share, respectively. The total grant date fair value of restricted shares vested during the nine months ended September 30, 2011 and 2010, was $1.7 million for each respective period.

Restricted Stock Awards that Contain Performance or Market Conditions

During the three months ended September 30, 2011 and 2010, the Company recorded $0.3 million and $2.1 million, respectively, of compensation expense related to restricted stock awards that contain performance or market conditions. During the nine months ended September 30, 2011 and 2010, the Company recorded $0.4 million and $2.1 million, respectively, of compensation expense related to restricted stock awards that contain performance or market conditions. At September 30, 2011, approximately 317,000 shares of restricted stock awards with performance or market conditions remain unvested, and could result in approximately $3.1 million of additional compensation expense if the performance targets are met or expected to be attained.

A summary of the status of the Company's unvested restricted stock awards that contain performance or market conditions at December 31, 2010 and changes during the nine months ended September 30, 2011, is presented below:

	Number of Shares			Weighted- Average Grant Date Fair Value Per Share
	(Shares in thousands)
Unvested at December 31, 2010		39		$	19.37
Granted		300			9.23
Vested		(7	)		13.95
Forfeited		(15	)		20.59
Unvested at September 30, 2011		317		$	9.82

Employee Stock Purchase Plan

In 1998, the Company adopted its 1998 Employee Stock Purchase Plan (the "1998 ESPP"). The 1998 ESPP is qualified as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended. Under the 1998 ESPP, the Company grants rights to purchase shares of common stock ("Rights") at prices not less than 85% of the lesser of (i) the fair market value of the shares on the date of grant of such Rights or (ii) the fair market value of the shares on the date such Rights are exercised. Therefore, the 1998 ESPP is considered compensatory since, along with other factors, it includes a purchase discount of greater than 5%. For the three months ended September 30, 2011 and 2010, approximately $0.2 million and $0.1 million, respectively, was charged against income related to participation in the 1998 ESPP. For the nine months ended September 30, 2011 and 2010, approximately $0.5 million and $0.3 million, respectively, was charged against income related to participation in the 1998 ESPP.

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Share-Based Compensation (Schedule Of Unvested Stock Option Awards) (Details) (USD $)	9 Months Ended
	Sep. 30, 2011
Unvested Restricted Stock and RSUs [Member]
Share-based Compensation Arrangement By Share-based Payment Award [Line Items]
Number of Shares, Unvested at December 31, 2010	315,000
Number of Shares, Granted	856,000
Number of Shares, Vested	(141,000)
Number of Shares, Forfeited	(72,000)
Number of Shares, Unvested at June 30, 2011	958,000
Weighted-Average Grant Date Fair Value Per Share, Non-vested/Unvested at December 31, 2010	$ 11.56
Weighted-Average Grant Date Fair Value Per Share, Granted	$ 8.35
Weighted-Average Grant Date Fair Value Per Share, Vested	$ 11.97
Weighted-Average Grant Date Fair Value Per Share, Forfeited	$ 9.73
Weighted-Average Grant Date Fair Value Per Share, Non-vested/Unvested at June 30, 2011	$ 8.77
Unvested Restricted Stock Awards [Member]
Share-based Compensation Arrangement By Share-based Payment Award [Line Items]
Number of Shares, Unvested at December 31, 2010	39,000
Number of Shares, Granted	300,000
Number of Shares, Vested	(7,000)
Number of Shares, Forfeited	(15,000)
Number of Shares, Unvested at June 30, 2011	317,000
Weighted-Average Grant Date Fair Value Per Share, Non-vested/Unvested at December 31, 2010	$ 19.37
Weighted-Average Grant Date Fair Value Per Share, Granted	$ 9.23
Weighted-Average Grant Date Fair Value Per Share, Vested	$ 13.95
Weighted-Average Grant Date Fair Value Per Share, Forfeited	$ 20.59
Weighted-Average Grant Date Fair Value Per Share, Non-vested/Unvested at June 30, 2011	$ 9.82

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Convertible Notes (Schedule Of Accretion Of Debt Discount) (Details) (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011
Convertible Notes [Abstract]
Remainder of 2011	$ 1,613
2012	6,865
2013	7,582
2014	8,372
2015	9,246
Thereafter	$ 22,477

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Investments

9 Months Ended

Sep. 30, 2011

Investments [Abstract]

Investments

Note 4—Investments

At September 30, 2011 and December 31, 2010, the Company held no trading securities. Available-for-sale and held-to-maturity securities consisted of the following:

