10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2011

OR

o 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: 001-14471

MEDICIS PHARMACEUTICAL CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware	52-1574808
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7720 North Dobson Road
Scottsdale, Arizona 85256-2740
(Address of principal executive offices)

(602) 808-8800
(Registrant’s telephone number, including area code)

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 þ No o

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 þ No o

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.

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

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at August 3, 2011
Class A Common Stock $.014 Par Value	63,358,951 (a) (a) includes 2,046,565 shares of unvested restricted stock awards

MEDICIS PHARMACEUTICAL CORPORATION

Table of Contents

	Page
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements		1
Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010		1
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2011 and 2010		3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010		4
Notes to the Condensed Consolidated Financial Statements		5
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3 Quantitative and Qualitative Disclosures About Market Risk		49
Item 4 Controls and Procedures		49
PART II. OTHER INFORMATION
Item 1 Legal Proceedings		50
Item 1A Risk Factors		55
Item 6 Exhibits		56
SIGNATURES		57
EX-10.1
EX-10.2
EX-10.4
EX-10.5
EX-10.6
EX-10.7
EX-10.8
EX-10.9
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Part I. Financial Information

Item 1. Financial Statements

MEDICIS PHARMACEUTICAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	June 30, 2011		December 31, 2010
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	150,201	$	218,362
Short-term investments		655,555		485,192
Accounts receivable, net		166,399		130,622
Inventories, net		30,829		35,282
Deferred tax assets, net		24,602		70,461
Other current assets		19,264		15,268
Assets held for sale from discontinued operations		10,248		13,127
Total current assets		1,057,098		968,314
Property and equipment, net		23,683		24,435
Net intangible assets		197,283		195,308
Goodwill		92,398		92,398
Deferred tax assets, net		95,516		36,898
Long-term investments		22,379		21,480
Other assets		2,991		2,991
	$	1,491,348	$	1,341,824

See accompanying notes to condensed consolidated financial statements.

1

MEDICIS PHARMACEUTICAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS, Continued

(in thousands, except share amounts)

	June 30, 2011			December 31, 2010
	(unaudited)
Liabilities
Current liabilities:
Accounts payable	$	45,393		$	41,015
Current portion of contingent convertible senior notes		169,145			—
Reserve for sales returns		78,220			60,692
Accrued consumer rebates and loyalty programs		124,922			101,678
Managed care and Medicaid reserves		51,239			49,375
Income taxes payable		—			4,628
Other current liabilities		73,764			75,228
Liabilities held for sale from discontinued operations		7,172			7,276
Total current liabilities		549,855			339,892
Long-term liabilities:
Contingent convertible senior notes		181			169,326
Other liabilities		38,982			5,084
Stockholders’ Equity
Preferred stock, $0.01 par value; shares authorized: 5,000,000; issued and outstanding: none		—			—
Class A common stock, $0.014 par value; shares authorized: 150,000,000; issued and outstanding: 74,272,334 and 71,863,191 at June 30, 2011 and December 31, 2010, respectively		1,023			995
Class B common stock, $0.014 par value; shares authorized: 1,000,000; issued and outstanding: none		—			—
Additional paid-in capital		778,120			715,651
Accumulated other comprehensive loss		(23,298	)		(2,149	)
Accumulated earnings		498,907			460,716
Less: Treasury stock, 13,059,002 and 12,897,610 shares at cost at June 30, 2011 and December 31, 2010, respectively		(352,422	)		(347,691	)
Total stockholders’ equity		902,330			827,522
	$	1,491,348		$	1,341,824

See accompanying notes to condensed consolidated financial statements.

2

MEDICIS PHARMACEUTICAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)

(in thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2011			2010			2011			2010
Net product revenues	$	189,819		$	171,734		$	353,715		$	335,326
Net contract revenues		1,008			1,862			2,025			3,812
Net revenues		190,827			173,596			355,740			339,138
Cost of product revenues (1)		18,237			16,330			32,568			31,437
Gross profit		172,590			157,266			323,172			307,701
Operating expenses:
Selling, general and administrative (2)		90,393			77,091			175,023			149,375
Research and development (3)		15,195			7,420			29,468			13,979
Depreciation and amortization		7,110			6,916			14,434			13,649
Operating income		59,892			65,839			104,247			130,698
Interest and investment income		(1,238	)		(780	)		(2,512	)		(1,940	)
Interest expense		1,141			1,061			2,199			2,119
Other expense, net		—			(2	)		—			257
Income from continuing operations before income tax expense		59,989			65,560			104,560			130,262
Income tax expense		25,477			24,632			43,363			49,316
Net income from continuing operations		34,512			40,928			61,197			80,946
Loss from discontinued operations, net of income tax benefit		5,729			4,428			13,054			9,078
Net income	$	28,783		$	36,500		$	48,143		$	71,868
Basic net income per share — continuing operations	$	0.55		$	0.68		$	0.99		$	1.35
Basic net loss per share — discontinued operations	$	(0.09	)	$	(0.08	)	$	(0.22	)	$	(0.16	)
Basic net income per share	$	0.46		$	0.61		$	0.78		$	1.19
Diluted net income per share — continuing operations	$	0.51		$	0.62		$	0.91		$	1.24
Diluted net loss per share — discontinued operations	$	(0.09	)	$	(0.08	)	$	(0.22	)	$	(0.16	)
Diluted net income per share	$	0.43		$	0.56		$	0.72		$	1.10
Cash dividend declared per common share	$	0.08		$	0.06		$	0.16		$	0.12
Common shares used in calculating:
Basic net income per share		60,308			58,271			59,719			58,161
Diluted net income per share		67,140			64,395			66,347			64,294
(1) amounts exclude amortization of intangible assets related to acquired products	$	5,266		$	5,184		$	10,718		$	10,368
(2) amounts include share-based compensation expense	$	8,705		$	2,070		$	14,989		$	4,957
(3) amounts include share-based compensation expense	$	615		$	44		$	1,020		$	100

See accompanying notes to condensed consolidated financial statements.

3

MEDICIS PHARMACEUTICAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Six Months Ended
	June 30, 2011			June 30, 2010
Operating Activities:
Net income	$	48,143		$	71,868
Loss from discontinued operations, net of income tax benefit		13,054			9,078
Net income from continuing operations		61,197			80,946
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities from continuing operations:
Depreciation and amortization		14,434			13,649
Amortization of prior service costs, supplemental executive retirement plan		400			—
Adjustment of impairment of available-for-sale investments		—			260
(Gain) loss on sale of available-for-sale investments, net		(27	)		750
Share-based compensation expense		16,009			5,057
Deferred income tax (benefit) expense		(877	)		7,099
Tax benefit (expense) from exercise of stock options and vesting of restricted stock awards		1,864			(269	)
Excess tax benefits from share-based payment arrangements		(2,872	)		(320	)
Increase in provision for sales discounts and chargebacks		1,163			1,031
Accretion of premium on investments		2,604			1,811
Changes in operating assets and liabilities:
Accounts receivable		(36,940	)		(42,849	)
Inventories		4,453			(10,413	)
Other current assets		(3,995	)		(3,810	)
Accounts payable		4,378			14,972
Reserve for sales returns		17,528			1,131
Accrued consumer rebates and loyalty programs		23,244			17,053
Managed care and Medicaid reserves		1,863			(2,668	)
Income taxes payable		(4,628	)		(13,923	)
Other current liabilities		(17,338	)		(2,282	)
Other liabilities		128			(1,958	)
Net cash provided by operating activities from continuing operations		82,588			65,267
Net cash used in operating activities from discontinued operations		(9,978	)		(5,274	)
Net cash provided by operating activities		72,610			59,993
Investing Activities:
Purchase of property and equipment		(2,834	)		(3,922	)
Payments for purchase of product rights		(12,824	)		768
Purchase of available-for-sale investments		(474,810	)		(273,402	)
Sale of available-for-sale investments		112,379			41,238
Maturity of available-for-sale investments		188,865			69,515
Net cash used in investing activities from continuing operations		(189,224	)		(165,803	)
Net cash used in investing activities from discontinued operations		—			(577	)
Net cash used in investing activities		(189,224	)		(166,380	)
Financing Activities:
Payment of dividends		(8,535	)		(5,993	)
Excess tax benefits from share-based payment arrangements		2,872			320
Proceeds from the exercise of stock options		54,049			2,206
Net cash provided by (used in) financing activities		48,386			(3,467	)
Effect of exchange rate on cash and cash equivalents		67			(34	)
Net decrease in cash and cash equivalents		(68,161	)		(109,888	)
Cash and cash equivalents at beginning of period		218,362			207,941
Cash and cash equivalents at end of period	$	150,201		$	98,053

See accompanying notes to condensed consolidated financial statements.

4

MEDICIS PHARMACEUTICAL CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2011
(unaudited)

1. NATURE OF BUSINESS

          Medicis Pharmaceutical Corporation (“Medicis” or the “Company”) is a leading specialty pharmaceutical company focusing primarily on the development and marketing of products in the United States (“U.S.”) for the treatment of dermatological and aesthetic conditions. Medicis also markets products in Canada for the treatment of dermatological and aesthetic conditions and began commercial efforts in Europe with the Company’s acquisition of LipoSonix, Inc. (“LipoSonix”) in July 2008.

          The Company offers a broad range of products addressing various conditions or aesthetic improvements including facial wrinkles, glabellar lines, acne, fungal infections, hyperpigmentation, photoaging, psoriasis, seborrheic dermatitis and cosmesis (improvement in the texture and appearance of skin). Medicis currently offers 13 branded products. Its primary brands are DYSPORT^®, PERLANE^®, RESTYLANE^®, SOLODYN^®, VANOS^® and ZIANA^®. Medicis entered the non-invasive body contouring market with its acquisition of LipoSonix in July 2008. Beginning in the first quarter of 2011, the Company classifies the LipoSonix business as a discontinued operation for financial statement reporting purposes. See Note 2.

          The consolidated financial statements include the accounts of Medicis and its wholly owned subsidiaries. The Company does not have any subsidiaries in which it does not own 100% of the outstanding stock. All of the Company’s subsidiaries are included in the consolidated financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation.

          The accompanying interim condensed consolidated financial statements of Medicis have been prepared in conformity with U.S. generally accepted accounting principles, consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The financial information is unaudited, but reflects all adjustments, consisting only of normal recurring adjustments and accruals, which are, in the opinion of the Company’s management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

2. DISCONTINUED OPERATIONS

          On February 25, 2011, the Company announced that as a result of the Company’s strategic planning process and the current regulatory and commercial capital equipment environment, the Company has determined to explore strategic alternatives for its LipoSonix business including, but not limited to, the sale of the stand-alone business. The Company has engaged an investment banking firm to assist the Company in its exploration of strategic alternatives for LipoSonix. The Company expects the disposal of the LipoSonix business to take place by February 2012 or before. As a result of this decision, the Company now classifies the LipoSonix business as a discontinued operation for financial statement reporting purposes, including comparable period results.

          Intangible assets and property and equipment related to LipoSonix were determined to be impaired as of December 31, 2010, based on the Company’s analysis of the long-lived assets’ carrying value and projected future cash flows. As a result of the impairment analysis, the Company recorded a write-down of approximately $7.7 million related to LipoSonix intangible assets and $2.1 million related to LipoSonix property and equipment during the three months ended December 31, 2010. The write-down of intangible assets and property and equipment related to LipoSonix represented the full carrying value of the respective assets as of December 31, 2010. Therefore, no depreciation or amortization expense was recognized during the six months ended June 30, 2011 related to the discontinued operations, as the long-lived assets of the discontinued operations were written down to $0 as of December 31, 2010.

5

          The following is a summary of loss from discontinued operations, net of income tax benefit, for the three and six months ended June 30, 2011 and 2010 (in thousands):

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2011			2010			2011			2010
Net revenues	$	200		$	448		$	356		$	1,397
Cost of revenues		82			196			2,456			846
Gross profit		118			252			(2,100	)		551
Operating expenses:
Selling, general and administrative		5,731			3,782			11,594			7,542
Research and development		3,302			3,091			6,648			6,601
Depreciation and amortization		—			323			—			643
Loss from discontinued operations
before income tax benefit		(8,915	)		(6,944	)		(20,342	)		(14,235	)
Income tax benefit		(3,186	)		(2,516	)		(7,288	)		(5,157	)
Loss from discontinued operations,
net of income tax benefit	$	(5,729	)	$	(4,428	)	$	(13,054	)	$	(9,078	)

          The Company includes only revenues and costs directly attributable to the discontinued operations, and not those attributable to the ongoing entity. Accordingly, no interest expense or general corporate overhead costs have been allocated to the LipoSonix discontinued operations. Included in cost of revenues for the six months ended June 30, 2011 was a $1.9 million charge related to an increase in the valuation reserve for LipoSonix inventory that is not expected to be sold.

          The following is a summary of assets and liabilities held for sale associated with the LipoSonix discontinued operations as of June 30, 2011 and December 31, 2010 (in thousands):

	June 30, 2011		December 31, 2010
Cash and cash equivalents	$	878	$	629
Accounts receivable, net		83		129
Inventories, net		3,815		4,495
Deferred tax assets, net		5,191		7,328
Other assets		281		546
Assets held for sale from discontinued operations	$	10,248	$	13,127
Accounts payable	$	2,228	$	1,802
Other liabilities		4,944		5,474
Liabilities held for sale from discontinued operations	$	7,172	$	7,276

6

          The following is a summary of net cash used in operating activities from discontinued operations for the six months ended June 30, 2011 and 2010 (in thousands):

	Six Months Ended
	June 30,			June 30,
	2011			2010
Loss from discontinued operations, net of income tax benefit	$	(13,054	)	$	(9,078	)
Depreciation and amortization		—			643
Share-based compensation expense		1,795			327
Decrease in assets held for sale from discontinued operations		2,879			3,563
Decrease in liabilities held for sale from discontinued operations		(1,598	)		(729	)
Net cash used in operating activities from discontinued operations	$	(9,978	)	$	(5,274	)

          Net cash used in investing activities from discontinued operations of $0.6 million for the six months ended June 30, 2010 represents purchases of property and equipment.

3. SHARE-BASED COMPENSATION

          At June 30, 2011, the Company had seven active share-based employee compensation plans. Of these seven share-based compensation plans, only the 2006 Incentive Award Plan is eligible for the granting of future awards.

Stock Option Awards

          Stock option awards are granted at the fair market value on the date of grant. The option awards vest over a period determined at the time the options are granted, ranging from one to five years, and generally have a maximum term of ten years. Certain options provide for accelerated vesting if there is a change in control (as defined in the plans). When options are exercised, new shares of the Company’s Class A common stock are issued.

          The total value of the stock option awards is expensed ratably over the service period of the employees receiving the awards. As of June 30, 2011, total unrecognized compensation cost related to stock option awards, to be recognized as expense subsequent to June 30, 2011, was approximately $1.5 million and the related weighted average period over which it is expected to be recognized is approximately 2.6 years. All of the unrecognized compensation cost related to stock option awards relates to continuing operations.

          A summary of stock option activity within the Company’s stock-based compensation plans and changes for the six months ended June 30, 2011, is as follows:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number			Exercise		Contractual		Intrinsic
	of Shares			Price		Term		Value
Balance at December 31, 2010		6,491,353		$	30.01
Granted		79,933		$	34.30
Exercised		(1,984,481	)	$	27.64
Terminated/expired		(80,705	)	$	36.82
Balance at June 30, 2011		4,506,100		$	31.01		2.7	$	32,807,450

7

          The intrinsic value of options exercised during the six months ended June 30, 2011 was $16,015,062. Options exercisable under the Company’s share-based compensation plans at June 30, 2011 were 4,352,288, with a weighted average exercise price of $31.18, a weighted average remaining contractual term of 2.6 years, and an aggregate intrinsic value of $30,957,994.

          A summary of outstanding and exercisable stock options that are fully vested and are expected to vest, based on historical forfeiture rates, as of June 30, 2011, is as follows:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number		Exercise		Contractual		Intrinsic
	of Shares		Price		Term		Value
Outstanding, net of expected forfeitures		4,238,744	$	31.19		2.7	$	30,085,482
Exercisable, net of expected forfeitures		4,124,910	$	31.27		2.6	$	28,950,668

          The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

	Six Months Ended
	June 30, 2011		June 30, 2010
Expected dividend yield	0.77% to 0.88%		1.02% to 1.06%
Expected stock price volatility		0.33		0.33
Risk-free interest rate	2.47% to 2.81%		2.82% to 3.04%
Expected life of options	7.0 Years		7.0 Years

          The expected dividend yield is based on expected annual dividends to be paid by the Company as a percentage of the market value of the Company’s stock as of the date of grant. The Company determined that a blend of implied volatility and historical volatility is more reflective of market conditions and a better indicator of expected volatility than using purely historical volatility. The risk-free interest rate is based on the U.S. treasury security rate in effect as of the date of grant. The expected lives of options are based on historical data of the Company.

          The weighted average fair value of stock options granted during the six months ended June 30, 2011 and 2010, was $12.25 and $8.28, respectively.

Restricted Stock Awards

          The Company also grants restricted stock awards to certain employees. Restricted stock awards are valued at the closing market value of the Company’s Class A common stock on the date of grant, and the total value of the award is expensed ratably over the service period of the employees receiving the grants. As of June 30, 2011, the total amount of unrecognized compensation cost related to nonvested restricted stock awards, to be recognized as expense subsequent to June 30, 2011, was approximately $40.7 million, and the related weighted average period over which it is expected to be recognized is approximately 3.4 years. Included in the $40.7 million of total unrecognized compensation cost related to nonvested restricted stock awards is $2.6 million related to discontinued operations.

8

          A summary of restricted stock activity within the Company’s share-based compensation plans and changes for the six months ended June 30, 2011, is as follows:

				Weighted
				Average
				Grant-Date
Nonvested Shares	Shares			Fair Value
Nonvested at December 31, 2010		1,794,445		$	17.94
Granted		757,310		$	31.47
Vested		(445,912	)	$	19.11
Forfeited		(25,373	)	$	23.96
Nonvested at June 30, 2011		2,080,470		$	22.54

          The total fair value of restricted shares vested during the six months ended June 30, 2011 and 2010 was approximately $8.5 million and $6.6 million, respectively.

Stock Appreciation Rights

          During 2009, the Company began granting cash-settled stock appreciation rights (“SARs”) to many of its employees. SARs generally vest over a graduated five-year period and expire seven years from the date of grant, unless such expiration occurs sooner due to the employee’s termination of employment, as provided in the applicable SAR award agreement. SARs allow the holder to receive cash (less applicable tax withholding) upon the holder’s exercise, equal to the excess, if any, of the market price of the Company’s Class A common stock on the exercise date over the exercise price, multiplied by the number of shares relating to the SAR with respect to which the SAR is exercised. The exercise price of the SAR is the fair market value of a share of the Company’s Class A common stock relating to the SAR on the date of grant. The total value of the SAR is expensed over the service period of the employee receiving the grant, and a liability is recognized in the Company’s condensed consolidated balance sheets until settled. The fair value of SARs is required to be remeasured at the end of each reporting period until the award is settled, and changes in fair value must be recognized as compensation expense to the extent of vesting each reporting period based on the new fair value. As of June 30, 2011, the total measured amount of unrecognized compensation cost related to outstanding SARs, to be recognized as expense subsequent to June 30, 2011, based on the remeasurement at June 30, 2011, was approximately $42.1 million, and the related weighted average period over which it is expected to be recognized is approximately 3.2 years. Included in the $42.1 million of total measured unrecognized compensation cost related to outstanding SARs is $5.3 million related to discontinued operations.

          The fair value of each SAR was estimated on the date of the grant, and was remeasured at quarter-end, using the Black-Scholes option pricing model with the following assumptions:

	SARs Granted During			SARs Granted During
	the			the			Remeasurement
	Six Months Ended			Six Months Ended			as of
	June 30, 2011			June 30, 2010			June 30, 2011
Expected dividend yield		0.87	%	0.95% to 1.06		%		0.84	%
Expected stock price volatility		0.32			0.32 to 0.33			0.31
Risk-free interest rate		3.12	%	3.04% to 3.07		%	1.76% to 2.50		%
Expected life of SARs	7.0 Years			7.0 Years				4.7 to 6.6 Years

          The weighted average fair value of SARs granted during the six months ended June 30, 2011 and 2010, as of the respective grant dates, was $9.90 and $8.14, respectively. The weighted average fair value of all SARs outstanding as of the remeasurement date of June 30, 2011 was $22.40.

9

          A summary of SARs activity for the six months ended June 30, 2011 is as follows:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number			Exercise		Contractual		Intrinsic
	of SARs			Price		Term		Value
Balance at December 31, 2010		3,030,142		$	16.99
Granted		64,135		$	27.56
Exercised		(272,120	)	$	15.48
Terminated/expired		(166,185	)	$	15.99
Balance at June 30, 2011		2,655,972		$	17.46		5.2	$	54,994,411

          The intrinsic value of SARs exercised during the six months ended June 30, 2011 was $4,937,860.