	September 30, 2011
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In thousands)
Available-for-sale securities:
Equity securities (1)	$	—	$	1	$	(1	)	$	—
Total available-for-sale securities		—		1		(1	)		—
Held-to-maturity securities:
Fixed maturities:
Bank deposits and certificates of deposit		49,215		—		—			49,215
Total held-to-maturity securities		49,215		—		—			49,215
Total	$	49,215	$	1	$	(1	)	$	49,215
	December 31, 2010
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In thousands)
Available-for-sale securities:
Equity securities (1)	$	—	$	1	$	—		$	1
Total available-for-sale securities		—		1		—			1
Held-to-maturity securities:
Fixed maturities:
Bank deposits and certificates of deposit		21,350		—		(1	)		21,349
Total held-to-maturity securities		21,350		—		(1	)		21,349
Total	$	21,350	$	1	$	(1	)	$	21,350

(1) Equity securities at September 30, 2011 and December 31, 2010 were comprised of the Company's investment in common shares of Neuro-Hitech, Inc. The fair value of this investment is obtained from quoted prices in an inactive market. The Company considers the market for Neuro-Hitech, Inc. shares to be inactive due to its low trading volume and infrequency of trading.

The Company's available-for-sale and held-to-maturity securities were included in the following captions in its consolidated balance sheets:

	September 30, 2011				December 31, 2010
	Available- for-Sale Securities:		Held-to- Maturity Securities:		Available- for-Sale Securities		Held-to- Maturity Securities:
	(In thousands)
Cash and cash equivalents	$	—	$	—	$	—	$	6,200
Short-term investments		—		47,935		1		13,870
Other long-term assets (including investments and restricted cash)		—		1,280		—		1,280
	$	—	$	49,215	$	1	$	21,350

At September 30, 2011, all of the Company's held-to-maturity securities classified as short-term investments had maturity dates of one-year or less. Since available-for-sale securities are made up exclusively of equity securities, there are no maturity dates associated with available-for-sale securities. At September 30, 2011 and December 31, 2010, there was $1,000 and $2,000 of net unrealized losses, respectively, included as a component of accumulated other comprehensive income, net of taxes. Additionally, the amount included as a component of other long-term assets reflects the Company's office rent-related security deposit, which is secured by a $1.3 million cash deposit.

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Convertible Notes

9 Months Ended

Sep. 30, 2011

Convertible Notes [Abstract]

Convertible Notes

Note 14—Convertible Notes

2018 Convertible Notes

In February 2011, the Company issued the 2018 Convertible Notes at par that become due on February 1, 2018. The Company received cash proceeds from the sale of the Notes of $222.7 million, net of expenses. The aggregate principal amount of the Convertible Notes sold reflects the full exercise by the underwriters of their option to purchase $30 million principal amount of Convertible Notes to cover over-allotments. The 2018 Convertible Notes bear cash interest at a rate of 4.75% per year, payable semiannually in arrears on February 1 and August 1 of each year, beginning on August 1, 2011. The 2018 Convertible Notes may be converted into shares of the Company's common stock based on an initial conversion rate of 86.6739 shares per $1,000 principal amount of Convertible Notes, which represents a conversion price of approximately $11.54 per share. The Company may not redeem the Convertible Notes prior to February 1, 2015. On or after February 1, 2015 and prior to the maturity date, the Company may redeem for cash all or part of the Convertible Notes at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. This conversion rate will be adjusted if the Company makes specified types of distributions or enter into certain other transactions with respect to the Company's common stock.

The 2018 Convertible Notes may only be converted: (1) during any calendar quarter commencing after March 31, 2011 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period, or the measurement period, in which the trading price per $1,000 principal amount of Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; (3) if the Company calls any or all of the Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. As of September 30, 2011, the 2018 Convertible Notes were not convertible.

As required for cash settled Convertible Notes, the debt and equity components of the 2018 Convertible Notes were bifurcated and accounted for separately. While the 2018 Convertible Notes are outstanding, their discounted carrying values resulting from the bifurcation are accreted back to their principal amounts over periods that end on the scheduled maturity dates, resulting in the recognition of non-cash interest expense. For the three months ended September 30, 2011, total interest expense for the 2018 Convertible Notes was $3.4 million, consisting of $2.9 million of interest based upon the 4.75% coupon rate coupled with $0.5 million of non-cash interest expense related to the accretion of the discount on the Convertible Notes. For the nine months ended September 30, 2011, total interest expense for the 2018 Convertible Notes was $11.4 million, consisting of $7.3 million of accrued interest based upon the 4.75% coupon rate coupled with $4.1 million of non-cash interest expense related to the accretion of the discount on the Note.