          As of June 30, 2011, 88,455 SARs were exercisable, with a weighted average exercise price of $14.69, a weighted average remaining contractual term of 4.7 years, and an aggregate intrinsic value of $1,911,063.

          Total share-based compensation expense related to continuing operations recognized during the three months and six months ended June 30, 2011 and 2010 was as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30, 2011		June 30, 2010		June 30, 2011		June 30, 2010
Stock options	$	234	$	385	$	484	$	838
Restricted stock awards		3,197		1,291		5,799		3,176
Stock appreciation rights		5,889		438		9,726		1,043
Total share-based compensation expense	$	9,320	$	2,114	$	16,009	$	5,057

4. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

          On June 24, 2011, the Company’s Compensation Committee adopted the Medicis Pharmaceutical Supplemental Executive Retirement Plan (the “SERP”), a non-qualified, noncontributory, defined benefit pension plan that provides supplemental retirement income for a select group of officers, including the Company’s named executive officers. The SERP is effective as of June 1, 2011. Retirement benefits are based on a SERP participant’s years of service and average earnings (base salary plus cash bonus or incentive payments) during any three calendar years of service (regardless of whether the years are consecutive), beginning with the 2009 calendar year.

          A SERP participant vests in 1/6th of his or her retirement benefit per plan year, effective as of the first day of the plan year, and becomes fully vested in his or her accrued retirement benefit upon (1) the participant’s normal retirement date, provided that the participant has at least fifteen years of service with the Company and is employed by the Company on such date, (2) the participant’s separation from service due to a discharge without “cause” or resignation for “good reason” (as such terms are defined in the participant’s employment agreement, or in the absence of such employment agreement or definitions, in the Company’s Executive Retention Plan), or (3) a “change in control” of the Company. A SERP participant accrues his or her retirement benefit based on (x) the participant’s number of years of service with the Company (including prior years of service), divided by (y) the number of years designated for such participant’s tier (which ranges from five to twenty years).

          Participants in the SERP received credit for prior service with the Company. The prior service accrued benefit of approximately $33.8 million was recorded as other comprehensive income within stockholders’ equity, and is amortized as compensation expense over the remaining service years of each participant. Amortization of

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prior service costs recognized as compensation expense during the three months ended June 30, 2011, was approximately $0.4 million, representing one month of amortization. The Company also established a deferred tax asset of approximately $12.0 million, the benefit of which was also recorded in other comprehensive income.

          No investments were held by the Company related to the SERP as of June 30, 2011.

5. SHORT-TERM AND LONG-TERM INVESTMENTS

          The Company’s policy for its short-term and long-term investments is to establish a high-quality portfolio that preserves principal, meets liquidity needs, avoids inappropriate concentrations and delivers an appropriate yield in relationship to the Company’s investment guidelines and market conditions. Short-term and long-term investments consist of corporate and various government agency and municipal debt securities. The Company’s investments in auction rate floating securities consist of investments in student loans. Management classifies the Company’s short-term and long-term investments as available-for-sale. Available-for-sale securities are carried at fair value with unrealized gains and losses reported in stockholders’ equity. Realized gains and losses and declines in value judged to be other than temporary, if any, are included in other expense in the condensed consolidated statement of operations. A decline in the market value of any available-for-sale security below cost that is deemed to be other than temporary, results in impairment of the fair value of the investment. The impairment is charged to earnings and a new cost basis for the security is established. Premiums and discounts are amortized or accreted over the life of the related available-for-sale security. Dividends and interest income are recognized when earned. The cost of securities sold is calculated using the specific identification method. At June 30, 2011, the Company has recorded the estimated fair value of available-for-sale securities in short-term and long-term investments of approximately $655.6 million and $22.4 million, respectively.

          Available-for-sale securities consist of the following at June 30, 2011 (in thousands):

	June 30, 2011
								Other-Than-
			Gross		Gross			Temporary
			Unrealized		Unrealized			Impairment		Fair
	Cost		Gains		Losses			Losses		Value
Corporate notes and bonds	$	360,758	$	474	$	(128	)	$	—	$	361,104
Federal agency notes and bonds		251,136		769		(8	)		—		251,897
Auction rate floating securities		26,575		—		(6,691	)		—		19,884
Asset-backed securities		45,011		38		—			—		45,049
Total securities	$	683,480	$	1,281	$	(6,827	)	$	—	$	677,934

          During the three and six months ended June 30, 2011, there were no significant gross realized gains and losses on sales of available-for-sale securities. Gross unrealized gains and losses are determined based on the specific identification method. The net adjustment to unrealized losses during the six months ended June 30, 2011, on available-for-sale securities included in stockholders’ equity totaled $0.2 million. The amortized cost and estimated fair value of the available-for-sale securities at June 30, 2011, by maturity, are shown below (in thousands):

	June 30, 2011
			Estimated
	Cost		Fair Value
Available-for-sale
Due in one year or less	$	327,303	$	327,965
Due after one year through five years		329,602		330,085
Due after 10 years		26,575		19,884
	$	683,480	$	677,934

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          Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties, and the Company views its available-for-sale securities as available for current operations. At June 30, 2011, approximately $22.4 million in estimated fair value expected to mature greater than one year has been classified as long-term investments since these investments are in an unrealized loss position, and management has both the ability and intent to hold these investments until recovery of fair value, which may be maturity.

          As of June 30, 2011, the Company’s investments included auction rate floating securities with a fair value of $19.9 million. The Company’s auction rate floating securities are debt instruments with a long-term maturity and with an interest rate that is reset in short intervals through auctions. The negative conditions in the credit markets from 2008 through the first half of 2011 have prevented some investors from liquidating their holdings, including their holdings of auction rate floating securities. During the three months ended March 31, 2008, the Company was informed that there was insufficient demand at auction for the auction rate floating securities. As a result, these affected auction rate floating securities are now considered illiquid, and the Company could be required to hold them until they are redeemed by the holder at maturity. The Company may not be able to liquidate the securities until a future auction on these investments is successful.

          During the three months ended March 31, 2010, the Company became aware of new circumstances that directly impacted the valuation of an asset-backed security that is owned by the Company. An unrealized loss on the asset-backed security, based on the Company’s intent to hold the security until recovery of the fair value, had previously been recorded in stockholders’ equity. Based on the new circumstances related to the investment, the Company determined that the impairment of the asset-backed security was other-than-temporary, as the Company believed it would not recover its investment even if the asset were held to maturity. A $0.3 million impairment charge was therefore recorded in other expense, net, during the three months ended March 31, 2010 related to the asset-backed security. The asset-backed security was sold in April 2010.

          The following table shows the gross unrealized losses and the fair value of the Company’s investments, with unrealized losses that are not deemed to be other-than-temporarily impaired aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2011 (in thousands):

	Less Than 12 Months				Greater Than 12 Months
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss
Corporate notes and bonds	$	79,304	$	128	$	—	$	—
Federal agency notes and bonds		18,892		8		—		—
Auction rate floating securities		—		—		19,884		6,691
Asset-backed securities		1,790		—		—		—
Total securities	$	99,986	$	136	$	19,884	$	6,691

          As of June 30, 2011, the Company has concluded that the unrealized losses on its investment securities are temporary in nature and are caused by changes in credit spreads and liquidity issues in the marketplace. Available-for-sale securities are reviewed quarterly for possible other-than-temporary impairment. This review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security’s performance and the creditworthiness of the issuer. Additionally, the Company does not intend to sell and it is not more-likely-than-not that the Company will be required to sell any of the securities before the recovery of their amortized cost basis.

6. FAIR VALUE MEASUREMENTS

          As of June 30, 2011, the Company held certain assets that are required to be measured at fair value on a recurring basis. These included certain of the Company’s short-term and long-term investments, including investments in auction rate floating securities.

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          The Company has invested in auction rate floating securities, which are classified as available-for-sale securities and reflected at fair value. Due to events in credit markets, the auction events for some of these instruments held by the Company failed during the three months ended March 31, 2008 (see Note 5). Therefore, the fair values of these auction rate floating securities, which are primarily rated AAA, are estimated utilizing a discounted cash flow analysis as of June 30, 2011. These analyses consider, among other items, the collateralization underlying the security investments, the creditworthiness of the counterparty, the timing of expected future cash flows, and the expectation of the next time the security is expected to have a successful auction. These investments were also compared, when possible, to other observable market data with similar characteristics to the securities held by the Company. Changes to these assumptions in future periods could result in additional declines in fair value of the auction rate floating securities.

          The Company’s assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820, Fair Value Measurements and Disclosures, at June 30, 2011, were as follows (in thousands):

			Fair Value Measurement at Reporting Date Using
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
			Markets		Inputs		Inputs
	June 30, 2011		(Level 1)		(Level 2)		(Level 3)
Corporate notes and bonds	$	361,104	$	361,104	$	—	$	—
Federal agency notes and bonds		251,897		251,897		—		—
Auction rate floating securities		19,884		—		—		19,884
Asset-backed securities		45,049		45,049		—		—
Total assets measured at fair value	$	677,934	$	658,050	$	—	$	19,884

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          The following tables present the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2011 (in thousands):

	Fair Value
	Measurements
	Using Significant
	Unobservable
	Inputs (Level 3)
	Auction Rate
	Floating
	Securities
Balance at March 31, 2011	$	20,772
Transfers to (from) Level 3		—
Total gains (losses) included in other (income) expense, net		—
Total gains included in other comprehensive income		12
Purchases		—
Settlements		(900	)
Balance at June 30, 2011	$	19,884

	Fair Value
	Measurements
	Using Significant
	Unobservable
	Inputs (Level 3)
	Auction Rate
	Floating
	Securities
Balance at December 31, 2010	$	21,480
Transfers to (from) Level 3		—
Total gains (losses) included in other (income) expense, net		—
Total gains included in other comprehensive income		404
Purchases		—
Settlements		(2,000	)
Balance at June 30, 2011	$	19,884

7. RESEARCH AND DEVELOPMENT

          All research and development costs, including payments related to products under development and research consulting agreements, are expensed as incurred. The Company may continue to make non-refundable payments to third parties for new technologies and for research and development work that has been completed. These payments may be expensed at the time of payment depending on the nature of the payment made.

          The Company’s policy on accounting for costs of strategic collaborations determines the timing of the recognition of certain development costs. In addition, this policy determines whether the cost is classified as development expense or capitalized as an asset. Management is required to form judgments with respect to the commercial status of such products in determining whether development costs meet the criteria for immediate expense or capitalization. For example, when the Company acquires certain products for which there is already an

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Abbreviated New Drug Application (“ANDA”) or a New Drug Application (“NDA”) approval related directly to the product, and there is net realizable value based on projected sales for these products, the Company capitalizes the amount paid as an intangible asset. If the Company acquires product rights which are in the development phase and to which the Company has no assurance that the third party will successfully complete its development milestones, the Company expenses such payments.

          Research and development expense for the three and six months ended June 30, 2011 and 2010 are as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2011		2010		2011		2010
Ongoing research and development costs	$	7,080	$	7,376	$	13,948	$	13,879
Payments related to strategic collaborations		7,500		—		14,500		—
Share-based compensation expense		615		44		1,020		100
Total research and development	$	15,195	$	7,420	$	29,468	$	13,979

8. STRATEGIC COLLABORATIONS

          Collaboration with a privately-held U.S. biotechnology company

          On September 10, 2010, the Company and a privately-held U.S. biotechnology company entered into a sublicense and development agreement to develop an agent for specific dermatological conditions in the Americas and Europe and a purchase option to acquire the privately-held U.S. biotechnology company.

          Under the terms of the agreements, the Company paid the privately-held U.S. biotechnology company $5.0 million in connection with the execution of the agreement, and will pay additional potential milestone payments totaling approximately $100.5 million upon successful completion of certain clinical, regulatory and commercial milestones.

          During the three months ended December 31, 2010 and June 30, 2011, development milestones were achieved, and the Company made a $10.0 million and a $5.5 million payment, respectively, pursuant to the agreements. The initial $5.0 million payment, the $10.0 million milestone payment and the $5.5 million milestone payment were recognized as research and development expense during the three months ended September 30, 2010, December 31, 2010 and June 30, 2011, respectively.

          Anacor

          On February 9, 2011, the Company entered into a research and development agreement with Anacor Pharmaceuticals, Inc. (“Anacor”) for the discovery and development of boron-based small molecule compounds directed against a target for the potential treatment of acne. Under the terms of the agreement, the Company paid Anacor $7.0 million in connection with the execution of the agreement, and will pay up to $153.0 million upon the achievement of certain research, development, regulatory and commercial milestones, as well as royalties on sales by the Company. Anacor will be responsible for discovering and conducting the early development of product candidates which utilize Anacor’s proprietary boron chemistry platform, while the Company will have an option to obtain an exclusive license for products covered by the agreement. The initial $7.0 million payment was recognized as research and development expense during the three months ended March 31, 2011.

9. SEGMENT AND PRODUCT INFORMATION

          The Company operates in one business segment: pharmaceuticals. The Company’s current pharmaceutical franchises are divided between the dermatological and non-dermatological fields. The dermatological field represents products for the treatment of acne and acne-related dermatological conditions and non-acne dermatological conditions. The non-dermatological field represents products for the treatment of urea cycle disorder and contract revenue. The acne and acne-related dermatological product lines include SOLODYN^® and ZIANA^®. During early 2011, the Company discontinued its TRIAZ^® branded products and decided to no longer promote its PLEXION^® branded products. The non-acne dermatological product lines include DYSPORT^®, LOPROX^®,

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PERLANE^®, RESTYLANE^® and VANOS^®. The non-dermatological product lines include AMMONUL^® and BUPHENYL^®. The non-dermatological field also includes contract revenues associated with licensing agreements and authorized generics.

          The Company’s pharmaceutical products, with the exception of AMMONUL^® and BUPHENYL^®, are promoted to dermatologists and plastic surgeons. Such products are often prescribed by physicians outside these two specialties, including family practitioners, general practitioners, primary-care physicians and OB/GYNs, as well as hospitals, government agencies, and others. Currently, the Company’s products are sold primarily to wholesalers and retail chain drug stores.

          Net revenues and the percentage of net revenues for each of the product categories are as follows (amounts in thousands):

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2011		2010		2011		2010
Acne and acne-related dermatological products	$	123,130	$	124,763	$	226,592	$	244,976
Non-acne dermatological products		57,719		41,017		109,940		75,269
Non-dermatological products		9,978		7,816		19,208		18,893
Total net revenues	$	190,827	$	173,596	$	355,740	$	339,138

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2011			2010			2011			2010
Acne and acne-related dermatological products		65	%		72	%		64	%		72	%
Non-acne dermatological products		30			24			31			22
Non-dermatological products		5			4			5			6
Total net revenues		100	%		100	%		100	%		100	%

10. INVENTORIES

          The Company primarily utilizes third parties to manufacture and package inventories held for sale, takes title to certain inventories once manufactured, and warehouses such goods until packaged for final distribution and sale. Inventories consist of salable products held at the Company’s warehouses, as well as raw materials and components at the manufacturers’ facilities, and are valued at the lower of cost or market using the first-in, first-out method. The Company provides valuation reserves for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.

          Inventory costs associated with products that have not yet received regulatory approval are capitalized if, in the view of the Company’s management, there is probable future commercial use and future economic benefit. If future commercial use and future economic benefit are not considered probable, then costs associated with pre-launch inventory that has not yet received regulatory approval are expensed as research and development expense during the period the costs are incurred. As of June 30, 2011 and December 31, 2010, there were no costs capitalized into inventory for products that had not yet received regulatory approval.

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          Inventories are as follows (in thousands):

	June 30, 2011			December 31, 2010
Raw materials	$	12,103		$	15,801
Work-in-process		3,370			3,236
Finished goods		19,930			24,838
Valuation reserve		(4,574	)		(8,593	)
Total inventories	$	30,829		$	35,282

11. OTHER CURRENT LIABILITIES

          Other current liabilities are as follows (in thousands):

	June 30, 2011		December 31, 2010
Accrued incentives, including SARs liability	$	33,346	$	33,923
Deferred revenue		13,799		16,422
Other accrued expenses		26,619		24,883
	$	73,764	$	75,228

          Deferred revenue is comprised of the following (in thousands):

	June 30, 2011		December 31, 2010
Deferred revenue — aesthetics products, net of cost of revenue	$	9,802	$	10,334
Deferred contract revenue		1,467		3,014
Deferred revenue — sales into distribution channel in excess of eight weeks of projected demand		2,441		582
Other deferred revenue		89		2,492
	$	13,799	$	16,422

          The Company defers revenue, and the related cost of revenue, of its aesthetics products, including DYSPORT^®, PERLANE^® and RESTYLANE^®, until its exclusive U.S. distributor ships the product to physicians. Deferred contract revenue primarily relates to the Company’s strategic collaboration with Hyperion Therapeutics, Inc. The Company also defers the recognition of revenue for certain sales of inventory into the distribution channel that are in excess of eight (8) weeks of projected demand.

12. CONTINGENT CONVERTIBLE SENIOR NOTES

          In June 2002, the Company sold $400.0 million aggregate principal amount of its 2.5% Contingent Convertible Senior Notes Due 2032 (the “Old Notes”) in private transactions. As discussed below, approximately $230.8 million in principal amount of the Old Notes was exchanged for New Notes on August 14, 2003. The Old Notes bear interest at a rate of 2.5% per annum, which is payable on June 4 and December 4 of each year, beginning on December 4, 2002. The Company also agreed to pay contingent interest at a rate equal to 0.5% per annum during any six-month period, with the initial six-month period commencing June 4, 2007, if the average trading price of the Old Notes reaches certain thresholds. Contingent interest of $0.1 million was payable at June 30, 2011. No contingent interest related to the Old Notes was payable at December 31, 2010. The Old Notes will mature on June 4, 2032.

          The Company may redeem some or all of the Old Notes at any time on or after June 11, 2007, at a redemption price, payable in cash, of 100% of the principal amount of the Old Notes, plus accrued and unpaid

17

interest, including contingent interest, if any. Holders of the Old Notes may require the Company to repurchase all or a portion of their Old Notes on June 4, 2012 and June 4, 2017, or upon a change in control, as defined in the indenture governing the Old Notes, at 100% of the principal amount of the Old Notes, plus accrued and unpaid interest to the date of the repurchase, payable in cash. Under GAAP, if an obligation is due on demand or will be due on demand within one year from the balance sheet date, even though liquidation may not be expected within that period, it should be classified as a current liability. Accordingly, the outstanding balance of Old Notes along with the deferred tax liability associated with accelerated interest deductions on the Old Notes will be classified as a current liability during the respective twelve month periods prior to June 4, 2012 and June 4, 2017. As of June 30, 2011, $169.1 million of the Old Notes and $57.9 million of deferred tax liabilities were classified as current liabilities in the Company’s condensed consolidated balance sheets. The $57.9 million of deferred tax liabilities were included within current deferred tax assets, net. If all of the Old Notes are put back to the Company on June 4, 2012, the Company would be required to pay $169.1 million in outstanding principal, plus accrued interest. The Company would also be required to pay the accumulated deferred tax liability related to the Old Notes.

          The Old Notes are convertible, at the holders’ option, prior to the maturity date into shares of the Company’s Class A common stock in the following circumstances:

• during any quarter commencing after June 30, 2002, if the closing price of the Company’s Class A common stock over a specified number of trading days during the previous quarter, including the last trading day of such quarter, is more than 110% of the conversion price of the Old Notes, or $31.96. The Old Notes are initially convertible at a conversion price of $29.05 per share, which is equal to a conversion rate of approximately 34.4234 shares per $1,000 principal amount of Old Notes, subject to adjustment;

• if the Company has called the Old Notes for redemption;

• during the five trading day period immediately following any nine consecutive day trading period in which the trading price of the Old Notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of the Company’s Class A common stock on that day multiplied by the number of shares of the Company’s Class A common stock issuable upon conversion of $1,000 principal amount of the Old Notes; or

• upon the occurrence of specified corporate transactions.

          The Old Notes, which are unsecured, do not contain any restrictions on the payment of dividends, the incurrence of additional indebtedness or the repurchase of the Company’s securities and do not contain any financial covenants.

          The Company incurred $12.6 million of fees and other origination costs related to the issuance of the Old Notes. The Company amortized these costs over the first five-year Put period, which ran through June 4, 2007.

          On August 14, 2003, the Company exchanged approximately $230.8 million in principal amount of its Old Notes for approximately $283.9 million in principal amount of its 1.5% Contingent Convertible Senior Notes Due 2033 (the “New Notes”). Holders of Old Notes that accepted the Company’s exchange offer received $1,230 in principal amount of New Notes for each $1,000 in principal amount of Old Notes. The terms of the New Notes are similar to the terms of the Old Notes, but have a different interest rate, conversion rate and maturity date. Holders of Old Notes that chose not to exchange continue to be subject to the terms of the Old Notes.

          The New Notes bear interest at a rate of 1.5% per annum, which is payable on June 4 and December 4 of each year, beginning December 4, 2003. The Company will also pay contingent interest at a rate of 0.5% per annum during any six-month period, with the initial six-month period commencing June 4, 2008, if the average trading price of the New Notes reaches certain thresholds. No contingent interest related to the New Notes was payable at June 30, 2011 or December 31, 2010. The New Notes mature on June 4, 2033.

          As a result of the exchange, the outstanding principal amounts of the Old Notes and the New Notes were $169.2 million and $283.9 million, respectively. The Company incurred approximately $5.1 million of fees and other origination costs related to the issuance of the New Notes. The Company amortized these costs over the first five-year Put period, which ran through June 4, 2008.

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          Holders of the New Notes were able to require the Company to repurchase all or a portion of their New Notes on June 4, 2008, at 100% of the principal amount of the New Notes, plus accrued and unpaid interest, including contingent interest, if any, to the date of the repurchase, payable in cash. Holders of approximately $283.7 million of New Notes elected to require the Company to repurchase their New Notes on June 4, 2008. The Company paid $283.7 million, plus accrued and unpaid interest of approximately $2.2 million, to the holders of New Notes that elected to require the Company to repurchase their New Notes. The Company was also required to pay an accumulated deferred tax liability of approximately $34.9 million related to the repurchased New Notes. This $34.9 million deferred tax liability was paid during the second half of 2008. Following the repurchase of these New Notes, $181,000 of principal amount of New Notes remained outstanding as of June 30, 2011 and December 31, 2010.

          The remaining New Notes are convertible, at the holders’ option, prior to the maturity date into shares of the Company’s Class A common stock in the following circumstances:

• during any quarter commencing after September 30, 2003, if the closing price of the Company’s Class A common stock over a specified number of trading days during the previous quarter, including the last trading day of such quarter, is more than 120% of the conversion price of the New Notes, or $46.51. The Notes are initially convertible at a conversion price of $38.76 per share, which is equal to a conversion rate of approximately 25.7998 shares per $1,000 principal amount of New Notes, subject to adjustment;

• if the Company has called the New Notes for redemption;

• during the five trading day period immediately following any nine consecutive day trading period in which the trading price of the New Notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of the Company’s Class A common stock on that day multiplied by the number of shares of the Company’s Class A common stock issuable upon conversion of $1,000 principal amount of the New Notes; or

• upon the occurrence of specified corporate transactions.

          The remaining New Notes, which are unsecured, do not contain any restrictions on the incurrence of additional indebtedness or the repurchase of the Company’s securities and do not contain any financial covenants. The New Notes require an adjustment to the conversion price if the cumulative aggregate of all current and prior dividend increases above $0.025 per share would result in at least a one percent (1%) increase in the conversion price. This threshold has not been reached and no adjustment to the conversion price has been made.

          During the quarter ended June 30, 2011, the Old Notes met the criteria for the right of conversion into shares of the Company’s Class A common stock. This right of conversion of the holders of Old Notes was triggered by the stock closing above $31.96 on 20 of the last 30 trading days and the last trading day of the quarter ended June 30, 2011. The holders of Old Notes have this conversion right only until September 30, 2011. At the end of each future quarter, the conversion rights will be reassessed in accordance with the bond indenture agreement to determine if the conversion trigger rights have been achieved. During the quarter ended June 30, 2011, the New Notes did not meet the criteria for the right of conversion.

13. INCOME TAXES

          Income taxes are determined using an annual effective tax rate, which generally differs from the U.S. Federal statutory rate, primarily because of state and local income taxes, enhanced charitable contribution deductions for inventory, tax credits available in the U.S., the treatment of certain share-based payments that are not designed to normally result in tax deductions, various expenses that are not deductible for tax purposes, changes in valuation allowances against deferred tax assets and differences in tax rates in certain non-U.S. jurisdictions. The Company’s effective tax rate may be subject to fluctuations during the year as new information is obtained which may affect the assumptions it uses to estimate its annual effective tax rate, including factors such as its mix of pre-tax earnings in the various tax jurisdictions in which it operates, changes in valuation allowances against deferred tax assets, reserves for tax audit issues and settlements, utilization of tax credits and changes in tax laws in jurisdictions where the Company conducts operations. The Company recognizes tax benefits only if the tax position is more likely than not of being sustained. The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of its assets and liabilities, along with net

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operating losses and credit carryforwards. The Company records valuation allowances against its deferred tax assets to reduce the net carrying value to amounts that management believes is more likely than not to be realized.

          At June 30, 2011, the Company has an unrealized tax loss of $21.0 million related to the Company’s option to acquire Revance or license Revance’s topical product that is under development. The Company will not be able to determine the character of the loss until the Company exercises or fails to exercise its option. A realized loss characterized as a capital loss can only be utilized to offset capital gains. At June 30, 2011, the Company has recorded a valuation allowance of $7.6 million against the deferred tax asset associated with this unrealized tax loss in order to reduce the carrying value of the deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

          At June 30, 2011, the Company has an unrealized tax loss of $21.9 million related to the Company’s option to acquire a privately-held U.S. biotechnology company. If the Company fails to exercise its option, a capital loss will be recognized. A loss characterized as a capital loss can only be used to offset capital gains. At June 30, 2011, the Company has recorded a valuation allowance of $7.9 million against the deferred tax asset associated with this unrealized tax loss in order to reduce the carrying value of the deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

          During the three months ended June 30, 2011 and June 30, 2010, the Company made net tax payments of $32.0 million and $30.9 million, respectively. During the six months ended June 30, 2011 and June 30, 2010, the Company made net tax payments of $38.0 million and $47.7 million, respectively.

          The Company operates in multiple tax jurisdictions and is periodically subject to audit in these jurisdictions. These audits can involve complex issues that may require an extended period of time to resolve and may cover multiple years. The Company and its domestic subsidiaries file a consolidated U.S. federal income tax return. Such returns have either been audited or settled through statute expiration through 2006. The state of California conducted an examination on the Company’s tax returns for the periods ending June 30, 2005, December 31, 2005, December 31, 2006 and December 31, 2007. During the three months ended March 31, 2011, the Company reached a settlement for all periods with the state of California and paid approximately $0.5 million. The state of California has also notified the Company of an upcoming examination of the Company’s tax returns for the periods ending December 31, 2008 and December 31, 2009.

          The Company owns two subsidiaries that file corporate tax returns in Sweden. The Swedish tax authorities examined the tax return of one of the subsidiaries for fiscal 2004. The examiners issued a no change letter, and the examination is complete. The Company’s other subsidiary in Sweden has not been examined by the Swedish tax authorities. The Swedish statute of limitations may be open for up to five years from the date the tax return was filed. Thus, all returns filed for periods ending December 31, 2006 forward are open under the statute of limitations.

          At June 30, 2011 and December 31, 2010, the Company had unrecognized tax benefits of $1.0 million and $1.4 million, respectively. The amount of unrecognized tax benefits which, if ultimately recognized, could favorably affect the Company’s effective tax rate in a future period is $0.6 million and $0.9 million as of June 30, 2011 and December 31, 2010, respectively. During the next twelve months, the Company estimates that it is reasonably possible that the amount of unrecognized tax benefits will decrease by $0.7 million.

          The Company recognizes accrued interest and penalties, if applicable, related to unrecognized tax benefits in income tax expense. The Company had approximately $0.5 million for the payment of interest and penalties accrued (net of tax benefit) at June 30, 2011 and December 31, 2010.

14. DIVIDENDS DECLARED ON COMMON STOCK

          On June 8, 2011, the Company announced that its Board of Directors had declared a cash dividend of $0.08 per issued and outstanding share of the Company’s Class A common stock, which was paid on July 29, 2011, to stockholders of record at the close of business on July 1, 2011. The $5.1 million dividend was recorded as a reduction of accumulated earnings and is included in other current liabilities in the accompanying condensed consolidated balance sheets as of June 30, 2011. The Company has not adopted a dividend policy.

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15. COMPREHENSIVE INCOME

          Total comprehensive income includes net income and other comprehensive income (loss), which consists of foreign currency translation adjustments, unrealized gains and losses on available-for-sale investments and unamortized prior service costs related to the Company’s supplemental executive retirement plan. Total comprehensive income for the three months ended June 30, 2011 and 2010, was $7.4 million and $36.9 million, respectively. Total comprehensive income for the six months ended June 30, 2011 and 2010, was $27.0 million and $72.9 million, respectively. Included as a reduction of total comprehensive income for the three and six months ended June 30, 2011 is $21.4 million related to the establishment of prior service costs related to the Company’s supplemental executive retirement plan, net of income tax benefit.

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16. NET INCOME PER COMMON SHARE

          The following table sets forth the computation of basic and diluted net income per common share (in thousands, except per share amounts):

	Three Months Ended
	June 30, 2011									June 30, 2010
	Continuing			Discontinued			Net			Continuing			Discontinued			Net
	Operations			Operations			Income			Operations			Operations			Income
BASIC
Net income (loss)	$	34,512		$	(5,729	)	$	28,783		$	40,928		$	(4,428	)	$	36,500
Less: income (loss) allocated to participating securities		1,113			—			916			1,355			—			1,206
Net income (loss) available to common stockholders		33,399			(5,729	)		27,867			39,573			(4,428	)		35,294
Weighted average number of common shares outstanding		60,308			60,308			60,308			58,271			58,271			58,271
Basic net income (loss) per common share	$	0.55		$	(0.09	)	$	0.46		$	0.68		$	(0.08	)	$	0.61
DILUTED
Net income (loss)	$	34,512		$	(5,729	)	$	28,783		$	40,928		$	(4,428	)	$	36,500
Less: income (loss) allocated to participating securities		1,113			—			916			1,355			—			1,206
Net income (loss) available to common stockholders		33,399			(5,729	)		27,867			39,573			(4,428	)		35,294
Less:
Undistributed earnings allocated to unvested stockholders		(987	)		—			(796	)		(1,263	)		—			(1,113	)
Add:
Undistributed earnings re-allocated to unvested stockholders		971			—			783			1,256			—			1,107
Add:
Tax-effected interest expense related to Old Notes		711			—			711			666			—			666
Net income (loss) assuming dilution	$	34,094		$	(5,729	)	$	28,565		$	40,232		$	(4,428	)	$	35,954
Weighted average number of common shares outstanding		60,308			60,308			60,308			58,271			58,271			58,271
Effect of dilutive securities:
Old Notes		5,823			—			5,823			5,823			—			5,823
New Notes		4			—			4			4			—			4
Stock options		1,005			—			1,005			297			—			297
Weighted average number of common shares assuming dilution		67,140			60,308			67,140			64,395			58,271			64,395
Diluted net income (loss) per common share	$	0.51		$	(0.09	)	$	0.43		$	0.62		$	(0.08	)	$	0.56

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	Six Months Ended
	June 30, 2011									June 30, 2010
	Continuing			Discontinued			Net			Continuing			Discontinued			Net
	Operations			Operations			Income			Operations			Operations			Income
BASIC
Net income (loss)	$	61,197		$	(13,054	)	$	48,143		$	80,946		$	(9,078	)	$	71,868
Less: income (loss) allocated to participating securities		1,905			—			1,469			2,673			—			2,368
Net income (loss) available to common stockholders		59,292			(13,054	)		46,674			78,273			(9,078	)		69,500
Weighted average number of common shares outstanding		59,719			59,719			59,719			58,161			58,161			58,161
Basic net income (loss) per common share	$	0.99		$	(0.22	)	$	0.78		$	1.35		$	(0.16	)	$	1.19
DILUTED
Net income (loss)	$	61,197		$	(13,054	)	$	48,143		$	80,946		$	(9,078	)	$	71,868
Less: income (loss) allocated to participating securities		1,905			—			1,469			2,673			—			2,368
Net income (loss) available to common stockholders		59,292			(13,054	)		46,674			78,273			(9,078	)		69,500
Less:
Undistributed earnings allocated to unvested stockholders		(1,668	)		—			(1,245	)		(2,474	)		—			(2,170	)
Add:
Undistributed earnings re-allocated to unvested stockholders		1,647			—			1,229			2,461			—			2,159
Add:
Tax-effected interest expense related to Old Notes		1,376			—			1,376			1,332			—			1,332
Tax-effected interest expense related to New Notes		1			—			1			1			—			1
Net income (loss) assuming dilution	$	60,648		$	(13,054	)	$	48,035		$	79,593		$	(9,078	)	$	70,822
Weighted average number of common shares outstanding		59,719			59,719			59,719			58,161			58,161			58,161
Effect of dilutive securities:
Old Notes		5,823			—			5,823			5,823			—			5,823
New Notes		4			—			4			4			—			4
Stock options		801			—			801			306			—			306
Weighted average number of common shares assuming dilution		66,347			59,719			66,347			64,294			58,161			64,294
Diluted net income (loss) per common share	$	0.91		$	(0.22	)	$	0.72		$	1.24		$	(0.16	)	$	1.10

          Diluted net income per common share must be calculated using the “if-converted” method. Diluted net income per share using the “if-converted” method is calculated by adjusting net income for tax-effected net interest on the Old Notes and New Notes, divided by the weighted average number of common shares outstanding assuming conversion.

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          Unvested share-based payment awards that contain rights to receive nonforfeitable dividends or dividend equivalents (whether paid or unpaid) are participating securities, and thus, are included in the two-class method of computing earnings per share. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common stockholders. Restricted stock granted to certain employees by the Company (see Note 3) participate in dividends on the same basis as common shares, and these dividends are not forfeitable by the holders of the restricted stock. As a result, the restricted stock grants meet the definition of a participating security.

          The diluted net income per common share computation for the three months ended June 30, 2011 and 2010 excludes 1,797,876 and 8,027,204 shares of stock, respectively, that represented outstanding stock options whose impact would be anti-dilutive. The diluted net income per common share computation for the six months ended June 30, 2011 and 2010 excludes 3,291,806 and 8,559,315 shares of stock, respectively, that represented outstanding stock options whose impact would be anti-dilutive.

          Due to the net loss from discontinued operations during the three and six months ended June 30, 2011 and 2010, diluted earnings per share and basic earnings per share from discontinued operations are the same, as the effect of potentially dilutive securities would be anti-dilutive.

17. COMMITMENTS AND CONTINGENCIES

Legal Matters

          The Company is currently party to various legal proceedings, including those noted in this section. Unless specifically noted below, any possible range of loss associated with the legal proceedings described below is not reasonably estimable at this time. The Company is engaged in numerous other legal actions not described below arising in the ordinary course of its business and, while there can be no assurance, the Company believes that the ultimate outcome of these actions will not have a material adverse effect on its operating results, liquidity or financial position.

          From time to time the Company may conclude it is in the best interests of its stockholders, employees, and customers to settle one or more litigation matters, and any such settlement could include substantial payments; however, other than as noted below, the Company has not reached this conclusion with respect to any particular matter at this time. There are a variety of factors that influence the Company’s decisions to settle and the amount the Company may choose to pay, including the strength of its case, developments in the litigation, the behavior of other interested parties, the demand on management time and the possible distraction of the Company’s employees associated with the case and/or the possibility that the Company may be subject to an injunction or other equitable remedy. It is difficult to predict whether a settlement is possible, the amount of an appropriate settlement or when is the opportune time to settle a matter in light of the numerous factors that go into the settlement decision. Unless otherwise specified below, any settlement payment made pursuant to any of the completed settlement agreements described below is immaterial to the Company for financial reporting purposes.

Stockholder Class Action Litigation

          On October 3, 10 and 27, 2008, purported stockholder class action lawsuits styled Andrew Hall v. Medicis Pharmaceutical Corp., et al. (Case No. 2:08-cv-01821-MHB); Steamfitters Local 449 Pension Fund v. Medicis Pharmaceutical Corp., et al. (Case No. 2:08-cv-01870-DKD); and Darlene Oliver v. Medicis Pharmaceutical Corp., et al. (Case No. 2:08-cv-01964-JAT) were filed in the United States District Court for the District of Arizona on behalf of stockholders who purchased securities of the Company during the period between October 30, 2003 and approximately September 24, 2008. The Court consolidated these actions into a single proceeding and on May 18, 2009 an amended complaint was filed alleging violations of the federal securities laws arising out of the Company’s restatement of its consolidated financial statements in 2008. On December 2, 2009, the Court granted the Company’s and other defendants’ dismissal motions and dismissed the consolidated amended complaint without prejudice. On January 18, 2010 the lead plaintiff filed a second amended complaint, and on or about August 9, 2010, the Court denied the Company’s and other defendants’ related dismissal motions. On December 17, 2010, the lead plaintiff filed a motion for class certification, and the defendants filed an opposition to the motion on March 8, 2011. On June 6, 2011, the Company, certain of its current officers who are named in the complaint, and the Company’s outside auditors entered into a Memorandum of Understanding (the “Class Action MOU”) with the

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plaintiffs’ representatives to memorialize an agreement in principle to settle the pending action. Under the terms of the settlement agreement, which remains subject to Court approval among other customary conditions, the Company’s portion of the settlement will be paid entirely by insurance. The Company’s outside auditors also will contribute to this settlement. The Company itself is not required to make any payments to fund the settlement. The settlement agreement contains no admission of liability by the Company or the named individuals in the action, the allegations of which are expressly denied in the Class Action MOU. In the event the settlement is not approved by the Court, the Company will continue to vigorously defend the claims in the class action lawsuits. There can be no assurance that the Court will approve the settlement, or that the Company will otherwise ultimately be successful in settling the lawsuits or in defending the lawsuits, and an adverse resolution of the lawsuits could have a material adverse effect on the Company’s financial position and results of operations in the period in which the lawsuits are resolved.

Stockholder Derivative Lawsuits

          On January 21, 2009, the Company received a letter from an alleged stockholder demanding that its Board of Directors take certain actions, including potentially legal action, in connection with the restatement of its consolidated financial statements in 2008. The letter stated that, if the Board of Directors did not take the demanded action, the alleged stockholder would commence a derivative action on behalf of the Company. The Company’s Board of Directors reviewed the letter during the course of 2009 and established a special committee of the Board of Directors, comprised of directors who are independent and disinterested with respect to the allegations in the letter, to assess the allegations contained in the letter. The special committee engaged outside counsel to assist with the investigation. The special committee completed its investigation, and on or about February 16, 2010, the Board of Directors, pursuant to the report and recommendation of the special committee, resolved to decline the derivative demand. On February 26, 2010, Company counsel sent a declination letter to opposing counsel. On or about October 21, 2010, the stockholder filed a derivative complaint against the Company and its directors and certain officers in the Superior Court of the State of Arizona in and for the County of Maricopa, alleging that such individuals breached their fiduciary duties to the Company in connection with the restatement. The stockholder seeks to recover unspecified damages and costs, including counsel and expert fees.

          On or about October 20, 2010, a second alleged stockholder of the Company filed a derivative complaint against the Company and its directors and certain officers in the Superior Court of the State of Arizona in and for the County of Maricopa. The complaint alleges, among other things, that such individuals breached their fiduciary duties to the Company in connection with the restatement. The complaint further alleges that a demand upon the Board of Directors to institute an action in the Company’s name would be futile and that the stockholder is therefore excused under Delaware law from making such a demand prior to filing the complaint. The stockholder seeks, among other things, to recover unspecified damages and costs, including counsel and expert fees.

          On June 6, 2011, the Company and certain of its current officers and directors who are named in the complaints entered into a Memorandum of Understanding (the “Derivative Lawsuits MOU”) with the plaintiffs’ representatives to memorialize an agreement in principle to settle the pending actions. The only financial component under the settlement agreement, which remains subject to Court approval among other customary conditions, involves payment of plaintiffs’ attorneys’ fees, which will be paid entirely by insurance. The Company itself is not required to make any payments to fund the settlement. The settlement also reflects certain control and other enhancements taken by the Company in connection with and subsequent to the restatement of its consolidated financial statements in 2008. The settlement agreement contains no admission of liability by the Company or the named individuals in the lawsuits, the allegations of which are expressly denied in the Derivative Lawsuits MOU. In the event the settlement is not approved by the Court, the Company will continue to vigorously defend the claims in the derivative lawsuits. There can be no assurance that the Court will approve the settlement, or that the Company will otherwise ultimately be successful in settling the lawsuits or in defending the lawsuits, and an adverse resolution of the lawsuits could have a material adverse effect on the Company’s financial position and results of operations in the period in which the lawsuits are resolved.