The principal balance, unamortized discount and net carrying amount of the liability components and the equity components of the 2018 Convertible Notes was as follows as of September 30, 2011:

	Liability Component						Equity Component
September 30, 2011	Principal Balance		Unamortized Discount		Net Carrying Amount		Net Carrying Amount
	(In thousands)
2018 Convertible Notes	$	230,000	$	56,155	$	173,845	$	34,427

Debt Discount

The accretion of debt discount expected to be included in the Company's consolidated financial statements is as follows for each of the following calendar years:

2018 Convertible Notes	(In thousands)
Remainder of 2011	$	1,613
2012	$	6,865
2013	$	7,582
2014	$	8,372
2015	$	9,246
Thereafter	$	22,477

Financing Costs

Deferred financing costs are amortized to interest expense over the seven-year contract term of the debt using the effective-interest method. Amortization of deferred financing costs is included as a component of interest expense and was $0.1 million and $0.4 million for the three and nine months ended September 30, 2011.

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Commitments And Contingencies (Future Annual Minimum Rentals) (Details) (USD $) In Thousands	Sep. 30, 2011
Commitments And Contingencies [Abstract]
Remainder of 2011	$ 467
2012	1,867
2013	$ 467

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Income Taxes (Schedule Of Deferred Tax Liabilities) (Details) (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Dec. 31, 2010
Income Taxes [Abstract]
Deferred tax liability set-up related to the convertible notes (net of finance costs)	$ 23,924
Decrease in valuation allowance allowing an income tax benefit on current year net operating losses	(15,455)
Net deferred tax asset reserved for by a liability for unrecognized tax benefits	(2,700)	(4,200)
Net deferred tax liability on consolidated balance sheet	$ 5,769

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Investment Income, Net (Tables)

9 Months Ended

Sep. 30, 2011

Investment Income, Net [Abstract]

Schedule Of Investment Income, Net

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(In thousands)
Interest and dividend income from cash, cash equivalents and short-term investments	$	39	$	33	$	107	$	82

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Investments (Tables)

9 Months Ended

Sep. 30, 2011

Investments [Abstract]

Available-For-Sale And Held-To-Maturity Securities

	September 30, 2011
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In thousands)
Available-for-sale securities:
Equity securities (1)	$	—	$	1	$	(1	)	$	—
Total available-for-sale securities		—		1		(1	)		—
Held-to-maturity securities:
Fixed maturities:
Bank deposits and certificates of deposit		49,215		—		—			49,215
Total held-to-maturity securities		49,215		—		—			49,215
Total	$	49,215	$	1	$	(1	)	$	49,215
	December 31, 2010
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In thousands)
Available-for-sale securities:
Equity securities (1)	$	—	$	1	$	—		$	1
Total available-for-sale securities		—		1		—			1
Held-to-maturity securities:
Fixed maturities:
Bank deposits and certificates of deposit		21,350		—		(1	)		21,349
Total held-to-maturity securities		21,350		—		(1	)		21,349
Total	$	21,350	$	1	$	(1	)	$	21,350

(1) Equity securities at September 30, 2011 and December 31, 2010 were comprised of the Company's investment in common shares of Neuro-Hitech, Inc. The fair value of this investment is obtained from quoted prices in an inactive market. The Company considers the market for Neuro-Hitech, Inc. shares to be inactive due to its low trading volume and infrequency of trading.

Available-For-Sale And Held-To-Maturity Securities Included In Consolidated Balance Sheets

	September 30, 2011				December 31, 2010
	Available- for-Sale Securities:		Held-to- Maturity Securities:		Available- for-Sale Securities		Held-to- Maturity Securities:
	(In thousands)
Cash and cash equivalents	$	—	$	—	$	—	$	6,200
Short-term investments		—		47,935		1		13,870
Other long-term assets (including investments and restricted cash)		—		1,280		—		1,280
	$	—	$	49,215	$	1	$	21,350

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Consolidated Statement Of Changes In Stockholders' Equity (USD $) In Thousands	Common Stock [Member]	Additional Paid-In-Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Income [Member]	Total
Balance at Dec. 31, 2010	$ 703	$ 364,139	$ (315,576)	$ 1	$ 49,267
Balance (in Shares) at Dec. 31, 2010	70,259
Comprehensive loss:
Net loss			(71,171)		(71,171)
Unrealized loss on marketable securities, net				(1)	(1)
Total comprehensive loss					(71,172)
Restricted stock grants	11	(11)
Restricted stock grants (in Shares)	1,174
Amortization of deferred compensation		2,440			2,440
Forfeiture of restricted stock grants
Forfeiture of restricted stock grants (in Shares)	(87)
Exercise of stock options		168			168
Exercise of stock options (in Shares)	34				33
Issuance of common stock	1	499			500
Issuance of common stock (in Shares)	93
ESPP compensation expense		504			504
Stock option compensation expense		2,707			2,707
Convertible note conversion option, net of tax of $23,924		34,427			34,427
Balance at Sep. 30, 2011	$ 715	$ 404,873	$ (386,747)		$ 18,841
Balance (in Shares) at Sep. 30, 2011	71,473

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Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

Income Taxes

Note 15—Income Taxes

The Company recorded a non-cash income tax benefit of $19.1 million for the nine months ended September 30, 2011. This benefit was partially the result of a reduction in a liability for an unrecognized tax benefit of $3.6 million which was considered effectively settled due to the recent completion of a state tax audit in the first quarter of 2011. The remaining $15.5 million of income tax benefit resulted from the allocation of a tax benefit to continuing operations pursuant to ASC 740-30-45, Income Taxes. This guidance requires that amounts credited to capital in excess of par value, other comprehensive income or discontinued operations during the year are considered sources of income that enable a company to recognize a tax benefit on its loss from continuing operations. As discussed in Note 14 – Convertible Notes, the 2018 Convertible Notes were bifurcated into debt and equity components for accounting purposes. As a result, the Company recorded a credit to the capital in excess of par value account of $34.4 million, which caused the allocation of the $15.5 million tax benefit to continuing operations. The Company expects the full year tax benefit allocated to continuing operations for this item to be approximately $23.9 million. A deferred tax liability was also recorded as a result of the 2018 Convertible Notes creating a book carrying value that differs from the tax basis, since tax regulations do not recognize the beneficial conversion feature as an equity element.

	(In thousands)
Deferred tax liability set-up related to the convertible notes (net of finance costs)	$	23,924
Decrease in valuation allowance allowing an income tax benefit on current year net operating losses		(15,455	)
Net deferred tax asset reserved for by a liability for unrecognized tax benefits		(2,700	)
Net deferred tax liability on consolidated balance sheet	$	5,769

The total amount of federal, state and local unrecognized tax benefits was $3.4 million at September 30, 2011 and $10.3 million at December 31, 2010, including accrued penalties and interest. The decrease of $6.9 million in the Company's liability for unrecognized tax benefits from December 31, 2010 to September 30, 2011 is primarily the result of a recently completed state tax audit during the first quarter of 2011. The Company also decreased a portion of its liability for unrecognized tax benefits due to a change in estimate resulting from a recently settled federal tax audit during the first quarter of 2011.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of other (expense) income, net, in its consolidated statements of operations, which is consistent with the recognition of these items in prior reporting periods. The accrued liability for interest and penalties for unrecognized tax benefits decreased by $1.2 million and $0.5 million during the nine months ended September 30, 2011, respectively, with a corresponding $1.7 million increase to income recorded to other (expense) income, net, within the Company's statement of operations for the nine months ended September 30, 2011. The decrease in interest and penalty is primarily the result of a recently completed state tax audit during the first quarter of 2011.

The Company has filed income tax returns in the United States and various state jurisdictions for all tax years through 2010. In January 2011, the Company settled the 2006 through 2008 examination by the Internal Revenue Service for no additional liability, although certain tax attributes were adjusted (i.e. NOL carryforwards, orphan drug credit carryforward and capital loss carryforwards). However, the net results of these adjustments were not material to the Company's financial statements.

State income tax returns are generally subject to examination for a period of three to five years subsequent to the filing of the respective tax return. In March 2011, the Company settled the examination with the State of New Jersey for an immaterial amount of sales and use tax liability which included interest and penalty expense. The examination encompassed the review of the Company's 2005 through 2008 corporate income tax returns, the 2007 through 2009 gross employer tax returns and the April 2006 through March 2010 sales and use tax returns.

The initial Irish tax return for the Company's newly established Irish subsidiary, Savient Pharma Ireland Limited will be filed in 2012.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their basis for income tax purposes and the tax effects of capital loss, net operating loss and tax credit carryforwards. Valuation allowances reduce deferred tax assets to the amounts that are more likely than not to be realized.

At present, the likelihood of the Company being able to fully realize its deferred income tax benefits against future income is uncertain. Accordingly, at September 30, 2011, the Company had a valuation allowance against its deferred income tax assets except for the portion of the deferred tax asset that the Company expects to benefit from in the current year of $15.5 million and for the deferred income tax assets of $2.7 million that were offset by an unrecognized tax benefit reserve. As of December 31, 2010, the Company had a valuation allowance against its deferred income tax assets except for the deferred tax assets of $4.2 million that were offset by an unrecognized tax benefit reserve.