Hyperion Arbitration

          On June 23, 2011, Hyperion Therapeutics, Inc. (“Hyperion”) filed a demand for arbitration before the American Arbitration Association for a judgment declaration of the rights and obligations of Hyperion and Ucyclyd Pharma, Inc., a subsidiary of the Company (“Ucyclyd”), under a collaboration agreement between the parties, dated August 23, 2007, as amended (the “Collaboration Agreement”). Pursuant to the terms of the Collaboration

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Agreement, Hyperion is responsible for the ongoing research and development of a compound referred to as HPN-100 (formerly known as GT4P) for the treatment of urea cycle disorder, hepatic encephalopathies and other indications. In addition, if certain specified conditions are satisfied, then Hyperion will have certain purchase rights under the Collaboration Agreement with respect to HPN-100, as well as Ucyclyd’s existing on-market products, AMMONUL^® and BUPHENYL^®, and will be required to pay Ucyclyd royalties and regulatory and sales milestone payments in connection with certain licenses that will be granted to Hyperion upon exercise of the purchase rights. In its demand for arbitration, Hyperion requested a judgment regarding the rights of the parties in connection with the development activities relating to HPN-100, including relating to the submission of a NDA to the FDA for HPN-100 for the treatment of urea cycle disorder. The Company responded to the demand for arbitration on July 28, 2011. In its response, the Company denied the allegations of Hyperion and requested the arbitration panel deny Hyperion’s requested declaratory relief. Additionally, the Company brought counterclaims against Hyperion and sought a declaration of rights in the Company’s favor and an award of damages.

          In addition to the matters discussed above, in the ordinary course of business, the Company is involved in a number of legal actions, both as plaintiff and defendant, and could incur uninsured liability in any one or more of them. Although the outcome of these actions is not presently determinable, it is the opinion of the Company’s management, based upon the information available at this time, that the expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on the results of operations, financial condition or cash flows of the Company.

18. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

          In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (Topic 820) — Fair Value Measurement, to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU No. 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements. ASU No. 2011-04 is effective for interim and annual reporting periods beginning after December 15, 2011 and must be applied prospectively. The Company is currently assessing what impact, if any, the revised guidance will have on its results of operations and financial condition.

          In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The updated guidance amends the FASB Accounting Standards Codification (“Codification”) to allow 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 alternatives, 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. ASU No. 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments to the Codification in the ASU 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 No. 2011-05 will be applied retrospectively. ASU No. 2011-05 is effective for annual reporting periods beginning after December 15, 2011, with early adoption permitted, and will be applied retrospectively. It is expected that the adoption of this amendment will only impact the presentation of comprehensive income within the Company’s consolidated financial statements.

19. SUBSEQUENT EVENTS

          The Company has evaluated subsequent events through the date of issuance of its financial statements.

License and Settlement Agreement with Lupin

          On July 21, 2011, the Company entered into a License and Settlement Agreement (the “Settlement Agreement”) with Lupin Limited and Lupin Pharmaceuticals, Inc. (together, “Lupin”). Under the terms of the Settlement Agreement, the Company agreed to grant to Lupin a future license to make and sell its generic versions of SOLODYN^® in 45mg, 90mg and 135mg strengths under the SOLODYN^® intellectual property rights belonging to the Company, with the license grant effective November 26, 2011, or earlier under certain conditions. The

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Company also agreed to grant to Lupin future licenses to make and sell its generic versions of SOLODYN^® in 65mg and 115mg strengths effective in February 2018, or earlier under certain conditions, and its generic versions of SOLODYN^® in 55mg (against which Lupin’s Paragraph IV Patent Certification was the first received by the Company), 80mg and 105mg strengths effective in February 2019, or earlier under certain conditions. The Settlement Agreement provides that Lupin will be required to pay the Company royalties based on sales of Lupin’s generic SOLODYN^® products pursuant to the foregoing licenses.

          Pursuant to the Settlement Agreement, the companies agreed to terminate all legal disputes between them relating to SOLODYN^®. In addition, Lupin confirmed that the Company’s patents relating to SOLODYN^® are valid and enforceable, and cover Lupin’s activities relating to Lupin’s generic SOLODYN^® products under an ANDA. Lupin also agreed to be permanently enjoined from any distribution of generic SOLODYN^® products in the U.S. except as described above.

          On July 21, 2011, the Company entered into a Joint Development Agreement (the “Joint Development Agreement”) with Lupin Limited, on behalf of itself and its affiliates (hereinafter collectively referred to in this paragraph as “Lupin”), whereby the Company and Lupin will collaborate to develop multiple novel proprietary therapeutic products. Pursuant to the Joint Development Agreement, subject to the terms and conditions contained therein, the Company will make an up-front $20 million payment to Lupin and will make additional payments to Lupin of up to $38 million upon the achievement of certain research, development, regulatory and other milestones, as well as royalty payments on sales of the products covered under the agreement. In addition, the Company will receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Joint Development Agreement. The $20 million up-front payment will be recognized as research and development expense during the three months ended September 30, 2011.

Stock Repurchase Plan

          On August 8, 2011, the Company announced that its Board of Directors approved a Stock Repurchase Plan to purchase up to $200 million in aggregate value of shares of Medicis Class A common stock. Any repurchases will be made in compliance with the Securities and Exchange Commission’s Rule 10b-18.

          The number of shares to be repurchased and the timing of repurchases (if any) will depend on a variety of factors, including, but not limited to, stock price, economic and market conditions and corporate and regulatory requirements. The plan does not obligate the Company to repurchase any common stock. The plan is scheduled to terminate on the earlier of the first anniversary of the plan or the time at which the purchase limit is reached, but may be suspended or terminated at any time at the Company’s discretion without prior notice.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

          We are a leading independent specialty pharmaceutical company focused primarily on helping patients attain a healthy and youthful appearance and self-image through the development and marketing in the U.S. of products for the treatment of dermatological and aesthetic conditions. We also market products in Canada for the treatment of dermatological and aesthetic conditions and began commercial efforts in Europe with our acquisition of LipoSonix in July 2008. We offer a broad range of products addressing various conditions or aesthetics improvements, including facial wrinkles, acne, fungal infections, hyperpigmentation, photoaging, psoriasis, seborrheic dermatitis and cosmesis (improvement in the texture and appearance of skin).

          Our current product lines are divided between the dermatological and non-dermatological fields. The dermatological field represents products for the treatment of acne and acne-related dermatological conditions and non-acne dermatological conditions. The non-dermatological field represents products for the treatment of urea cycle disorder and contract revenue. Our acne and acne-related dermatological product lines include SOLODYN^® and ZIANA^®. During early 2011, we discontinued our TRIAZ^® branded products and decided to no longer promote our PLEXION^® branded products. Our non-acne dermatological product lines include DYSPORT^®, LOPROX^®, PERLANE^®, RESTYLANE^® and VANOS^®. Our non-dermatological product lines include AMMONUL^® and BUPHENYL^®. Our non-dermatological field also includes contract revenues associated with licensing agreements and authorized generic agreements.

Financial Information About Segments

          We operate in one business segment: pharmaceuticals. Our current pharmaceutical franchises are divided between the dermatological and non-dermatological fields. Information on revenues, operating income, identifiable assets and supplemental revenue of our business franchises appears in the condensed consolidated financial statements included in Item 1 hereof.

Key Aspects of Our Business

          We derive a majority of our revenue from our primary products: DYSPORT^®, PERLANE^®, RESTYLANE^®, SOLODYN^®, VANOS^® and ZIANA^®. We believe that sales of our primary products will constitute a significant portion of our revenue for 2011.

          We have built our business by executing a four-part growth strategy: promoting existing brands, developing new products and important product line extensions, entering into strategic collaborations and acquiring complementary products, technologies and businesses. Our core philosophy is to cultivate high integrity relationships of trust and confidence with the foremost dermatologists and the leading plastic surgeons in the U.S. We rely on third parties to manufacture our products (except for the LIPOSONIX^TM system).

          We estimate customer demand for our prescription products primarily through use of third party syndicated data sources which track prescriptions written by health care providers and dispensed by licensed pharmacies. The data represents extrapolations from information provided only by certain pharmacies and are estimates of historical demand levels. We estimate customer demand for our non-prescription products primarily through internal data that we compile. We observe trends from these data and, coupled with certain proprietary information, prepare demand forecasts that are the basis for purchase orders for finished and component inventory from our third party manufacturers and suppliers. Our forecasts may fail to accurately anticipate ultimate customer demand for our products. Overestimates of demand and sudden changes in market conditions may result in excessive inventory production and underestimates may result in inadequate supply of our products in channels of distribution.

          We schedule our inventory purchases to meet anticipated customer demand. As a result, miscalculation of customer demand or relatively small delays in our receipt of manufactured products could result in revenues being deferred or lost. Our operating expenses are based upon anticipated sales levels, and a high percentage of our operating expenses are relatively fixed in the short term.

          We sell our products primarily to major wholesalers and retail pharmacy chains. Approximately 75-80% of our gross revenues are typically derived from two major drug wholesale concerns. Depending on the customer, we recognize revenue at the time of shipment to the customer, or at the time of receipt by the customer, net of estimated

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provisions. We recognize revenue on our aesthetics products DYSPORT^®, PERLANE^® and RESTYLANE^® upon shipment from McKesson, our exclusive U.S. distributor of these products, to physicians. Consequently, variations in the timing of revenue recognition could cause significant fluctuations in operating results from period to period and may result in unanticipated periodic earnings shortfalls or losses. We have distribution services agreements with our two largest wholesale customers. We review the supply levels of our significant products sold to major wholesalers by reviewing periodic inventory reports that are supplied to us by our major wholesalers in accordance with the distribution services agreements. We rely wholly upon our wholesale and retail chain drugstore customers to effect the distribution allocation of substantially all of our prescription products. We believe our estimates of trade inventory levels of our products, based on our review of the periodic inventory reports supplied by our major wholesalers and the estimated demand for our products based on prescription and other data, are reasonable. We further believe that inventories of our products among wholesale customers, taken as a whole, are similar to those of other specialty pharmaceutical companies, and that our trade practices, which periodically involve volume discounts and early payment discounts, are typical of the industry.

          We periodically offer promotions to wholesale and retail chain drugstore customers to encourage dispensing of our prescription products, consistent with prescriptions written by licensed health care providers. Because many of our prescription products compete in multi-source markets, it is important for us to ensure the licensed health care providers’ dispensing instructions are fulfilled with our branded products and are not substituted with a generic product or another therapeutic alternative product which may be contrary to the licensed health care providers’ recommended and prescribed Medicis brand. We believe that a critical component of our brand protection program is maintenance of full product availability at wholesale and drugstore customers. We believe such availability reduces the probability of local and regional product substitutions, shortages and backorders, which could result in lost sales. We expect to continue providing favorable terms to wholesale and retail chain drugstore customers as may be necessary to ensure the fullest possible distribution of our branded products within the pharmaceutical chain of commerce. From time to time we may enter into business arrangements (e.g., loans or investments) involving our customers and those arrangements may be reviewed by federal and state regulators.

          Purchases by any given customer, during any given period, may be above or below actual prescription volumes of any of our products during the same period, resulting in fluctuations of product inventory in the distribution channel. In addition, we consistently assess our product mix and portfolio to promote a high level of profitability and revenues and to ensure that our products are responsive to consumer tastes and changes to regulatory classifications. During early 2011, we discontinued our TRIAZ^® branded products and decided to no longer promote our PLEXION^® branded products.

Recent Developments

          As described in more detail below, the following significant events and transactions occurred during the six months ended June 30, 2011, and affected our results of operations, our cash flows and our financial condition:

• Research and development agreement with Anacor;

• Settlement Agreement with Teva;

• Classification of LipoSonix as a discontinued operation;

• Increase of our quarterly dividend from $0.06 per share to $0.08 per share;

• Development milestone payment related to our collaboration with a privately-held U.S. biotechnology company;

• Issuance of new patent covering SOLODYN^®;

• Settlement of class action and derivative lawsuits; and

• Establishment of a Supplemental Executive Retirement Plan.

Research and development agreement with Anacor

          On February 9, 2011, we entered into a research and development agreement with Anacor Pharmaceuticals, Inc. (“Anacor”) for the discovery and development of boron-based small molecule compounds directed against a target for the potential treatment of acne. Under the terms of the agreement, we paid Anacor $7.0 million in connection with the execution of the agreement, and will pay up to $153.0 million upon the achievement of certain research, development, regulatory and commercial milestones, as well as royalties on sales by us. Anacor will be responsible for discovering and conducting the early development of product candidates which utilize Anacor’s proprietary boron chemistry platform, while we will have an option to obtain an exclusive license for products

29

covered by the agreement. The initial $7.0 million payment was recognized as research and development expense during the three months ended March 31, 2011.

Settlement Agreement with Teva

          On February 24, 2011, we entered into a Settlement Agreement (“Teva Settlement Agreement”) with Barr Laboratories, Inc., a subsidiary of Teva Pharmaceuticals USA, Inc., on behalf of itself and certain of its affiliates, including Teva Pharmaceuticals USA, Inc. (collectively, “Teva”). Under the terms of the Teva Settlement Agreement, we agreed to grant to Teva a future license to make and sell our generic versions of SOLODYN^® in 65mg and 115mg strengths under the SOLODYN^® intellectual property rights belonging to us, with the license grant effective in February 2018, or earlier under certain conditions. We also agreed to grant to Teva a future license to make and sell generic versions of SOLODYN^® in 55mg, 80mg and 105mg strengths under our SOLODYN^® intellectual property rights, with the license grant effective in February 2019, or earlier under certain conditions. The Teva Settlement Agreement provides that Teva will be required to pay us royalties based on sales of Teva’s generic SOLODYN^® products pursuant to the foregoing licenses. Pursuant to the Teva Settlement Agreement, the companies agreed to terminate all legal disputes between them relating to SOLODYN^®. In addition, Teva confirmed that our patents relating to SOLODYN^® are valid and enforceable, and cover Teva’s activities relating to Teva’s generic SOLODYN^® products under ANDA No. 65-485 and any amendments and supplements thereto. Teva also agreed to be permanently enjoined from any distribution of generic SOLODYN^® products in the U.S. except as described above. The United States District Court for the District of Maryland subsequently entered a permanent injunction against any infringement by Teva.

Classification of LipoSonix as a discontinued operation

          On February 25, 2011, we announced that as a result of our strategic planning process and the current regulatory and commercial capital equipment environment, we determined to explore strategic alternatives for our LipoSonix business including, but not limited to, the sale of the stand-alone business. We have engaged Deutsche Bank to assist us in our exploration of strategic alternatives for LipoSonix. As a result of this decision, we now classify the LipoSonix business as a discontinued operation for financial statement reporting purposes.

Increase of our quarterly dividend from $0.06 per share to $0.08 per share

          On March 22, 2011, we announced that our Board of Directors had declared a cash dividend of $0.08 per issued and outstanding share of our Class A common stock, which was paid on April 29, 2011, to stockholders of record at the close of business on April 1, 2011. This represented a 33% increase compared to our previous $0.06 dividend. A subsequent cash dividend announced in June 2011 was also at the rate of $0.08 per issued and outstanding share of our Class A common stock. The dividend was paid on July 29, 2011 to stockholders of record at the close of business on July 1, 2011.

Development milestone payment related to our collaboration with a privately-held U.S. biotechnology company

          On September 10, 2010, we and a privately-held U.S. biotechnology company entered into a sublicense and development agreement to develop an agent for specific dermatological conditions in the Americas and Europe and a purchase option to acquire the privately-held U.S. biotechnology company. Under the terms of the agreements, we paid the privately-held U.S. biotechnology company $5.0 million in connection with the execution of the agreement, and will pay additional potential milestone payments totaling approximately $100.5 million upon successful completion of certain clinical, regulatory and commercial milestones.

          During the three months ended June 30, 2011, a development milestone was achieved, and we made a $5.5 million payment pursuant to the agreements. The $5.5 million milestone payment was recognized as research and development expense during the three months ended June 30, 2011.

Issuance of new patent covering SOLODYN^®

          On April 5, 2011, the United States Patent and Trademark Office (“USPTO”) issued U.S. Patent No. 7,919,483, entitled “Method For The Treatment Of Acne” (the “’483 Patent”) to us. The’483 Patent, which expires in February 2027, covers methods of using a controlled-release oral dosage form of minocycline to treat acne, including the use of our product SOLODYN^® in all eight currently available dosage forms. As previously reported,

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the USPTO issued a Notice of Allowance for U.S. Application No. 11/166,817, the patent application for the ‘483 Patent, in October 2009 and a second Notice of Allowance in April 2010 following the completion of a Request for Continued Examination which we filed with the USPTO in November 2009.

Settlement of class action and derivative lawsuits

          On June 6, 2011, we, certain of our current officers and directors named in the class action and derivative lawsuits more fully described under “Legal Matters” in Note 17 in the notes to the condensed consolidated financial statements, included in Part I, Item I of this Report, and our outside auditors entered into Memoranda of Understanding (the “MOUs”) with the plaintiffs’ representatives to memorialize an agreement in principle to settle the class action, as well as both stockholder derivative lawsuits. Under the terms of these settlement agreements, which remain subject to approval by the applicable courts among other customary conditions, our portion of the class action settlement will be paid entirely by insurance. Our outside auditors also will contribute to this settlement. The derivative lawsuits settlement, the only financial component of which involves payment of plaintiffs’ attorneys’ fees, also will be paid entirely by insurance. We are not required to make any payments to fund the settlements of the class action or the derivative lawsuits. The settlement of the derivative lawsuits reflects certain control and other enhancements undertaken by us in connection with and subsequent to the restatement of our consolidated financial statements in 2008. The settlement agreements contain no admission of liability by us or the named individuals in the respective actions, the allegations of which are expressly denied in the MOUs.

Establishment of a Supplemental Executive Retirement Plan

          On June 24, 2011, our Compensation Committee adopted the Medicis Pharmaceutical Supplemental Executive Retirement Plan (the “SERP”), a non-qualified, noncontributory, defined benefit pension plan that provides supplemental retirement income for a select group of officers, including our named executive officers. The SERP is effective as of June 1, 2011. Retirement benefits are based on a SERP participant’s years of service and average earnings (base salary plus cash bonus or incentive payments) during any three calendar years of service (regardless of whether the years are consecutive), beginning with the 2009 calendar year.

          A SERP participant vests in 1/6th of his or her retirement benefit per plan year, effective as of the first day of the plan year, and becomes fully vested in his or her accrued retirement benefit upon (1) the participant’s normal retirement date, provided that the participant has at least fifteen years of service with the Company and is employed by the Company on such date, (2) the participant’s separation from service due to a discharge without “cause” or resignation for “good reason” (as such terms are defined in the participant’s employment agreement, or in the absence of such employment agreement or definitions, in the Company’s Executive Retention Plan), or (3) a “change in control” of the Company. A SERP participant accrues his or her retirement benefit based on (x) the participant’s number of years of service with the Company (including prior years of service), divided by (y) the number of years designated for such participant’s tier (which ranges from five to twenty years).

          Participants in the SERP received credit for prior service with us. The prior service accrued benefit of approximately $33.8 million was recorded as other comprehensive income within stockholders’ equity, and is amortized as compensation expense over the remaining service years of each participant. Amortization of prior service costs recognized as compensation expense during the three months ended June 30, 2011, was approximately $0.4 million, representing one month of amortization. We also established a deferred tax asset of approximately $12.0 million, which was also recorded as other comprehensive income.

Subsequent Events

          License and Settlement Agreement with Lupin

          On July 21, 2011, we entered into a License and Settlement Agreement (the “Settlement Agreement”) with Lupin Limited and Lupin Pharmaceuticals, Inc. (together, “Lupin”). Under the terms of the Settlement Agreement, we agreed to grant to Lupin a future license to make and sell our generic versions of SOLODYN^® in 45mg, 90mg and 135mg strengths under the SOLODYN^® intellectual property rights belonging to us, with the license grant effective November 26, 2011, or earlier under certain conditions. We also agreed to grant to Lupin future licenses to make and sell our generic versions of SOLODYN^® in 65mg and 115mg strengths effective in February 2018, or earlier under certain conditions, and our generic versions of SOLODYN^® in 55mg (against which Lupin’s Paragraph IV Patent Certification was the first received by us), 80mg and 105mg strengths effective in

31

February 2019, or earlier under certain conditions. The Settlement Agreement provides that Lupin will be required to pay us royalties based on sales of Lupin’s generic SOLODYN^® products pursuant to the foregoing licenses.

          Pursuant to the Settlement Agreement, the companies agreed to terminate all legal disputes between them relating to SOLODYN^®. In addition, Lupin confirmed that our patents relating to SOLODYN^® are valid and enforceable, and cover Lupin’s activities relating to Lupin’s generic SOLODYN^® products under an ANDA. Lupin also agreed to be permanently enjoined from any distribution of generic SOLODYN^® products in the U.S. except as described above.

          On July 21, 2011, we entered into a Joint Development Agreement (the “Joint Development Agreement”) with Lupin Limited, on behalf of itself and its affiliates (hereinafter collectively referred to in this paragraph as “Lupin”), whereby we and Lupin will collaborate to develop multiple novel proprietary therapeutic products. Pursuant to the Joint Development Agreement, subject to the terms and conditions contained therein, we will make an up-front $20 million payment to Lupin and will make additional payments to Lupin of up to $38 million upon the achievement of certain research, development, regulatory and other milestones, as well as royalty payments on sales of the products covered under the agreement. In addition, we will receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Joint Development Agreement. The $20 million up-front payment will be recognized as research and development expense during the three months ended September 30, 2011.

          Stock Repurchase Plan

          On August 8, 2011, we announced that our Board of Directors approved a Stock Repurchase Plan to purchase up to $200 million in aggregate value of shares of Medicis Class A common stock. Any repurchases will be made in compliance with the Securities and Exchange Commission’s Rule 10b-18.

          The number of shares to be repurchased and the timing of repurchases (if any) will depend on a variety of factors, including, but not limited to, stock price, economic and market conditions and corporate and regulatory requirements. The plan does not obligate us to repurchase any common stock. The plan is scheduled to terminate on the earlier of the first anniversary of the plan or the time at which the purchase limit is reached, but may be suspended or terminated at any time at our discretion without prior notice.

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Results of Operations

          The following table sets forth certain data as a percentage of net revenues for the periods indicated.

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2011			2010			2011			2010
		(a	)		(b	)		(c	)		(d	)
Net revenues		100.0	%		100.0	%		100.0	%		100.0	%
Gross profit (e)		90.4			90.6			90.8			90.7
Operating expenses		59.1			52.7			61.5			52.2
Operating income		31.3			37.9			29.3			38.5
Other expense, net		—			—			—			0.1
Interest and investment income (expense), net		0.1			(0.2	)		0.1			(0.1	)
Income from continuing operations before income tax expense		31.4			37.7			29.4			38.5
Income tax expense		(13.4	)		(14.2	)		(12.2	)		(14.5	)
Net income from continuing operations		18.0			23.5			17.2			24.0
Loss from discontinued operations, net of income tax benefit		(3.0	)		(2.6	)		(3.7	)		(2.7	)
Net income		15.0	%		20.9	%		13.5	%		21.3	%

(a)	Included in operating expenses is $5.5 million (2.9% of net revenues) paid related to a product development agreement with a privately-held U.S. biotechnology company, $2.0 million (1.0% of net revenues) paid to a Medicis partner related to a product development agreement and $9.3 million (4.9% of net revenues) of compensation expense related to stock options, restricted stock and stock appreciation rights.
(b)	Included in operating expenses is $2.1 million (1.2% of net revenues) of compensation expense related to stock options, restricted stock and stock appreciation rights.
(c)	Included in operating expenses is $7.0 million (2.0% of net revenues) paid to Anacor related to a product development agreement, $5.5 million (1.5% of net revenues) paid related to a product development agreement with a privately-held U.S. biotechnology company, $2.0 million (0.6% of net revenues) paid to a Medicis partner related to a product development agreement and $16.0 million (4.5% of net revenues) of compensation expense related to stock options, restricted stock and stock appreciation rights.
(d)	Included in operating expenses is $5.1 million (1.5% of net revenues) of compensation expense related to stock options, restricted stock and stock appreciation rights.
(e)	Gross profit does not include amortization of the related intangibles as such expense is included in operating expenses.

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Three Months Ended June 30, 2011 Compared to the Three Months Ended June 30, 2010

Net Revenues

          The following table sets forth our net revenues for the three months ended June 30, 2011 (the “second quarter of 2011”) and June 30, 2010 (the “second quarter of 2010”), along with the percentage of net revenues and percentage point change for each of our product categories (dollar amounts in millions):

	Second Quarter		Second Quarter
	2011		2010		$ Change			% Change
Net product revenues	$	189.8	$	171.7	$	18.1			10.5	%
Net contract revenues		1.0		1.9		(0.9	)		(47.4)	%
Total net revenues	$	190.8	$	173.6	$	17.2			9.9	%

	Second Quarter		Second Quarter
	2011		2010		$ Change			% Change
Acne and acne-related dermatological products	$	123.1	$	124.8	$	(1.7	)		(1.4)	%
Non-acne dermatological products		57.7		41.0		16.7			40.7	%
Non-dermatological products (including contract revenues)		10.0		7.8		2.2			28.2	%
Total net revenues	$	190.8	$	173.6	$	17.2			9.9	%

	Second Quarter			Second Quarter
	2011			2010			Change
Acne and acne-related dermatological products		64.5	%		71.9	%		(7.4)	%
Non-acne dermatological products		30.3	%		23.6	%		6.7	%
Non-dermatological products (including contract revenues)		5.2	%		4.5	%		0.7	%
Total net revenues		100.0	%		100.0	%		—

          Net revenues associated with our acne and acne-related dermatological products decreased by $1.7 million, or 1.4%, during the second quarter of 2011 as compared to the second quarter of 2010, primarily due to a decrease in sales of TRIAZ^®, partially offset by increases in sales of SOLODYN^® and ZIANA^®. The decrease in net revenues of TRIAZ^® was primarily due to our early 2011 discontinuation of TRIAZ^® as a result of the FDA’s requirement that, effective March 4, 2011, prescription benzoyl peroxide products that are not approved through a New Drug Application, such as TRIAZ^®, not be sold as prescription products. The increase in net revenues of SOLODYN^® was primarily the result of an increase in gross sales of SOLODYN^® due to increased demand and the FDA approval of new 55mg, 80mg and 105mg strengths of SOLODYN^® on August 27, 2010. The increase in net revenues of ZIANA^® was primarily the result of an increase in gross sales of ZIANA^®. We also reversed reserves during the second quarter of 2011 of $3.9 million that were originally recorded during the first quarter of 2011 related to a targeted recall of the product as a result of a notice we received during April 2011 from our contract manufacturer regarding one lot of ZIANA^® that went out of specification, as the actual amount of product subject to recall was less than previously estimated. However, this reserve reversal was offset by increased returns and related reserve adjustments on the legacy products within this category.

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          Net revenues associated with our non-acne dermatological products increased by $16.7 million, or 40.7%, during the second quarter of 2011 as compared to the second quarter of 2010 primarily due to increased sales of DYSPORT^® and VANOS^®.

          Net revenues associated with our non-dermatological products increased by $2.2 million, or 28.2%, during the second quarter of 2011 as compared to the second quarter of 2010 primarily due to an increase in sales of BUPHENYL^®, partially offset by a decrease in contract revenues.

Gross Profit

          Gross profit represents our net revenues less our cost of product revenue. Our cost of product revenue includes our acquisition cost for the products we purchase from our third party manufacturers and royalty payments made to third parties. Amortization of intangible assets related to products sold is not included in gross profit. Amortization expense related to these intangibles for the second quarter of 2011 and 2010 was approximately $5.3 million and $5.2 million, respectively. Product mix plays a significant role in our quarterly and annual gross profit as a percentage of net revenues. Different products generate different gross profit margins, and the relative sales mix of higher gross profit products and lower gross profit products can affect our total gross profit.

          The following table sets forth our gross profit for the second quarter of 2011 and 2010, along with the percentage of net revenues represented by such gross profit (dollar amounts in millions):

	Second Quarter			Second Quarter
	2011			2010			$ Change		% Change
Gross profit	$	172.6		$	157.3		$	15.3		9.7	%
% of net revenues		90.4	%		90.6	%

          The increase in gross profit during the second quarter of 2011 as compared to the second quarter of 2010 is primarily due to the $17.2 million increase in net revenues.

Selling, General and Administrative Expenses

          The following table sets forth our selling, general and administrative expenses for the second quarter of 2011 and 2010, along with the percentage of net revenues represented by selling, general and administrative expenses (dollar amounts in millions):

	Second Quarter			Second Quarter
	2011			2010			$ Change		% Change
Selling, general and administrative	$	90.4		$	77.1		$	13.3		17.3	%
% of net revenues		47.4	%		44.4	%
Share-based compensation expense included in selling, general and administrative	$	8.7		$	2.1		$	6.6		314.3	%

          Selling, general and administrative expenses increased $13.3 million, or 17.3%, during the second quarter of 2011 as compared to the second quarter of 2010, and increased as a percentage of net revenues from 44.4% during the second quarter of 2010 to 47.4% during the second quarter of 2011. Included in this increase was a $10.3 million increase in personnel expenses, including a $6.6 million increase in stock compensation expense, primarily related to the revaluation of stock appreciation rights (“SARs”) awards based on changes in the market price of our common stock, a $3.6 million increase in promotion costs and a decrease of $0.6 million of other selling, general and administrative costs.

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Research and Development Expenses

          The following table sets forth our research and development expenses for the second quarter of 2011 and 2010 (dollar amounts in millions):

	Second Quarter		Second Quarter
	2011		2010		$ Change		% Change
Research and development	$	15.2	$	7.4	$	7.8		105.4	%
Charges included in research and development	$	7.5	$	—	$	7.5		100.0	%
Share-based compensation expense included in research and development	$	0.6	$	0.1	$	0.5		500.0	%

          Included in research and development expenses for the second quarter of 2011 was a $5.5 million payment related to a product development agreement with a privately-held U.S. biotechnology company and $2.0 million paid to a Medicis partner related to a product development agreement. We expect research and development expenses to continue to fluctuate from quarter to quarter based on the timing of the achievement of development milestones under license and development agreements, as well as the timing of other development projects and the funds available to support these projects.

Depreciation and Amortization Expenses

          Depreciation and amortization expenses during the second quarter of 2011 were $7.1 million, as compared to $6.9 million during the second quarter of 2010, primarily due to increased depreciation expense for property and equipment.

Interest and Investment Income

          Interest and investment income during the second quarter of 2011 increased $0.4 million, or 58.8%, to $1.2 million from $0.8 million during the second quarter of 2010, due to an increase in the amount of funds available for investment during the second quarter of 2011.

Interest Expense

          Interest expense during each of the second quarter of 2011 and the second quarter of 2010 was $1.1 million. Our interest expense during the second quarter of 2011 and 2010 consisted of interest expense on our Old Notes, which accrue interest at 2.5% per annum, and our New Notes, which accrue interest at 1.5% per annum. In addition, during the second quarter of 2011, approximately $0.1 million of contingent interest was accrued related to our Old Notes. See Note 12 in our accompanying condensed consolidated financial statements for further discussion on the Old Notes and New Notes.

Income Tax Expense

          Our effective tax rate for continuing operations for the second quarter of 2011 was 42.5%, as compared to 37.6% for the second quarter of 2010. The effective tax rate for the second quarter of 2011 reflects the impact of the non-deductibility of a $5.5 million milestone payment associated with a product development agreement with a privately-held U.S. biotechnology company.

Loss from Discontinued Operations, Net of Income Tax Benefit

          Loss from discontinued operations, net of income tax benefit, was $5.7 million during the second quarter of 2011, as compared to $4.4 million during the second quarter of 2010. See Note 2 in our accompanying condensed consolidated financial statements for further discussion.

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Six Months Ended June 30, 2011 Compared to the Six Months Ended June 30, 2010

Net Revenues

          The following table sets forth our net revenues for the six months ended June 30, 2011 (the “2011 six months”) and June 30, 2010 (the “2010 six months”), along with the percentage of net revenues and percentage point change for each of our product categories (dollar amounts in millions):

	2011 Six		2010 Six
	Months		Months		$ Change			% Change
Net product revenues	$	353.7	$	335.3	$	18.4			5.5	%
Net contract revenues		2.0		3.8		(1.8	)		(47.4)	%
Total net revenues	$	355.7	$	339.1	$	16.6			4.9	%

	2011 Six		2010 Six
	Months		Months		$ Change			% Change
Acne and acne-related dermatological products	$	226.6	$	245.0	$	(18.4	)		(7.5)	%
Non-acne dermatological products		109.9		75.2		34.7			46.1	%
Non-dermatological products (including contract revenues)		19.2		18.9		0.3			1.6	%
Total net revenues	$	355.7	$	339.1	$	16.6			4.9	%

	2011 Six			2010 Six
	Months			Months			Change
Acne and acne-related dermatological products		63.7	%		72.2	%		(8.5)	%
Non-acne dermatological products		30.9	%		22.2	%		8.7	%
Non-dermatological products (including contract revenues)		5.4	%		5.6	%		(0.2)	%
Total net revenues		100.0	%		100.0	%		—	%

          Net revenues associated with our acne and acne-related dermatological products decreased by $18.4 million, or 7.5%, during the 2011 six months as compared to the 2010 six months primarily as a result of a decrease in net revenues of TRIAZ^®. The decrease in net revenues of TRIAZ^® was primarily due to our early 2011 discontinuation of TRIAZ^® as a result of the FDA’s requirement that, effective March 4, 2011, prescription benzoyl peroxide products that are not approved through a New Drug Application, such as TRIAZ^®, not be sold as prescription products.

          Net revenues associated with our non-acne dermatological products increased by $34.7 million, or 46.1%, during the 2011 six months as compared to the 2010 six months, primarily due to increased sales of DYSPORT^® and VANOS^®.

Gross Profit

          Gross profit represents our net revenues less our cost of product revenue. Our cost of product revenue includes our acquisition cost for the products we purchase from our third party manufacturers and royalty payments made to third parties. Amortization of intangible assets related to products sold is not included in gross profit. Amortization

37

expense related to these intangibles for the 2011 six months and 2010 six months was approximately $10.7 million and $10.4 million, respectively. Product mix plays a significant role in our quarterly and annual gross profit as a percentage of net revenues. Different products generate different gross profit margins, and the relative sales mix of higher gross profit products and lower gross profit products can affect our total gross profit.

          The following table sets forth our gross profit for the 2011 six months and 2010 six months, along with the percentage of net revenues represented by such gross profit (dollar amounts in millions):

	2011 Six			2010 Six
	Months			Months			$ Change		% Change
Gross profit	$	323.2		$	307.7		$	15.5		5.0	%
% of net revenues		90.8	%		90.7	%

          The increase in gross profit during the 2011 six months as compared to the 2010 six months is primarily due to the $16.6 million increase in net revenues.

Selling, General and Administrative Expenses

          The following table sets forth our selling, general and administrative expenses for the 2011 six months and 2010 six months, along with the percentage of net revenues represented by selling, general and administrative expenses (dollar amounts in millions):

	2011 Six			2010 Six
	Months			Months			$ Change		% Change
Selling, general and administrative	$	175.0		$	149.4		$	25.6		17.1	%
% of net revenues		49.2	%		44.0	%
Share-based compensation expense included in selling, general and administrative expense	$	15.0		$	5.0		$	10.0		200.0	%

     Selling, general and administrative expenses increased $25.6 million, or 17.1%, during the 2011 six months as compared to the 2010 six months, and increased as a percentage of net revenues from 44.0% during the 2010 six months to 49.2% during the 2011 six months. Included in this increase was an $18.8 million increase in personnel expenses, including a $10.0 million increase in stock compensation expense, primarily related to the revaluation of SARs awards based on changes in the market price of our common stock, a $2.6 million increase in promotion costs and an increase of $4.2 million of other selling, general and administrative costs.

Research and Development Expenses

     The following table sets forth our research and development expenses for the 2011 six months and 2010 six months (dollar amounts in millions):

	2011 Six		2010 Six
	Months		Months		$ Change		% Change
Research and development	$	29.5	$	14.0	$	15.5		110.7	%
Charges included in research and development	$	14.5	$	—	$	14.5		100.0	%
Share-based compensation expense included in research and development	$	1.0	$	0.1	$	0.9		900.0	%

          Included in research and development expenses for the 2011 six months was a $7.0 million payment to Anacor related to a product development agreement, a $5.5 million payment related to a product development agreement with a privately-held U.S. biotechnology company and $2.0 million paid to a Medicis partner related to a

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product development agreement. We expect research and development expenses to continue to fluctuate from quarter to quarter based on the timing of the achievement of development milestones under license and development agreements, as well as the timing of other development projects and the funds available to support these projects.

Depreciation and Amortization Expenses

          Depreciation and amortization expenses during the 2011 six months were $14.4 million, as compared to $13.6 million during the 2010 six months, primarily due to increased depreciation expense for property and equipment.

Interest and Investment Income

          Interest and investment income during the 2011 six months increased $0.6 million, or 29.5%, to $2.5 million from $1.9 million during the 2010 six months, due to an increase in the amount of funds available for investment during the first half of 2011.

Interest Expense

          Interest expense during the 2011 six months and the 2010 six months was $2.2 million and $2.1 million, respectively. Our interest expense during the 2011 six months and 2010 six months consisted of interest expense on our Old Notes, which accrue interest at 2.5% per annum, and our New Notes, which accrue interest at 1.5% per annum. In addition, during the 2011 six months, approximately $0.1 million of contingent interest was accrued related to our Old Notes. See Note 12 in our accompanying condensed consolidated financial statements for further discussion on the Old Notes and New Notes.

Other Expense, net

          Other expense of $0.3 million recognized during the 2010 six months represented an other-than-temporary impairment on an asset-backed security investment.

Income Tax Expense

          Our effective tax rate for the 2011 six months was 41.5%, as compared to 37.9% for the 2010 six months. The effective tax rate for the 2011 six months reflects the impact of the non-deductibility of a $5.5 million milestone payment associated with a product development agreement with a privately-held U.S. biotechnology company.

Loss from Discontinued Operations, Net of Income Tax Benefit

          Loss from discontinued operations, net of income tax benefit, was $13.1 million during the 2011 six months, as compared to $9.1 million during the 2010 six months. See Note 2 in our accompanying condensed consolidated financial statements for further discussion.

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Liquidity and Capital Resources

Overview

          The following table highlights selected cash flow components for the second quarter of 2011 and 2010, and selected balance sheet components as of June 30, 2011 and December 31, 2010 (dollar amounts in millions):

	2011			2010
	Six Months			Six Months			$ Change			% Change
Cash provided by (used in):
Operating activities	$	72.6		$	60.0		$	12.6			21.0	%
Investing activities		(189.2	)		(166.4	)		(22.8	)		(13.7)	%
Financing activities		48.4			(3.5	)		51.9			1,482.9	%

	June 30, 2011		Dec. 31, 2010		$ Change			% Change
Cash, cash equivalents, and short-term investments	$	805.8	$	703.6	$	102.2			14.5	%
Working capital		507.2		628.4		(121.2	)		(19.3)	%
Long-term investments		22.4		21.5		0.9			4.2	%
2.5% contingent convertible senior notes due 2032		169.1		169.1		—			—	%
1.5% contingent convertible senior notes due 2033		0.2		0.2		—			—	%

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Working Capital

          Working capital as of June 30, 2011 and December 31, 2010 consisted of the following (dollar amounts in millions):

	June 30, 2011		Dec. 31, 2010		$ Change			% Change
Cash, cash equivalents, and short-term investments	$	805.8	$	703.6	$	102.2			14.5	%
Accounts receivable, net		166.4		130.6		35.8			27.4	%
Inventories, net		30.8		35.3		(4.5	)		(12.7	)%
Deferred tax assets, net		24.6		70.5		(45.9	)		(65.1	)%
Other current assets		19.3		15.2		4.1			27.0	%
Assets held for sale from discontinued operations		10.2		13.1		(2.9	)		(22.1	)%
Total current assets		1,057.1		968.3		88.8			9.2	%
Accounts payable		45.4		41.0		4.4			10.7	%
Current portion of contingent convertible senior notes		169.1		—		169.1			100.0	%
Reserve for sales returns		78.2		60.7		17.5			28.8	%
Accrued consumer rebate and loyalty programs		124.9		101.7		23.2			22.8	%
Managed care and Medicaid reserves		51.3		49.4		1.9			3.8	%
Income taxes payable		—		4.6		(4.6	)		(100.0	)%
Other current liabilities		73.8		75.2		(1.4	)		(1.9	)%
Liabilities held for sale from discontinued operations		7.2		7.3		(0.1	)		(1.4	)%
Total current liabilities		549.9		339.9		210.0			61.8	%
Working capital	$	507.2	$	628.4	$	(121.2	)		(19.3	)%

          We had cash, cash equivalents and short-term investments of $805.8 million and working capital of $507.2 million at June 30, 2011, as compared to $703.6 million and $628.4 million, respectively, at December 31, 2010. The increase in cash, cash equivalents and short-term investments was primarily due to the generation of $72.6 million of operating cash flow and $54.0 million of proceeds received from stock option exercises during the 2011 six months.