As of September 30, 2011 and December 31, 2010, $2.7 million and $4.2 million, respectively, of the net deferred tax assets remaining were offset by an unrecognized tax benefit reserve recorded as components of long-term liabilities on the Company's consolidated balance sheets.

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Investments (Available-For-Sale And Held-To-Maturity Securities) (Details) (USD $)	Sep. 30, 2011		Dec. 31, 2010
Investment [Line Items]
Available-for-sale securities, Gross Unrealized Gains	$ 1,000		$ 1,000
Available-for-sale securities, Gross Unrealized Losses	(1,000)
Available-for-sale securities, Estimated Fair Value			1,000
Cost or Amortized Cost, Total	49,215,000		21,350,000
Gross Unrealized Gains, Total	1,000		1,000
Gross Unrealized Losses, Total	(1,000)		(1,000)
Estimated Fair Value, Total	49,215,000		21,350,000
Trading securities held by the company	0		0
Bank Deposits And Certificates Of Deposit [Member] | Fixed Maturities [Member]
Investment [Line Items]
Held-to-maturity securities, Cost or Amortized Cost	49,215,000		21,350,000
Held-to-maturity securities, Gross Unrealized Losses			(1,000)
Held-to-maturity securities, Estimated Fair Value	49,215,000		21,349,000
Equity Securities [Member]
Investment [Line Items]
Available-for-sale securities, Gross Unrealized Gains	1,000	[1]	1,000	[1]
Available-for-sale securities, Gross Unrealized Losses	(1,000)	[1]
Available-for-sale securities, Estimated Fair Value			1,000	[1]
Fixed Maturities [Member]
Investment [Line Items]
Held-to-maturity securities, Cost or Amortized Cost	49,215,000		21,350,000
Held-to-maturity securities, Gross Unrealized Losses			(1,000)
Held-to-maturity securities, Estimated Fair Value	$ 49,215,000		$ 21,349,000

[1] Equity securities at September 30, 2011 and December 31, 2010 were comprised of the Company's investment in common shares of Neuro-Hitech, Inc. The fair value of this investment is obtained from quoted prices in an inactive market. The Company considers the market for Neuro-Hitech, Inc. shares to be inactive due to its low trading volume and infrequency of trading.

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Segment Information

9 Months Ended

Sep. 30, 2011

Segment Information [Abstract]

Segment Information

Note 17—Segment Information

The Company currently operates within one "Specialty Pharmaceutical" segment which includes sales of KRYSTEXXA, Oxandrin and oxandrolone and the research and development activities of KRYSTEXXA.

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Consolidated Statements Of Cash Flows (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Cash flows from operating activities:
Net loss	$ (71,171)	$ (72,658)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	294	321
Accretion of discount on convertible notes	4,109
Change in valuation of warrant liability		32,224
Warrant liability transferred to APIC upon exercise of warrant		2,682
Amortization of deferred compensation related to restricted stock (including restricted stock awards that contain performance conditions)	2,440	3,818
Amortization of deferred financing costs	449
Stock compensation expense	3,211	2,680
Recoverable income taxes		2,006
Unrecognized tax benefit liability	(6,853)	196
Deferred income taxes	(13,955)
Accrued interest on convertible notes	1,912
Changes in:
Accounts receivable, net	(2,800)	(246)
Inventories, net	(4,864)	91
Prepaid expenses and other current assets	(2,185)	(467)
Accounts payable	5,346	(3,283)
Other current liabilities	(1,162)	(3,581)
Deferred revenues	(93)	286
Net cash used in operating activities	(85,322)	(35,931)
Cash flows from investing activities:
Reclassification to cash and cash equivalents		5,095
Purchases of held-to-maturity securities (investments-short-term)	(27,865)	(19,859)
Capital expenditures	(165)	(22)
Changes in other long-term assets	4	8
Net cash used in investing activities	(28,026)	(14,778)
Cash flows from financing activities:
Proceeds from issuance of common stock	667	2,069
Stock repurchase and cancellation		(1,282)
Proceeds from issuance of convertible notes, net of expenses	222,697
Proceeds from the issuance of common stock from the exercise of warrants		5,100
Changes in other long-term liabilities	(34)	(43)
Net cash provided by financing activities	223,330	5,844
Net increase (decrease) in cash and cash equivalents	109,982	(44,865)
Cash and cash equivalents at beginning of period	44,791	108,172
Cash and cash equivalents at end of period	154,773	63,307
Other information:
Income tax paid
Interest paid	$ 5,393	$ 73