          Accounts receivable, net, increased $35.8 million, or 27.4%, from $130.6 million at December 31, 2010 to $166.4 million at June 30, 2011. The increase was primarily due to a $44.8 million increase in gross sales during the month of June 2011 as compared to the month of December 2010. As our standard payment terms are 30 days, orders that occur during the last month of a quarter are typically not due for payment until after the end of the quarter. Gross sales during the month of June 2011 were $185.2 million, or 52.4% of the total gross sales for the second quarter of 2011, as compared to gross sales during the month of December 2010 of $140.4 million, or 45.1% of total gross sales for the fourth quarter of 2010. Days’ sales outstanding, calculated as accounts receivable, net, as of the end of the reporting period, divided by total gross sales for the quarter, multiplied by the number of days in the quarter, was 43 days as of June 30, 2011 as compared to 39 days as of December 31, 2010. The increase in days’ sales outstanding was primarily due to the timing of orders placed by customers during the second quarter of 2011 as compared to the fourth quarter of 2010. Although more of the customers’ purchases during the second quarter of 2011 occurred during the last month of the quarter as compared to the last month of the fourth quarter of 2010, their total purchases for the second quarter of 2011 were consistent with previous quarters. We sell our products primarily to major wholesalers and retail chain drugstores. We have distribution services agreements with our two largest wholesale customers. We review the supply levels of our significant products sold to major wholesalers by reviewing periodic inventory reports that are supplied to us by our major wholesalers in accordance

41

with the distribution services agreements. We rely wholly upon our wholesale and retail chain drugstore customers to effect the distribution allocation of substantially all of our prescription products. We also defer the recognition of revenue for certain sales of inventory into the distribution channel that are in excess of eight (8) weeks of projected demand, and we defer the recognition of revenue of our aesthetics products DYSPORT^®, PERLANE^® and RESTYLANE^®, until our exclusive U.S. distributor, McKesson, ships these products to physicians. There has not been a significant change in inventories in the distribution channel during the quarter ended June 30, 2011.

          Management believes existing cash and short-term investments, together with funds generated from operations, should be sufficient to meet operating requirements for the foreseeable future. Our cash and short-term investments are available for dividends, milestone payments related to our product development collaborations, strategic investments, acquisitions of companies or products complementary to our business, the repayment of outstanding indebtedness, repurchases of our outstanding securities and other potential large-scale needs. In addition, we may consider incurring additional indebtedness and issuing additional debt or equity securities in the future to fund potential acquisitions or investments, to refinance existing debt or for general corporate purposes. If a material acquisition or investment is completed, our operating results and financial condition could change materially in future periods. However, no assurance can be given that additional funds will be available on satisfactory terms, or at all, to fund such activities.

          As of June 30, 2011, our short-term investments included $19.9 million of auction rate floating securities. Our auction rate floating securities are debt instruments with a long-term maturity and with an interest rate that is reset in short intervals through auctions. During the three months ended March 31, 2008, we were informed that there was insufficient demand at auction for the auction rate floating securities, and since that time we have been unable to liquidate our holdings in such securities. As a result, these affected auction rate floating securities are now considered illiquid, and we could be required to hold them until they are redeemed by the holder at maturity or until a future auction on these investments is successful. During the 2011 six months, we liquidated $2.0 million of our auction rate floating securities at par.

Operating Activities

          Net cash provided by operating activities during the 2011 six months was approximately $72.6 million, compared to cash provided by operating activities of approximately $60.0 million during the 2010 six months. The following is a summary of the primary components of cash provided by operating activities during the 2011 six months and 2010 six months (in millions):

	2011			2010
	Six Months			Six Months
Income taxes paid	$	(38.0	)	$	(47.7	)
Payment made to Anacor related to development agreement		(7.0	)		—
Payment made related to development agreement with a privately-held U.S. biotechnology company		(5.5	)		—
Payment made to a Medicis partner related to a development agreement		(2.0	)		—
Increase in accounts receivable		(36.9	)		(42.8	)
Increase in reserve for returns		17.5			1.1
Increase in accrued consumer rebates and loyalty programs		23.2			17.1
Decrease in other current liabilities		(17.3	)		(2.3	)
Cash used in operating activities from discontinued operations		(10.0	)		(5.3	)
Other cash provided by operating activities		148.6			139.9
Cash provided by operating activities	$	72.6		$	60.0

Investing Activities

          Net cash used in investing activities during the 2011 six months was approximately $189.2 million, compared to net cash used in investing activities during the 2010 six months of $166.4 million. The change was primarily due to the net purchases and sales of our short-term and long-term investments during the respective periods.

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Financing Activities

          Net cash provided by financing activities during the 2011 six months was $48.4 million, compared to net cash used in financing activities of $3.5 million during the 2010 six months. Proceeds from the exercise of stock options were $54.0 million during the 2011 six months compared to $2.2 million during the 2010 six months. Dividends paid during the 2011 six months were $8.5 million and dividends paid during the 2010 six months were $6.0 million.

Contingent Convertible Senior Notes and Other Long-Term Commitments

          We have two outstanding series of Contingent Convertible Senior Notes, consisting of $169.1 million principal amount of 2.5% Contingent Convertible Senior Notes due 2032 (the “Old Notes”) and $0.2 million principal amount of 1.5% Contingent Convertible Senior Notes due 2033 (the “New Notes”). The New Notes and the Old Notes are unsecured and do not contain any restrictions on the incurrence of additional indebtedness or the repurchase of our securities, and do not contain any financial covenants. The Old Notes do not contain any restrictions on the payment of dividends. The New Notes require an adjustment to the conversion price if the cumulative aggregate of all current and prior dividend increases above $0.025 per share would result in at least a one percent (1%) increase in the conversion price. This threshold has not been reached and no adjustment to the conversion price has been made.

          On June 4, 2012 and 2017, or upon the occurrence of a change in control, holders of the Old Notes may require us to offer to repurchase their Old Notes for cash. On June 4, 2013 and 2018, or upon the occurrence of a change in control, holders of the New Notes may require us to offer to repurchase their New Notes for cash. Under GAAP, if an obligation is due on demand or will be due on demand within one year from the balance sheet date, even though liquidation may not be expected within that period, it should be classified as a current liability. Accordingly, the outstanding balance of Old Notes along with the deferred tax liability associated with accelerated interest deductions on the Old Notes will be classified as a current liability during the respective twelve month periods prior to June 4, 2012 and June 4, 2017. As of June 30, 2011, $169.1 million of the Old Notes and $57.9 million of deferred tax liabilities were classified as current liabilities in our condensed consolidated balance sheets. The $57.9 million of deferred tax liabilities were included within current deferred tax assets, net. If all of the Old Notes are put back to us on June 4, 2012, we would be required to pay $169.1 million in outstanding principal, plus accrued interest. We would also be required to pay the accumulated deferred tax liability related to the Old Notes.

          During the quarter ended June 30, 2011, the Old Notes met the criteria for the right of conversion into shares of the Company’s Class A common stock. This right of conversion of the holders of the Old Notes was triggered by the stock closing above $31.96 on 20 of the last 30 trading days and the last trading day of the quarter ended June 30, 2011. The holders of Old Notes have this conversion right only until September 30, 2011. At the end of each future quarter, the conversion rights will be reassessed in accordance with the bond indenture agreement to determine if the conversion trigger rights have been achieved. During the quarter ended June 30, 2011, the New Notes did not meet the criteria for the right of conversion.

          Except for the New Notes, we had only $39.0 million of long-term liabilities at June 30, 2011, and, except for the Old Notes, we had $380.7 million of current liabilities at June 30, 2011. Our other commitments and planned expenditures consist principally of payments we will make in connection with strategic collaborations and research and development expenditures, and we will continue to invest in sales and marketing infrastructure.

Dividends

     We do not have a dividend policy. Prior to July 2003, we had not paid a cash dividend on our common stock. Since July 2003, we have paid quarterly cash dividends aggregating approximately $68.4 million on our common stock. In addition, on June 8, 2011, we announced that our Board of Directors had declared a cash dividend of $0.08 per issued and outstanding share of common stock, which was paid on July 29, 2011, to our stockholders of record at the close of business on July 1, 2011. Any future determinations to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon our financial condition, operating results, capital requirements and other factors that our Board of Directors deems relevant.

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Fair Value Measurements

          We utilize unobservable (Level 3) inputs in determining the fair value of our auction rate floating security investments, which totaled $19.9 million at June 30, 2011. These securities were included in long-term investments at June 30, 2011.

          Our auction rate floating securities are classified as available-for-sale securities and are reflected at fair value. In prior periods, due to the auction process which took place every 30-35 days for most securities, quoted market prices were readily available, which would qualify as Level 1 under ASC 820, Fair Value Measurements and Disclosure. However, due to events in credit markets that began during the first quarter of 2008, the auction events for most of these instruments failed, and, therefore, we determined the estimated fair values of these securities, beginning in the first quarter of 2008, utilizing a discounted cash flow analysis. These analyses consider, among other items, the collateralization underlying the security investments, the expected future cash flows, including the final maturity, associated with the securities, and the expectation of the next time the security is expected to have a successful auction. These securities were also compared, when possible, to other observable market data with similar characteristics to the securities held by us. Due to these events, we reclassified these instruments as Level 3 during the first quarter of 2008.

Off-Balance Sheet Arrangements

          As of June 30, 2011, we are not involved in any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Securities and Exchange Commission (“SEC”) Regulation S-K.

Critical Accounting Policies and Estimates

          The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of the condensed consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates related to sales allowances, chargebacks, rebates, returns and other pricing adjustments, depreciation and amortization and other contingencies and litigation. We base our estimates on historical experience and various other factors related to each circumstance. Actual results could differ from those estimates based upon future events, which could include, among other risks, changes in the regulations governing the manner in which we sell our products, changes in the health care environment and managed care consumption patterns. Our significant accounting policies are described in Note 2 to the consolidated financial statements included in our Form 10-K for the year ended December 31, 2010. There were no new significant accounting estimates in the second quarter of 2011, nor were there any material changes to the critical accounting policies and estimates discussed in our Form 10-K for the year ended December 31, 2010.

Items Deducted From Gross Revenue

          Our accounting policies for revenue recognition have a significant impact on our reported results and rely on certain estimates that require complex and subjective judgment on the part of our management. If the levels of product returns, inventory in the distribution channel, cash discounts, chargebacks, managed care and Medicaid rebates and consumer rebate and loyalty programs fluctuate significantly and/or if our estimates do not adequately reserve for these reductions of gross product revenues, our reported net product revenues could be negatively affected.

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          The following table shows the activity of each reserve, associated with the various sales provisions that serve to reduce our accounts receivable balance or increase our accrued expenses or deferred revenue, for the three months ended June 30, 2011 and 2010 (in thousands):

													Managed			Consumer
													Care &			Rebate
	Reserve						Sales						Medicaid			and
	for Sales			Deferred			Discounts			Chargebacks			Rebates			Loyalty
	Returns			Revenue			Reserve			Reserve			Reserve			Programs			Total
Balance at Mar. 31, 2011	$	73,802		$	4,217		$	2,351		$	1,122		$	49,156		$	121,704		$	252,352
Actual		(13,069	)		—			(5,667	)		(1,560	)		(22,210	)		(108,559	)		(151,065	)
Provision		17,487			(1,776	)		6,971			1,927			24,293			111,777			160,679
Balance at June 30, 2011	$	78,220		$	2,441		$	3,655		$	1,489		$	51,239		$	124,922		$	261,966

													Managed			Consumer
													Care &			Rebate
	Reserve						Sales						Medicaid			and
	for Sales			Deferred			Discounts			Chargebacks			Rebates			Loyalty
	Returns			Revenue			Reserve			Reserve			Reserve			Programs			Total
Balance at Mar. 31, 2010	$	43,716		$	2,561		$	2,365		$	1,148		$	48,964		$	94,582		$	193,336
Actual		(8,455	)		—			(5,185	)		(1,028	)		(26,517	)		(77,011	)		(118,196	)
Provision		13,933			(1,254	)		5,778			801			21,963			72,793			114,014
Balance at June 30, 2010	$	49,194		$	1,307		$	2,958		$	921		$	44,410		$	90,364		$	189,154

          The provision for product returns was $17.5 million, or 5.0% of gross product sales, and $13.9 million, or 4.8% of gross product sales, for the three months ended June 30, 2011 and 2010, respectively. The reserve for product returns increased $4.4 million, from $73.8 million as of March 31, 2011 to $78.2 million as of June 30, 2011. The increase in the provision during the comparable periods and in the reserve during the three months ended June 30, 2011 was primarily related to additional estimated required reserves for newly-launched products.

          The provision for cash discounts was $7.0 million, or 2.0% of gross product sales, and $5.8 million, or 2.0% of gross product sales, for the three months ended June 30, 2011 and 2010, respectively. The reserve for cash discounts increased $1.3 million, from $2.4 million as of March 31, 2011 to $3.7 million as of June 30, 2011. The increase in the provision during the comparable periods was due to an increase in gross product sales. The balance in the reserve for sales discounts at the end of a quarterly period is related to the amount of accounts receivable that is outstanding at that date that is still eligible for the cash discounts to be taken by the customers. The fluctuation in the reserve for sales discounts between periods is normally reflective of increases or decreases in the related eligible outstanding accounts receivable amounts at the comparable dates.

          The provision for consumer rebates and loyalty programs was $111.8 million, or 31.8% of gross product sales, and $72.8 million, or 25.0% of gross product sales, for the three months ended June 30, 2011 and 2010,

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respectively. The reserve for consumer rebates and loyalty programs increased $3.2 million, from $121.7 million as of March 31, 2011 to $124.9 million as of June 30, 2011. The increase in the provision during the comparable periods and in the reserve during the three months ended June 30, 2011 was primarily due to the continued growth in consumer rebate programs related to our SOLODYN^®, ZIANA^® RESTYLANE^® and PERLANE^® products.

          The following table shows the activity of each reserve, associated with the various sales provisions that serve to reduce our accounts receivable balance or increase our accrued expenses or deferred revenue, for the six months ended June 30, 2011 and 2010 (in thousands):

												Managed			Consumer
												Care &			Rebate
	Reserve					Sales						Medicaid			and
	for Sales			Deferred		Discounts			Chargebacks			Rebates			Loyalty
	Returns			Revenue		Reserve			Reserve			Reserve			Programs			Total
Balance at Dec. 31, 2010	$	60,692		$	582	$	2,830		$	1,151		$	49,375		$	101,678		$	216,308
Actual		(25,097	)		—		(12,724	)		(2,834	)		(47,439	)		(189,182	)		(277,276	)
Provision		42,625			1,859		13,549			3,172			49,303			212,426			322,934
Balance at June 30, 2011	$	78,220		$	2,441	$	3,655		$	1,489		$	51,239		$	124,922		$	261,966

												Managed			Consumer
												Care &			Rebate
	Reserve					Sales						Medicaid			and
	for Sales			Deferred		Discounts			Chargebacks			Rebates			Loyalty
	Returns			Revenue		Reserve			Reserve			Reserve			Programs			Total
Balance at Dec. 31, 2009	$	48,062		$	1,263	$	2,160		$	688		$	47,078		$	73,311		$	172,562
Actual		(13,008	)		—		(10,397	)		(2,181	)		(47,790	)		(129,981	)		(203,357	)
Provision		14,140			44		11,195			2,414			45,122			147,034			219,949
Balance at June 30, 2010	$	49,194		$	1,307	$	2,958		$	921		$	44,410		$	90,364		$	189,154

          The provision for product returns was $42.6 million, or 6.2% of gross product sales, and $14.1 million, or 2.5% of gross product sales, for the six months ended June 30, 2011 and 2010, respectively. The reserve for product returns increased $17.5 million, from $60.7 million as of December 31, 2010 to $78.2 million as of June 30, 2011. The increase in the provision during the comparable periods and in the reserve during the six months ended June 30, 2011 was primarily related to additional estimated required reserves for newly-launched products.

          The provision for cash discounts was $13.5 million, or 2.0% of gross product sales, and $11.2 million, or 2.0% of gross product sales, for the six months ended June 30, 2011 and 2010, respectively. The reserve for cash discounts increased $0.9 million, from $2.8 million as of December 31, 2010 to $3.7 million as of June 30, 2011. The increase in the provision during the comparable periods was due to an increase in gross product sales.

          The provision for consumer rebates and loyalty programs was $212.4 million, or 30.7% of gross product sales, and $147.0 million, or 25.9% of gross product sales, for the six months ended June 30, 2011 and 2010,

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respectively. The reserve for consumer rebates and loyalty programs increased $23.2 million, from $101.7 million as of December 31, 2010 to $124.9 million as of June 30, 2011. The increase in the provision during the comparable periods and in the reserve during the six months ended June 30, 2011 was primarily due to the continued growth in consumer rebate programs related to our SOLODYN^®, ZIANA^® RESTYLANE^® and PERLANE^® products.

Recent Accounting Pronouncements

          In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (Topic 820) — Fair Value Measurement, to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU No. 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements. ASU No. 2011-04 is effective for interim and annual reporting periods beginning after December 15, 2011 and must be applied prospectively. We are currently assessing what impact, if any, the revised guidance will have on our results of operations and financial condition.

          In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The updated guidance amends the FASB Accounting Standards Codification (“Codification”) to allow 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 alternatives, 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. ASU No. 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments to the Codification in the ASU 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 No. 2011-05 will be applied retrospectively. ASU No. 2011-05 is effective for annual reporting periods beginning after December 15, 2011, with early adoption permitted, and will be applied retrospectively. It is expected that the adoption of this amendment will only impact the presentation of comprehensive income within our consolidated financial statements.

Forward Looking Statements

          This Quarterly Report on Form 10-Q and other documents we file with the SEC include forward-looking statements. These include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales and marketing efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. From time to time, we also may make forward-looking statements in press releases or written statements, or in our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based on certain assumptions made by us based on our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecast by our forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” “should,” “outlook,” “could,” “target,” and other words and terms of similar meaning in connection with any discussion of future operations or financial performance. Among the factors that could cause actual results to differ materially from our forward-looking statements are the following:

• development and launch of new competitive products, including over-the-counter or generic competitor products;

• the ability to compete against generic and other branded products;

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• increases or decreases in the expected costs to be incurred in connection with the research and development, clinical trials, regulatory approvals, commercialization and marketing of our products;

• the success of research and development activities, including the development of additional forms of SOLODYN^®, and our ability to obtain regulatory approvals;

• the speed with which regulatory authorizations and product launches may be achieved;

• changes in the FDA’s position on the safety or effectiveness of our products;

• changes in our product mix;

• the anticipated size of the markets and demand for our products;

• changes in prescription levels;

• the impact of acquisitions, divestitures and other significant corporate transactions, including the disposition of LipoSonix;

• the effect of economic changes generally and in hurricane-affected areas;

• manufacturing or supply interruptions;

• importation of other dermal filler or botulinum toxin products, including the unauthorized distribution of products approved in countries neighboring the U.S.;

• changes in the prescribing or procedural practices of dermatologists and/or plastic surgeons, including prescription levels;

• the ability to successfully market both new products and existing products;

• difficulties or delays in manufacturing and packaging of our products, including delays and quality control lapses of third party manufacturers and suppliers of our products;

• the availability of product supply or changes in the cost of raw materials;

• trends toward managed care and health care cost containment, including health care initiatives and other third-party cost-containment pressures that could impose financial burdens or cause us to sell our products at lower prices, resulting in decreased revenues;

• inadequate protection of our intellectual property or challenges to the validity or enforceability of our proprietary rights and our ability to secure patent protection from filed patent applications for our primary products, including SOLODYN^®;

• possible introduction of generic versions of our products, including SOLODYN^®;

• possible federal and/or state legislation or regulatory action affecting, among other things, the Company’s ability to enter into agreements with companies introducing generic versions of the Company’s products as well as pharmaceutical pricing, federal pharmaceutical contracts, mandatory discounts, and reimbursement, including under Medicaid and Medicare and involuntary approval of prescription medicines for over-the-counter use;

• legal defense costs, insurance expenses, settlement costs and the risk of an adverse decision or settlement related to product liability, patent protection, government investigations, and other legal proceedings (see Note 17 in our accompanying condensed consolidated financial statements and Part II, Item 1, Legal Proceedings);

• changes in U.S. generally accepted accounting principles;

• additional costs related to compliance with changing regulation of corporate governance and public financial disclosure;

• any changes in business, political and economic conditions due to the threat of future terrorist activity in the U.S. and other parts of the world;

• access to available and feasible financing on a timely basis;

• the availability of product acquisition or in-licensing opportunities;

• the risks and uncertainties normally incident to the pharmaceutical and medical device industries, including product liability claims;

• the risks and uncertainties associated with obtaining necessary FDA approvals;

• the inability to obtain required regulatory approvals for any of our pipeline products;

• unexpected costs and expenses, or our ability to limit costs and expenses as our business continues to grow;

• decreases in revenues associated with the Company’s early 2011 discontinuation of TRIAZ^® and decision to no longer promote PLEXION^®;

• downturns in general economic conditions that negatively affect our dermal restorative and branded prescription products, and our ability to accurately forecast our financial performance as a result;

• changes in our stock price, economic or other market conditions or corporate or regulatory requirements affecting our ability to consummate repurchases under our Stock Repurchase Plan;

• failure to comply with our corporate integrity agreement, which could result in substantial civil or criminal penalties and our being excluded from government health care programs, which could materially reduce our sales and adversely affect our financial condition and results of operations; and

• the inability to successfully integrate newly-acquired entities.

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          We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to review any future disclosures contained in the reports that we file with the SEC. Our Annual Report on Form 10-K for the year ended December 31, 2010, and this Quarterly Report contain discussions of various risks relating to our business that could cause actual results to differ materially from expected and historical results, which you should review. You should understand that it is not possible to predict or identify all such risks. Consequently, you should not consider any such list or discussion to be a complete set of all potential risks or uncertainties.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

          As of June 30, 2011, there were no material changes to the information previously reported under Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2010.

Item 4. Controls and Procedures

          We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) that are designed to ensure that information required to be disclosed in reports filed by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer, with the participation of other members of management, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2011, and have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

          Although the management of the Company, including the Chief Executive Officer and the Chief Financial Officer, believes that our disclosure controls and internal controls currently provide reasonable assurance that our desired control objectives have been met, management does not expect that our disclosure controls or internal controls will prevent 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 system 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 all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the 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. Additionally, controls can 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 also based in part upon 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.

          During the three months ended June 30, 2011, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

Lupin SOLODYN^® Litigation

          On October 8, 2009, we received a Paragraph IV Patent Certification from Lupin Ltd. (“Lupin”) advising that Lupin had filed an Abbreviated New Drug Application (“ANDA”) with the U.S. Food and Drug Administration (“FDA”) for generic versions of SOLODYN^® in 45mg, 90mg, and 135mg strengths. Lupin did not advise us as to the timing or status of the FDA’s review of its filing, or whether it has complied with FDA requirements for proving bioequivalence. Lupin’s Paragraph IV Patent Certification alleges that our U.S. Patent No. 5,908,838 (the “‘838 Patent”) is invalid. Lupin’s Paragraph IV Patent Certification also alleges that our U.S. Patent Nos. 7,541,347, (the "'347 Patent”) and 7,544,373 (the “‘373 Patent”) are not infringed by Lupin’s manufacture, importation, use, sale and/or offer for sale of the products for which its ANDA was submitted. On November 17, 2009, we filed suit against Lupin in the United States District Court for the District of Maryland seeking an adjudication that Lupin has infringed one or more claims of the ‘838 Patent by submitting to the FDA its ANDA for generic versions of SOLODYN^® in 45mg, 90mg and 135mg strengths. The relief we requested includes a request for a permanent injunction preventing Lupin from infringing the ‘838 Patent by selling generic versions of SOLODYN^®. As a result of the filing of the suit, we believe that the ANDA cannot be approved by the FDA until after the expiration of a 30-month stay period or a court decision that the patent is invalid or not infringed.

          On November 24, 2009, we received a Paragraph IV Patent Certification from Lupin, advising that Lupin had filed a supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 with the FDA for a generic version of SOLODYN^® in 65mg strength. Lupin has not advised us as to the timing or status of the FDA’s review of its filing, or whether Lupin has complied with FDA requirements for proving bioequivalence. Lupin’s Paragraph IV Patent Certification alleges that our ‘838 Patent is invalid. Lupin’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the supplement or amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patent is invalid or not infringed.

          On December 23, 2009, we received a Paragraph IV Patent Certification from Lupin advising that Lupin had filed a supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 with the FDA for a generic version of SOLODYN^® in 115mg strength. Lupin has not advised us as to the timing or status of the FDA’s review of its filing, or whether Lupin has complied with FDA requirements for proving bioequivalence. Lupin’s Paragraph IV Patent Certification alleges that the ‘838 Patent is invalid. Lupin’s Paragraph IV Patent Certification also alleges that the ‘347 Patent and ‘373 Patent are not infringed by Lupin’s manufacture, importation, use, sale and/or offer for sale of the products for which the supplement or amendment was submitted. Lupin’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the supplement or amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patent is invalid or not infringed. On December 28, 2009, we amended our complaint against Lupin seeking an adjudication that Lupin has infringed one or more claims of the ‘838 Patent by submitting its supplement or amendment to its ANDA for a generic version of SOLODYN^® in 65mg strength. On February 2, 2010, we amended our complaint against Lupin seeking an adjudication that Lupin has infringed one or more claims of the ‘838 Patent by submitting its supplement or amendment to its earlier filed ANDA for a generic version of SOLODYN^® in 115mg strength.

          On July 1, 2010, we amended our complaint against Lupin in the United States District Court for the District of Maryland relating to Lupin’s filing of its ANDA, and amendments or supplements thereto, for generic versions of SOLODYN^® in 45mg, 65mg, 90mg, 115mg and 135mg strengths. We amended the complaint to assert new claims 19, 21, 23, 25 and 27-34 of the ‘838 Patent included in an Ex Parte Reexamination Certificate we received from the USPTO on June 1, 2010 in connection with a reexamination of the ‘838 Patent by the USPTO a the request of a third party. The complaint seeks an adjudication that Lupin has infringed one or more claims of the ‘838 Patent, including the new claims, by submitting the ANDA, and amendments or supplements thereto, to the FDA.

          On September 17, 2010, we received an additional Paragraph IV Patent Certification from Lupin advising that Lupin had filed a supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 with the FDA for generic versions of SOLODYN^® in 45mg, 65mg, 90mg, 115mg and 135mg strengths. Lupin’s Paragraph IV Patent Certification alleges that our U.S. Patent No. 7,790,705 (the “‘705 Patent”), which was issued to us by the

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U.S. Patent and Trademark Office (“USPTO”) on September 7, 2010, will not be infringed by Lupin’s manufacture, use, sale and/or importation of the products for which the supplement or amendment was submitted. Lupin’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the supplement or amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patent is invalid or not infringed.

          On October 18, 2010, we amended our complaint against Lupin in the United States District Court for the District of Maryland relating to Lupin’s filing of its ANDA, and amendments or supplements thereto for generic versions of SOLODYN^® in 45mg, 65mg, 90mg, 115mg and 135mg strengths. We amended the complaint to allege that Lupin has infringed one or more claims of the ‘705 Patent by submitting its ANDA, and amendments or supplements thereto, to the FDA to obtain approval for the commercial manufacture, use, offer for sale, sale, or distribution in and/or importation into the United States of its generic versions of SOLODYN^® before the expiration of the ‘705 Patent.

          On December 3, 2010, we received a Paragraph IV Patent Certification from Lupin advising that Lupin had filed a supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 with the FDA for generic versions of SOLODYN^® in 55mg and 80mg strengths. Lupin has not advised us as to the timing or status of the FDA’s review of its filing, or whether Lupin has complied with FDA requirements for proving bioequivalence. Lupin’s Paragraph IV Patent Certification alleges that the ‘838 Patent is invalid. Lupin’s Paragraph IV Patent Certification also alleges that the ‘705 Patent will not be infringed by Lupin’s manufacture, use, sale and/or importation of the products for which the supplement or amendment was submitted. Lupin’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the supplement or amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patents are invalid or not infringed. On January 10, 2011, we amended our complaint against Lupin seeking an adjudication that Lupin has infringed one or more claims of the ‘838 Patent and the ‘705 Patent by filing the supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 for generic versions of SOLODYN^® in 55mg and 80mg strengths.

          On January 24, 2011, we received a Paragraph IV Patent Certification from Lupin advising that Lupin had filed a supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 with the FDA for a generic version of SOLODYN^® in 105mg strength. Lupin has not advised us as to the timing or status of the FDA’s review of its filing, or whether Lupin has complied with FDA requirements for proving bioequivalence. Lupin’s Paragraph IV Patent Certification alleges that the ‘838 Patent is invalid. Lupin’s Paragraph IV Patent Certification also alleges that the ‘705 Patent will not be infringed by Lupin’s manufacture, use, sale and/or importation of the products for which the supplement or amendment was submitted. Lupin’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the supplement or amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patents are invalid or not infringed. On March 2, 2011, we amended our complaint against Lupin seeking an adjudication that Lupin has infringed one or more claims of the ‘838 Patent and the ‘705 Patent by filing the supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 for generic versions of SOLODYN^® in 105mg strength.

          On February 2, 2011, the Maryland Court issued an Order staying the litigation through and including April 1, 2011, to permit us and Lupin to discuss settlement of the litigation. On March 24, 2011, we and Lupin jointly requested that the Court extend the stay for an additional period through and including May 16, 2011, which was subsequently approved by the Court. On June 20, 2011, the Court issued a further Order staying the litigation through and including July 18, 2011.

          On April 19, 2011, we received a Paragraph IV Patent Certification from Lupin advising that Lupin had filed a supplement or amendment to its earlier filed ANDA assigned ANDA number 91-424 with the FDA for generic versions of SOLODYN^® in 45mg, 55mg, 65mg, 80mg, 90mg, 105mg, 115mg and 135 mg strengths. Lupin has not advised us as to the timing or status of the FDA’s review of its filing, or whether Lupin has complied with FDA requirements for proving bioequivalence. Lupin’s Paragraph IV Patent Certification alleges that our newly issued U.S. Patent No. 7,919,483 (the “‘483 Patent”), which was issued to us by the USPTO on April 5, 2011, will not be infringed by Lupin’s manufacture, use, sale and/or importation of the products for which the supplement or amendment was submitted. The expiration date for the ‘483 Patent is in February 2027. We are evaluating the details of Lupin’s certification letter and considering our options. Lupin’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patent is invalid or not infringed.

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          On July 21, 2011, we entered into a License and Settlement Agreement (the “Lupin Settlement Agreement”) with Lupin and Lupin Pharmaceuticals, Inc. (together referred to as “Lupin” hereunder). Under the terms of the Lupin Settlement Agreement, we agreed to grant to Lupin a future license to make and sell its generic versions of SOLODYN^® in 45mg, 90mg, and 135mg strengths under the SOLODYN^® intellectual property rights belonging to us, with the license grant effective November 26, 2011, or earlier under certain conditions. We also agreed to grant to Lupin future licenses to make and sell its generic versions of SOLODYN^® in 65mg and 115mg strengths effective in February 2018, or earlier under certain conditions, and its generic versions of SOLODYN^® in 55mg (against which Lupin’s Paragraph IV Patent Certification was the first received by us), 80mg and 105mg strengths effective in February 2019, or earlier under certain conditions. The Lupin Settlement Agreement provides that Lupin will be required to pay us royalties based on sales of Lupin’s generic SOLODYN^® products pursuant to the foregoing licenses. Pursuant to the Lupin Settlement Agreement, the companies agreed to terminate all legal disputes between them relating to SOLODYN^®. In addition, Lupin confirmed that our patents relating to SOLODYN^® are valid and enforceable, and cover Lupin’s activities relating to Lupin’s generic SOLODYN^® products under its ANDA. Lupin also agreed to be permanently enjoined from any distribution of generic SOLODYN^® products in the U.S. except as described above.

Aurobindo SOLODYN^® Litigation

          On October 26, 2010, we received a Paragraph IV Patent Certification from Aurobindo Pharma Limited (“Aurobindo Pharma”) advising that Aurobindo Pharma had filed an ANDA with the FDA for generic versions of SOLODYN^® in 45mg, 65mg, 90mg, 115mg and 135mg strengths. Aurobindo Pharma has not advised us as to the timing or status of the FDA’s review of its filing, or whether it has complied with FDA requirements for proving bioequivalence. Aurobindo Pharma’s Paragraph IV Patent Certification alleges that the ‘838 Patent is invalid. Aurobindo Pharma’s Paragraph IV Patent Certification also alleges that the ‘347 Patent, ‘373 Patent and ‘705 Patent are not infringed by Aurobindo Pharma’s manufacture, importation, use, sale and/or offer for sale of the products for which the ANDA was submitted.

          On December 3, 2010, we filed suit against Aurobindo Pharma and Aurobindo Pharma USA, Inc. (together, “Aurobindo”) in the United States District Court for the District of Delaware. On December 6, 2010, we also filed suit against Aurobindo in the United States District Court for the District of New Jersey. The suits seek an adjudication that Aurobindo has infringed one or more claims of the ‘838 Patent and the ‘705 Patent by submitting to the FDA an ANDA for generic versions of SOLODYN^® in 45mg, 65mg, 90mg, 115mg and 135mg strengths. The relief we requested includes a request for a permanent injunction preventing Aurobindo from infringing the asserted claims of the ‘838 Patent and the ‘705 Patent by engaging in the manufacture, use, importation, offer to sell, sale or distribution of generic versions of SOLODYN^® before the expiration of the patents.

          On June 1, 2011, we received a Paragraph IV Patent Certification from Aurobindo advising that Aurobindo had filed a supplement or amendment to its earlier filed ANDA with the FDA for generic versions of SOLODYN^® in 45mg, 65mg, 90mg, 115mg and 135mg strengths. Aurobindo has not advised us as to the timing or status of the FDA’s review of its filing, or whether Aurobindo has complied with FDA requirements for proving bioequivalence. Aurobindo’s Paragraph IV Patent Certification alleges that our newly issued U.S. Patent No. 7,919,483 (the "'483 Patent”), which was issued to us by the USPTO on April 15, 2011, will not be infringed by Aurobindo’s manufacture, use, sale and/or importation of the products for which the supplement or amendment was submitted. The expiration date for the ‘483 Patent is in February 2027. We are evaluating the details of Aurobindo’s certification letter and considering our options. Aurobindo’s submission amends an ANDA already subject to a 30-month stay. As such, we believe that the amendment cannot be approved by the FDA until after the expiration of the 30-month period or a court decision that the patent is invalid or not infringed.

Nycomed VANOS^® Litigation

          On April 7, 2010, we received a Paragraph IV Patent Certification from Nycomed US Inc. advising that Nycomed US Inc. had filed an ANDA with the FDA for a generic version of VANOS^®. Nycomed US Inc. has not advised us as to the timing or status of the FDA’s review of its filing, or whether it has complied with FDA requirements for proving bioequivalence. Nycomed US Inc.’s Paragraph IV Patent Certification alleges that our U.S. Patent Nos. 6,765,001 (the “‘001 Patent”) and 7,220,424 (the “‘424 Patent”) will not be infringed by Nycomed US Inc.’s manufacture, use, sale, offer for sale or importation of the product for which the ANDA was submitted.

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          On May 19, 2010, we filed suit against Nycomed US Inc. and Nycomed GmbH (together, hereunder “Nycomed”) in the United States District Court for the Southern District of New York and the United States District Court for the District of Delaware seeking an adjudication that Nycomed has infringed one or more claims of our ‘001 Patent, ‘424 Patent and U.S. Patent No. 7,217,422 (the "'422 Patent”) by submitting the ANDA to the FDA. The relief we requested includes a request for a permanent injunction preventing Nycomed from infringing the patents by selling a generic version of VANOS^® prior to the expiration of the asserted patents. On August 3, 2010, Nycomed responded in the New York action by filing an answer, affirmative defenses, and counterclaims alleging that the patents-in-suit are invalid, unenforceable, and will not be infringed by Nycomed’s proposed generic version of VANOS^®, and a motion to dismiss certain claims related to the patents-in-suit. On August 3, 2010, Nycomed responded in the Delaware action by filing a motion to transfer the Delaware action to New York and a motion to dismiss certain claims related to the patents-in-suit. We responded to Nycomed’s motions and pleadings on December 15, 2010.

          On December 23, 2010, Nycomed filed an amended answer and counterclaims in the New York action alleging only invalidity and noninfringement of the patents-in-suit. On January 14, 2011, we filed an answer to Nycomed’s amended counterclaims in the New York action denying that any of the asserted patents are invalid or not infringed. On January 19, 2011 and January 24, 2011, the New York court endorsed the parties’ stipulations withdrawing all pending motions.

          On January 19, 2011, the Delaware court endorsed the parties’ stipulation withdrawing Nycomed’s pending motion to dismiss and ordering Nycomed to answer or otherwise respond to the complaint. On February 2, 2011, Nycomed filed an answer with affirmative defenses alleging that the patents are invalid, unenforceable, and will not be infringed by Nycomed’s proposed generic version of VANOS^®. On March 31, 2011, the Delaware Court granted Nycomed’s motion to transfer the Delaware action to New York. On May 23, 2011, the New York Court consolidated the Delaware action with the New York action and entered a scheduling order. Pursuant to the Court’s schedule, discovery is set to close on May 4, 2012, and the parties are scheduled to submit a proposed Pretrial Order on June 1, 2012.

          On December 15, 2010, we filed a new complaint for patent infringement against Nycomed US Inc. in the United States District Court for the District of Delaware. Our new complaint seeks an adjudication that Nycomed US’s filing of its ANDA for fluocinonide cream 0.1% infringes one or more claims of our U.S. Patent No. 7,794,738 (the “‘738 Patent”). On February 15, 2011, Nycomed responded by filing a motion to transfer the new Delaware action to New York, as well as a motion to dismiss for failure to state a claim and lack of subject matter jurisdiction. Medicis opposed both motions on March 4, 2011, and Nycomed replied on April 12, 2011. On June 16, 2011, the Delaware Court granted Nycomed’s motion to transfer the case to New York. On July 19, 2011, Nycomed withdrew its motion to dismiss. On July 27, 2011, the New York Court consolidated this action with the other New York actions. Nycomed is scheduled to answer the complaint on August 12, 2011.

Stiefel VELTIN™ Litigation

          On July 28, 2010, we filed suit against Stiefel Laboratories, Inc., a subsidiary of GlaxoSmithKline plc (“Stiefel”), in the United States District Court for the Western District of Texas — San Antonio Division seeking a declaratory judgment that the manufacture and sale of Stiefel’s acne product VELTIN™ Gel, which was approved by the FDA in 2010, will infringe one or more claims of our U.S. Patent No. RE41,134 (the “‘134 Patent”) covering our product ZIANA^® Gel, a prescription topical gel indicated for the treatment of acne that was approved by the FDA in November 2006. The ‘134 Patent is listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (Orange Book) and expires in February 2015. We have rights to the ‘134 Patent pursuant to an exclusive license agreement with the owner of the patent. The relief we requested in the lawsuit includes a request for a permanent injunction preventing Stiefel from infringing the ‘134 Patent by engaging in the commercial manufacture, use, importation, offer to sell, or sale of any therapeutic composition or method of use covered by the ‘134 Patent, including such activities relating to VELTIN™, and from inducing or contributing to any such activities. On October 8, 2010, we and the owner of the ‘134 Patent filed a motion for a Preliminary Injunction seeking to enjoin sales of VELTIN™. The motion for Preliminary Injunction remains pending.

Actavis ZIANA^® Litigation

          On March 30, 2011, we received a Paragraph IV Patent Certification from Actavis Mid Atlantic LLC (“Actavis”) advising that Actavis has filed an ANDA with the FDA for a generic version of ZIANA^® (clindamycin

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phosphate 1.2% and tretinoin 0.025%) Gel. Actavis has not advised us as to the timing or status of the FDA’s review of its filing, or whether Actavis has complied with FDA requirements for proving bioequivalence. Actavis’ Paragraph IV Patent Certification alleges that our U.S. Patent Nos. RE41,134 (the “‘134 Patent”) and 6,387,383 (the “‘383 Patent”) will not be infringed by Actavis’ manufacture, use and/or sale of the product for which the ANDA was submitted. The expiration date for the ‘134 Patent is in 2015, and the expiration date for the ‘383 Patent is in 2020. On May 11, 2011, we filed suit against Actavis in the United States District Court for the District of Delaware. The suit seeks an adjudication that Actavis has infringed one or more clams of the ‘134 Patent and the ‘383 Patent by submitting its ANDA to the FDA. The relief we requested includes a request for a permanent injunction preventing Actavis from infringing the asserted claims of the ‘134 Patent and the ‘383 Patent by engaging in the commercial manufacture, use, offer to sell, or sale within the U.S., or importation into the U.S., of any chemical entity, therapeutic composition, or method of use claimed by the ‘134 Patent and the ‘383 Patent, and from inducing or contributing to such activities, prior to the expiration of the patents-in-suit. As a result of the filing of the suit, we believe that the ANDA cannot be approved by the FDA until after the expiration of the 30-month stay period or a court decision that the patents-in-suit are invalid or not infringed.

Acella TRIAZ^® Litigation

          On August 19, 2010, we filed suit against Acella Pharmaceuticals, Inc. (“Acella”) in the United States District Court for the District of Arizona based on Acella’s manufacture and offer for sale of benzoyl peroxide foaming cloths which we believe infringe one or more claims of our U.S. Patent No. 7,776,355 (the “‘355 Patent”) covering certain of our products, including TRIAZ^® (benzoyl peroxide) 3%, 6% and 9% Foaming Cloths indicated for the topical treatment of acne vulgaris. The ‘355 Patent was issued to us by the USPTO on August 17, 2010 and expires in June 2026. The relief we requested in the lawsuit includes a request for a Permanent Injunction preventing Acella from infringing the ‘355 Patent by engaging in the manufacture, use, importation, offer to sell, or sale of any products covered by the ‘355 Patent, including Acella’s benzoyl peroxide foaming cloths, and from inducing or contributing to any such activities. Acella filed with the USPTO a request for ex parte reexamination of the ‘355 Patent, and filed with the Court a request that the litigation be stayed for the duration of the reexamination. Both the request for reexamination and the request for a stay were initially denied. Acella resubmitted its request for reexamination to the USPTO, which was granted on December 15, 2010. Acella again requested that the case be stayed pending reexamination, and the Court again denied Acella’s request. We filed a motion for a Preliminary Injunction on December 10, 2010. The hearing on the Preliminary Injunction motion was to be combined with a “Markman Hearing” that was also scheduled for February 23, 2011. At a Markman Hearing, a court determines the scope of the patent’s claims. The Court held only the Markman Hearing on February 23, 2011, and deferred the hearing on the Preliminary Injunction motion until March 29, 2011. At the Markman Hearing, the Court determined the scope of the patent’s claims. Due to the need to postpone the March 29, 2011 hearing on the Preliminary Injunction due to scheduled conflicts, we withdrew our motion for a Preliminary Injunction in favor of a motion for an expedited trial. The case is now set for trial in January 2012.