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Earnings (Loss) Per Share Of Common Stock

9 Months Ended

Sep. 30, 2011

Earnings (Loss) Per Share Of Common Stock [Abstract]

Earnings (Loss) Per Share Of Common Stock

Note 9—Earnings (Loss) per Share of Common Stock

The Company accounts for and discloses net earnings (loss) per share using the treasury stock method. The dilutive effect of convertible debt is computed using the "as-if" converted method. Net earnings (loss) per common share, or basic earnings (loss) per share, is computed by dividing net earnings (loss) by the weighted-average number of common shares outstanding. Net earnings (loss) per common share assuming dilutions, or diluted earnings (loss) per share, is computed by reflecting the potential dilution from the exercise of in-the-money stock options, non-vested restricted stock and non-vested restricted stock units.

The Company's basic and diluted weighted-average number of common shares outstanding as of September 30, 2011 and 2010 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(In thousands)
Basic		70,122		67,047		70,037		66,773
Incremental common stock equivalents		—		—		—		—
Diluted		70,122		67,047		70,037		66,773

At September 30, 2011 and 2010, all in-the-money stock options, unvested restricted stock and warrants amounting to 1,851,782 and 7,116,919 shares, respectively, were excluded from the computation of diluted earnings (loss) per share as their effect would have been anti-dilutive, since the Company reported a net loss for these periods. At September 30, 2011, 19,934,997 shares related to the Company's Convertible Notes, calculated "as-if" the Convertible Notes had been converted, were excluded from the computation of diluted earnings (loss) per share as their effect would have been anti-dilutive, since the Company reported a net loss for the period.

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Share-Based Compensation (Schedule Of Weighted-Average Key Assumptions Used In Determining Fair Value Of Stock Option Awards) (Details) (USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2011	Sep. 30, 2010
Share-based Compensation Arrangement By Share-based Payment Award [Line Items]
Weighted-average volatility		83.80%
Weighted-average risk-free interest rate		3.00%
Weighted-average expected life in years		7.5
Dividend yield		0.00%
Weighted-average grant date fair value per share		$ 8.10
Stock Options [Member]
Share-based Compensation Arrangement By Share-based Payment Award [Line Items]
Weighted-average volatility	95.00%	88.00%	78.00%
Weighted-average risk-free interest rate	1.40%	2.10%	2.90%
Weighted-average expected life in years	5.4	4.4	6.9
Dividend yield	0.00%	0.00%	0.00%
Weighted-average grant date fair value per share	$ 3.59	$ 5.16	$ 8.87

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Convertible Notes (Narrative) (Details) (USD $)	1 Months Ended	3 Months Ended	9 Months Ended
	Feb. 28, 2011	Sep. 30, 2011	Sep. 30, 2011
Convertible Notes [Abstract]
Issuance date	February 2011
2018 Convertible notes, maturity date			Feb. 01, 2018
Cash proceeds from the sale of the notes			$ 222,700,000
Principal amount of notes purchased by underwriters to cover over- allotments			30,000,000
Notes bear cash interest		4.75%	4.75%
Date of commencement of repayment of notes			August 1, 2011
Number of shares of common stock issued upon conversion of notes			86.6739
Principal amount of notes for which number of shares of common stock issued upon conversion		1,000	1,000
Conversion price per share		$ 11.54	$ 11.54
Percentage of redemption price to principal amount of notes			100.00%
Number of trading days whether consecutive or not for first condition of convertibility of notes			20
Number of trading days immediately preceding calendar quarter			30
Minimum percentage of conversion price on each applicable trading day			130.00%
Debt conversion converted instrument principal amount		1,000	1,000
Maximum trading price			98.00%
Interest expense on convertible notes		3,406,000	11,393,000
Non-cash interest expense		500,000	500,000
Accrued interest		2,900,000	7,300,000
Accretion of discount on convertible notes			4,109,000
Amortization of deferred financing costs		$ 129,000	$ 449,000
Period over which deferred financing costs are amortized to interest expense, in years			7

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Other Current Liabilities (Tables) (Current [Member])

9 Months Ended

Sep. 30, 2011

Current [Member]

Schedule Of Components Of Other Liabilities

	September 30, 2011		December 31, 2010
	(In thousands)
Salaries and related expenses	$	3,870	$	2,460
Legal and professional fees		1,477		1,691
Severance		1,399		271
Selling and marketing expense accrual		1,367		1,317
Accrued interest – tax		962		962
Allowance for product returns		887		469
Accrued taxes		865		733
Manufacturing and technology transfer services		789		5,076
Returned product liability		545		679
Allowance for product rebates		452		318
Other		2,248		2,047
Total	$	14,861	$	16,023

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Other Liabilities

9 Months Ended

Sep. 30, 2011

Other Liabilities [Abstract]

Other Liabilities

Note 13—Other Liabilities

The components of other liabilities at September 30, 2011 and December 31, 2010, were as follows:

	September 30, 2011		December 31, 2010
	(In thousands)
Unrecognized tax benefit (1)	$	3,408	$	10,261
Capital leases		4		38
Total	$	3,412	$	10,299

(1) See Note 15 to the Company's consolidated financial statements for further discussion of unrecognized tax benefits.

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Consolidated Balance Sheets (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
ASSETS
Cash and cash equivalents	$ 154,773	$ 44,791
Short-term investments	47,935	20,070
Accounts receivable, net	3,709	909
Inventories, net	8,004	3,140
Prepaid expenses and other current assets	5,295	2,415
Total current assets	219,716	71,325
Deferred income taxes, net		4,200
Property and equipment, net	680	809
Deferred financing costs, net	4,246
Other assets (including restricted cash)	1,280	1,284
Total assets	225,922	77,618
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	6,947	1,601
Deferred revenues	335	428
Deferred income taxes	5,769
Accrued interest on convertible notes	1,912
Other current liabilities	14,861	16,023
Total current liabilities	29,824	18,052
Convertible notes, net of discount of $56,155	173,845
Other liabilities	3,412	10,299
Commitments and contingencies
Stockholders' Equity:
Preferred stock-$.01 par value 4,000,000 shares authorized; no shares issued
Common stock-$.01 par value 150,000,000 shares authorized; 71,473,000 issued and outstanding at September 30, 2011 and 70,259,000 shares issued and outstanding at December 31, 2010	715	703
Additional paid-in-capital	404,873	364,139
Accumulated deficit	(386,747)	(315,576)
Accumulated other comprehensive income		1
Total stockholders' equity	18,841	49,267
Total liabilities and stockholders' equity	$ 225,922	$ 77,618

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Convertible Notes (Tables)

9 Months Ended

Sep. 30, 2011

Convertible Notes [Abstract]

Principal Balance, Unamortized Discount And Net Carrying Amount Of The Liability Components And Equity Components

	Liability Component						Equity Component
September 30, 2011	Principal Balance		Unamortized Discount		Net Carrying Amount		Net Carrying Amount
	(In thousands)
2018 Convertible Notes	$	230,000	$	56,155	$	173,845	$	34,427

Schedule Of Accretion Of Debt Discount

2018 Convertible Notes	(In thousands)
Remainder of 2011	$	1,613
2012	$	6,865
2013	$	7,582
2014	$	8,372
2015	$	9,246
Thereafter	$	22,477

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Research And Development (Details) (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Dec. 31, 2010
Research And Development [Abstract]
Deferred research and development costs	$ 0		$ 0
Amortization expense	$ 0	$ 0

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Other Current Liabilities (Schedule Of Components Of Other Current Liabilities) (Details) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Accelerated Share Repurchases [Line Items]
Other Current Liabilities	$ 14,861	$ 16,023
Salaries And Related Expenses [Member]
Accelerated Share Repurchases [Line Items]
Other Current Liabilities	3,870	2,460
Legal And Professional Fees [Member]
Accelerated Share Repurchases [Line Items]
Other Current Liabilities	1,477	1,691
Severance [Member]
Accelerated Share Repurchases [Line Items]
Other Current Liabilities	1,399	271
Selling And Marketing Expense Accrual [Member]
Accelerated Share Repurchases [Line Items]
Other Current Liabilities	1,367	1,317
Accrued Interest - Tax [Member]
Accelerated Share Repurchases [Line Items]
Other Current Liabilities	962	962
Allowance For Product Returns [Member]
Accelerated Share Repurchases [Line Items]
Other Current Liabilities	887	469
Accrued Taxes [Member]
Accelerated Share Repurchases [Line Items]
Other Current Liabilities	865	733
Manufacturing And Technology Transfer Services [Member]
Accelerated Share Repurchases [Line Items]
Other Current Liabilities	789	5,076
Returned Product Liability [Member]
Accelerated Share Repurchases [Line Items]
Other Current Liabilities	545	679
Allowance For Product Rebates [Member]
Accelerated Share Repurchases [Line Items]
Other Current Liabilities	452	318
Other [Member]
Accelerated Share Repurchases [Line Items]
Other Current Liabilities	$ 2,248	$ 2,047

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Other (Expense) Income, Net (Schedule Of Other Income (Expense), Net) (Details) (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Other (Expense) Income, Net [Abstract]
Realized gain on change in valuation of warrant liability		$ (43,232)		$ (34,905)
Reversal of interest expense and penalties on unrecognized tax liability	(10)		1,753
Amortization of deferred financing costs on convertible debt	(129)		(449)
Other non-operating expenses	(2)	(497)	(15)	(620)
Total other (expense) income, net	$ (141)	$ (43,729)	$ 1,289	$ (35,525)

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Investments (Available-For-Sale And Held-To-Maturity Securities Included In Consolidated Balance Sheets) (Details) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Investments [Abstract]
Available-for-Sale Securities, Cash and cash equivalents
Available-for-Sale Securities, Short-term investments		1
Available-for-Sale Securities, Other long-term assets (including investments and restricted cash)
Available-for-Sale Securities, total		1
Held-to-Maturity Securities, Cash and cash equivalents		6,200
Held-to-Maturity Securities, Short-term investments	47,935	13,870
Held-to-Maturity Securities, Other long-term assets (including investments and restricted cash)	1,280	1,280
Held-to-Maturity Securities, total	$ 49,215	$ 21,350

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Inventories (Details) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Raw materials	$ 3,776	$ 888
Work-in-progress	6,930	2,605
Finished goods	1,713	913
Inventory at cost	12,419	4,406
Inventory reserves	(4,415)	(1,266)
Total	8,004	3,140
KRYSTEXXA [Member]
Inventory reserves	$ (3,400)

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Share-Based Compensation (Schedule Of Stock Option Activity) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2011
Number of Shares, Outstanding at December 31, 2010	2,183,000
Number of Shares, Granted	2,149,000
Number of Shares, Exercised	(33,000)
Number of Shares, Cancelled	(314,000)
Number of Shares, Outstanding at September 30, 2011	3,985,000
Number of Shares, Exercisable at September 30, 2011	1,584,000
Weighted-Average Exercise Price Per Share, Outstanding at December 31, 2010	$ 8.13
Weighted-Average Exercise Price Per Share, Granted	$ 8.16
Weighted-Average Exercise Price Per Share, Exercised	$ 5.08
Weighted-Average Exercise Price Per Share, Cancelled	$ 8.37
Weighted-Average Exercise Price Per Share, Outstanding at September 30, 2011	$ 8.15
Weighted-Average Exercise Price Per Share, Exercisable at September 30, 2011	$ 8.14
Weighted-Average Remaining Contractual Term (in yrs), Outstanding at December 31, 2010	7.13
Weighted-Average Remaining Contractual Term (in yrs), Outstanding at September 30, 2011	7.86
Weighted-Average Remaining Contractual Term (in yrs), Exercisable at September 30, 2011	5.66
Aggregate Intrinsic Value of In-the-Money Options, Outstanding at December 31, 2010	$ 8,710
Aggregate Intrinsic Value of In-the-Money Options, Outstanding at September 30, 2011	363
Aggregate Intrinsic Value of In-the-Money Options, Exercisable at September 30, 2011	$ 272
Stock Option Activity For Options That Contain Performance Or Market Conditions [Member]
Number of Shares, Outstanding at December 31, 2010	117
Number of Shares, Granted	400
Number of Shares, Cancelled	(15)
Number of Shares, Outstanding at September 30, 2011	502
Number of Shares, Exercisable at September 30, 2011	102
Weighted-Average Exercise Price Per Share, Outstanding at December 31, 2010	$ 13.57
Weighted-Average Exercise Price Per Share, Granted	$ 9.21
Weighted-Average Exercise Price Per Share, Cancelled	$ 11.91
Weighted-Average Exercise Price Per Share, Outstanding at September 30, 2011	$ 10.14
Weighted-Average Exercise Price Per Share, Exercisable at September 30, 2011	$ 13.81
Weighted-Average Remaining Contractual Term (in yrs), Outstanding at December 31, 2010	9.04
Weighted-Average Remaining Contractual Term (in yrs), Outstanding at September 30, 2011	9.14
Weighted-Average Remaining Contractual Term (in yrs), Exercisable at September 30, 2011	8.16

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Income Taxes (Tables)

9 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

Schedule Of Deferred Tax Liabilities

	(In thousands)
Deferred tax liability set-up related to the convertible notes (net of finance costs)	$	23,924
Decrease in valuation allowance allowing an income tax benefit on current year net operating losses		(15,455	)
Net deferred tax asset reserved for by a liability for unrecognized tax benefits		(2,700	)
Net deferred tax liability on consolidated balance sheet	$	5,769