LOPROX^® Patent Litigation

          On July 19, 2011, we filed lawsuits against each of Perrigo Company, Inc. (“Perrigo”), Nycomed U.S., Inc. (hereunder “Nycomed”), and Taro Pharmaceuticals U.S.A., Inc. and Taro Pharmaceutical Industries, Ltd. (together, “Taro,” and collectively with Perrigo and Nycomed, the “Defendants”) in the United States District Court for the Southern District of New York. Each of the lawsuits seeks an adjudication that the respective Defendant is infringing one or more claims of our U.S. Patent No. 7,981,909 (the “‘909 Patent”) by making, using, offering for sale, selling in the U.S. or importing, without authority, a generic version of LOPROX^® Shampoo (ciclopirox) 1%. Perrigo, Nycomed and Taro received FDA approval for generic ciclopirox 1% shampoos on or about February 16, 2010, May 25, 2010 and February 23, 2011, respectively. The relief we requested in each of the lawsuits includes damages and a request for a permanent injunction preventing the respective Defendant from selling a generic version of LOPROX^® prior to the expiration of the ‘909 Patent. We have not yet effected formal service of the complaints.

          The information set forth under “Legal Matters” in Note 17 in the notes to the condensed consolidated financial statements, included in Part I, Item I of this Report, is incorporated herein by reference. The pending proceedings described in this section and in “Legal Matters” in Note 17 in the notes to the condensed consolidated financial statements included in Part I, Item I of this Report involve complex questions of fact and law and will require the expenditure of significant funds and the diversion of other resources to prosecute and defend. The results of legal proceedings are inherently uncertain, and material adverse outcomes are possible. The resolution of

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intellectual property litigation may require us to pay damages for past infringement or to obtain a license under the other party’s intellectual property rights that could require one-time license fees or ongoing royalties, which could adversely impact our product gross margins in future periods, or could prevent us from manufacturing or selling some of our products or limit or restrict the type of work that employees involved in such litigation may perform for us. From time to time we may enter into confidential discussions regarding the potential settlement of pending litigation or other proceedings; however, there can be no assurance that any such discussions will occur or will result in a settlement. The settlement of any pending litigation or other proceeding could require us to incur substantial settlement payments and costs. In addition, the settlement of any intellectual property proceeding may require us to grant a license to certain of our intellectual property rights to the other party under a cross-license agreement. If any of those events were to occur, our business, financial condition and results of operations could be materially and adversely affected.

Item 1A. Risk Factors

          We operate in a rapidly changing environment that involves a number of risks that could materially and adversely affect our business, financial condition, prospects, operating results or cash flows. For a detailed discussion of the risk factors that should be understood by any investor contemplating investment in our stock, please refer to Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010.

          There are no material changes from the risk factors previously disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010.

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Item 6. Exhibits

Exhibit 10.1+	Medicis Pharmaceutical Corporation Supplemental Executive Retirement Plan
Exhibit 10.2+	Employment Agreement between the Company and Jonah Shacknai, dated June 24, 2011
Exhibit 10.3	Medicis Pharmaceutical Corporation Amended and Restated 2006 Incentive Award Plan(1)
Exhibit 10.4+	Form of Stock Option Agreement for Medicis Pharmaceutical Corporation Amended and Restated 2006 Incentive Award Plan
Exhibit 10.5+	Form of Amendment to Stock Option Award Agreement for Medicis Pharmaceutical Corporation Amended and Restated 2006 Incentive Award Plan
Exhibit 10.6+	Amendment No. 1 to the Medicis 1992 Stock Option Plan
Exhibit 10.7+	Amendment No. 1 to the Medicis 1995 Stock Option Plan
Exhibit 10.8+	Amendment No. 2 to the Medicis 1996 Stock Option Plan
Exhibit 10.9+	Amendment No. 3 to the Medicis 1998 Stock Option Plan
Exhibit 31.1+	Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2+	Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1++	Certification by the Chief Executive Officer and the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101++*	The following financial information from Medicis Pharmaceutical Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010, (ii) the Condensed Consolidated Statements of Income for each of the three-month and six-month periods ended June 30, 2011 and 2010, (iii) the Condensed Consolidated Statements of Cash Flows for each of the six-month periods ended June 30, 2011 and 2010, and (iv) the Notes to the Condensed Consolidated Financial Statements.

+	Filed herewith
++	Furnished herewith
*	Pursuant to applicable securities laws and regulations, we are deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and are not subject to liability under any anti-fraud provisions of the federal securities laws as long as we have made a good faith attempt to comply with the submission requirements and promptly amend the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.
(1)	Incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement for the 2011 Annual Meeting of Stockholders filed with the SEC on April 6, 2011.

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SIGNATURES

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

	MEDICIS PHARMACEUTICAL CORPORATION
Date: August 9, 2011	By:	/s/ Jonah Shacknai
		Jonah Shacknai
		Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
Date: August 9, 2011	By:	/s/ Richard D. Peterson
		Richard D. Peterson
		Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

MEDICIS PHARMACEUTICAL CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Effective as of June 1, 2011

TABLE OF CONTENTS

	Page
Article I. PURPOSE	1
Article II. DEFINITIONS	1
Article III. EFFECTIVE DATE	4
Article IV. ELIGIBILITY AND VESTING	5
Article V. RETIREMENT BENEFITS	5
Article VI. PAYMENT OF RETIREMENT BENEFITS	7
Article VII. FUNDING	10
Article VIII. PLAN ADMINISTRATION	10
Article IX. AMENDMENT AND TERMINATION	10
Article X. MISCELLANEOUS PROVISIONS	11
Article XI. CLAIMS PROCEDURES	13
EXHIBIT A	A-1

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ARTICLE I.
PURPOSE

     1.1 The purpose of this Supplemental Executive Retirement Plan (the “Plan”) is to provide supplemental retirement income for a select group of officers and other key employees of Medicis Pharmaceutical Corporation (the “Employer”).

ARTICLE II.
DEFINITIONS

     2.1 “Average Earnings” means the average of the highest Earnings earned by a Participant during any three (3) calendar years of Service; provided, however, that if the Participant has less than three (3) calendar years of Service, “Average Earnings” shall mean the average of the highest Earnings earned by the Participant during each calendar year(s) of Service; provided, further, that in no event shall such calendar years of Service be measured prior to calendar year 2009 for purposes of this Section 2.1. For purposes of this definition, a calendar year of Service shall include the calendar year of Service that ends within the Plan Year in which the Participant’s Separation from Service occurs, and the “Earnings” earned by a Participant during such a year shall be based on the Participant’s annualized base salary for such calendar year and actual annual bonus (or, if unknown, the target annual bonus) for such calendar year.

     2.2 “Accrued Retirement Benefit” means the Retirement Benefit accrued as of the date of a Participant’s Normal Retirement Date or a Change in Control, as the case may be, provided that such Participant has not incurred a Separation from Service as of such date.

     2.3 “Beneficiary” means the person or entity that the Participant designates as his or her beneficiary to receive any portion of the Retirement Benefit which may become payable upon the Participant’s death. Such designation shall be made on such forms as the Compensation Committee shall require. If the Participant does not designate a Beneficiary, then the Participant’s Beneficiary shall be the Participant’s Spouse, and if the Participant does not have a Spouse, then the Participant’s estate.

     2.4 “Benefit Accrual Percentage” means, with respect to any Participant and as of any date of reference, the percentage obtained by dividing (a) such Participant’s years of Service (determined as of such reference date) by (b) (i) twenty years for Tier I Participants and Tier II Participants, (ii) five (5) years for the Tier III Participant, (iii) sixteen (16) years of Service for the Tier IV Participant, and (iv) eighteen (18) years of Service for the Tier V Participant; provided, that the maximum “Benefit Accrual Percentage” for any Participant shall be 100%.

     2.5 “Board of Directors” means the Board of Directors of the Employer.

     2.6 “Change in Control” means the first to occur of any one of the following:

          (a) the acquisition by any individual, entity or group (a “Person”), including any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 49% or more of either (i) the then outstanding

1

shares of common stock of the Employer (the “Outstanding Common Stock”) or (ii) the combined voting power of the then outstanding securities of the Employer entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); excluding, however, the following: (A) any acquisition directly from the Employer (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege unless the security being so exercised, converted or exchanged was acquired directly from the Employer), (B) any acquisition by the Employer, (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Employer or any corporation controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this definition of “Change in Control”;

          (b) individuals who, as of the date hereof constitute the Board of Directors (the “Incumbent Board”), cease for any reason to constitute at least a majority of such Board of Directors; provided that any individual who becomes a director of the Employer subsequent to such date whose election or nomination for election by the Employer’s stockholders was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; provided further, that any individual who was initially elected as a director of the Employer as a result of a solicitation of proxies or consents by or on behalf of any Person other than the Board of Directors shall not be deemed a member of the Incumbent Board; or

          (c) a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Employer (a “Corporate Transaction”); excluding, however, a Corporate Transaction pursuant to which (i) all or substantially all of the individuals or entities who are the beneficial owners, respectively, of the Outstanding Common Stock and the Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 75% of, respectively, the outstanding shares of common stock, and the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Employer’s assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Common Stock and the Outstanding Voting Securities, as the case may be, (ii) no Person (other than: the Employer; any employee benefit plan (or related trust) sponsored or maintained by the Employer or any corporation controlled by the Employer; the entity resulting from such Corporate Transaction; and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 49% or more of the Outstanding Common Stock or the Outstanding Voting Securities, as the case may be) will beneficially own, directly or indirectly, 49% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of directors, and (iii) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction;

2

provided, that the transaction or event described in subsection (a), (b) or (c) constitutes a “change in control event,” as defined in Treasury Regulation §1.409A-3(i)(5); provided, further, that for purposes of this definition, “Employer” shall refer only to Medicis Pharmaceutical Corporation.

     2.7 “Code” shall mean the Internal Revenue Code of 1986, as amended, and any successor statute thereto.

     2.8 “Compensation Committee” means the Stock Option and Compensation Committee of the Board of Directors.

     2.9 “Earnings” means, with respect to a particular calendar year, the total of (a) cash earnings paid to a Participant in the form of base salary, (b) cash compensation under the incentive compensation plan (annual bonus) paid in such calendar year (regardless of whether earned for a prior year), and (c) any amount by which an Employee’s base salary and annual bonus awards are reduced under any 401(k) plan or any flexible benefit plans under the Code Sections 125 and 129 maintained by the Employer during the respective calendar year.

     2.10 “Effective Date” means June 1, 2011.

     2.11 “Employee” means a person who is employed by the Employer on a regular, full-time basis.

     2.12 “Employer” means Medicis Pharmaceutical Corporation, a Delaware Corporation, and its successor, and any of its subsidiaries so designated by the Board of Directors.

     2.13 “Key Executive” means an Employee who is designated by the Compensation Committee on or after the Effective Date of the Plan and as to whom the Compensation Committee has not withdrawn such designation.

     2.14 “Normal Retirement Date” means the first day of the month coincident with or next following the earlier of: (i) a Participant’s 65^th birthday, or (ii) the date that Participant attains age 59¹/2 and has 20 years of Service.

     2.15 “Participant” means a Key Executive designated by the Compensation Committee to participate in this Plan and who has a benefit accrued under this Plan.

     2.16 “Plan” means the Medicis Pharmaceutical Corporation Supplemental Executive Retirement Plan.

     2.17 “Plan Year” means the consecutive twelve (12) month period commencing on June 1 and ending on May 31.

     2.18 “Remaining Retirement Benefit” means the portion of a Retirement Benefit, if any, in which a Participant continues to accrue and vest following a Participant’s Normal Retirement Date or a Change in Control, as the case may be, provided that such Participant has not incurred a Separation from Service as of such date.

     2.19 “Retirement Benefit” means the benefit accrued under Section 5.1 of the Plan.

3

     2.20 “Separation from Service” shall have the meaning set forth in Treasury Regulation §1.409A-1(h).

     2.21 “Service” means a Participant’s period of full-time employment with the Employer commencing on his first day of employment with the Employer until the date of Participant’s Separation from Service with the Employer. For purposes of calculating Service earned prior to the Effective Date, such period of Service shall be rounded up or down to the nearest full year (i.e., consecutive twelve (12) month period) of Service through the Effective Date. For purposes of calculating Service earned after the Effective Date, if a Participant is employed on the first day of a Plan Year, he shall be credited with a year of Service for such Plan Year. For purposes of this definition, “full-time” employment shall mean an average of thirty (30) hours or more of employment per calendar week.

     2.22 “Spouse” shall mean the person to whom the Participant was lawfully married on the date the Participant’s benefits under this Plan are to commence.

     2.23 “Tier I Participants” means the Participants identified as “Tier I Participants” on Exhibit A hereto.

     2.24 “Tier II Participants” means the Participants identified as “Tier II Participants” on Exhibit A hereto.

     2.25 “Tier III Participant” means the Participant identified as “Tier III Participant” on Exhibit A hereto.

     2.26 “Tier IV Participant” means the Participant identified as “Tier IV Participant” on Exhibit A hereto.

     2.27 “Tier V Participant” means the Participant identified as “Tier V Participant” on Exhibit A hereto.

     2.28 “Total Disability” means the Participant: (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or continue for at least twelve(12) months; (b) by reason of any medically determinable physical or mental impairment that can be expected to result in death or continue for at least twelve (12) months, the Participant is receiving income replacement benefits under the Employer’s disability plan for at least three (3) months; or (c) the Participant has been determined to be totally disabled by the Social Security Administration; each of (a), (b) and (c) as certified by a licensed physician and determined by the Compensation Committee in its sole discretion; provided, that such “Total Disability” constitute a “disability” as defined under Treasury Regulation § 1.409A-3(i)(4).

ARTICLE III.
EFFECTIVE DATE

     3.1 This Plan as set forth in this document is effective as of June 1, 2011.

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ARTICLE IV.
ELIGIBILITY AND VESTING

     4.1 Eligibility. Key Executives shall continue to be Participants until their Separation from Service or they are no longer entitled to Retirement Benefits under this Plan, whichever is later. If a Participant is no longer a Key Executive, but remains an Employee, his Service accrued as a Participant shall not be forfeited, but he shall not accrue any additional Service for purposes of his Benefit Accrual Percentage.

     4.2 Vesting. Upon a Separation from Service, a Participant shall be paid a Retirement Benefit, to the extent vested, in such form and amounts, and at such times, as provided under this Plan. A Retirement Benefit shall vest and become nonforfeitable based on the number of Plan Years during which the Participant is a Participant in the Plan, up to a maximum of 100%. Each Participant’s Retirement Benefit shall vest as follows:

Plan Years of Participation in Plan	Vested Fraction
1 years but less than 2 years		1/6
2 years but less than 3 years		2/6
3 years but less than 4 years		3/6
4 years but less than 5 years		4/6
5 years but less than 6 years		5/6
6 or more years		100	%

provided, however, that a Retirement Benefit shall also be 100% vested upon (i) a Participant’s Normal Retirement Date, provided that the Participant has at least fifteen (15) years of Service and has not had a Separation from Service with the Company prior to such date, (ii) a Participant’s Separation from Service due to his discharge without “cause” or resignation for “good reason” (as such terms are defined in such Participant’s employment agreement with the Company, as amended from time to time, or, in the absence of such an employment agreement or such definitions, then as defined in the Company’s Executive Retention Plan, as amended from time to time), or (iii) a Change in Control. Additionally, in the event that no Change in Control has occurred, if the Tier III Participant terminates his employment prior to July 1, 2017 other than by reason of death, Total Disability, or an involuntary change in his material duties or responsibilities (as provided in such Participant’s employment agreement with the Company, as amended from time to time), then his vested Retirement Benefit shall be reduced by an additional 5%. Effective as of the Effective Date and thereafter, vesting shall be credited to each Participant on the first day of each Plan Year, in accordance with the vesting schedule set forth above.

ARTICLE V.
RETIREMENT BENEFITS

     5.1 Retirement Benefit.

5

          (a) A Participant’s Retirement Benefit under this Plan, computed as an annual benefit payable for twenty (20) years at Normal Retirement Date, shall equal the product of:

     (i) (A) with respect to any Tier I Participant, (x) 2.5% of such Participant’s Average Earnings, multiplied by (y) such Participant’s Benefit Accrual Percentage, multiplied by (z) the number of Participant’s years of Service at the Normal Retirement Date up to a maximum of twenty (20) years of Service;

          (B) with respect to any Tier II Participant, (x) 1.25% of such Participant’s Average Earnings, multiplied by (y) such Participant’s Benefit Accrual Percentage, multiplied by (z) the number of Participant’s years of Service at the Normal Retirement Date up to a maximum of twenty (20) years of Service;

          (C) with respect to the Tier III Participant, (x) 10% of such Participant’s Average Earnings, multiplied by (y) such Participant’s Benefit Accrual Percentage, multiplied by (z) the number of Participant’s years of Service at the Normal Retirement Date up to a maximum of five (5) years of Service;

          (D) with respect to the Tier IV Participant, (x) 3.125% of such Participant’s Average Earnings, multiplied by (y) such Participant’s Benefit Accrual Percentage, multiplied by (z) the number of Participant’s years of Service at the Normal Retirement Date up to a maximum of sixteen (16) years of Service;

          (E) with respect to the Tier V Participant,

          (1) (a) 3.125% of such Participant’s Average Earnings, multiplied by (b) such Participant’s Benefit Accrual Percentage as of May 31, 2011, multiplied by (c) the number of Participant’s years of Service as of May 31, 2011, plus

          (2) (x) 2.5% of such Participant’s Average Earnings, multiplied by (y) such Participant’s Benefit Accrual Percentage for the number of years of Service occurring between June 1, 2011 through Normal Retirement Date, multiplied by (z) the number of Participant’s years of Service from June 1, 2011 through the Normal Retirement Date;

provided, however, that the maximum aggregate years of Service taken into account for the Tier V Participant for purposes of calculating (1) plus (2) above shall be eighteen (18) years of Service;

provided, further, that in no event shall the Retirement Benefit exceed (x) fifty percent (50%) of a Participant’s Average Earnings with respect to any Tier I Participant, Tier III Participant, Tier IV Participant and Tier V Participant, and (y) twenty-five percent (25%) of a Participant’s Average Earnings with respect to any Tier II Participant.

          (b) A Participant shall continue to accrue and become vested in his Retirement Benefit for Service after his Normal Retirement Date or a Change in Control, as the

6

case may be, provided he has not incurred a Separation from Service with respect to such event. If the Participant is entitled to receive a distribution of his Retirement Benefit in accordance with Section 6.3(d) or (e) hereof, the Participant’s Accrued Retirement Benefit shall be distributed to Participant in accordance with the Participant’s distribution election, and the Participant shall continue to accrue and vest in any Remaining Retirement Benefit in accordance with the terms and conditions of the Plan, provided, that the sum of the Accrued Retirement Benefit plus the Remaining Retirement Benefit shall not exceed the maximum Retirement Benefit set forth in Section 5.1(a) with respect to such Participant. The Remaining Retirement Benefit shall vest as set forth in Section 4.2, with the first day of vesting commencing immediately following the Normal Retirement Date or the Change in Control, as the case may be. Any Remaining Retirement Benefit shall be paid according to the election of the Participant with respect to his or her Retirement Benefit under Section 6.3; provided that if such Remaining Retirement Benefit accrues after payment of the Accrued Retirement Benefit by reason of Section 6.3(e), the Remaining Retirement Benefit shall be paid on the Participant’s Separation from Service, or if elected by the Participant, if earlier, upon a Change in Control.

          (c) In the event a Participant receives a distribution of his Retirement Benefit prior to such Participant’s Normal Retirement Date, or in the event a Participant elects to receive a distribution of his Retirement Benefit in a lump sum payment or in installment payments in any number fewer than twenty (20), such Retirement Benefit shall be discounted to a present value equivalent benefit using a four percent (4%) annual interest discounting rate for each year (based on a consecutive twelve (12) month period from the Participant’s Normal Retirement Date, and including any partial years) that the Retirement Benefit is paid prior to the Participant’s Normal Retirement Date and less than twenty (20) years of annual installment payments. In the event a Participant’s Retirement Benefit commences after his Normal Retirement Date, the Retirement Benefit shall be credited with four percent (4%) annual interest for each year (based on a consecutive twelve (12) month period from the Participant’s Normal Retirement Date, and including any partial years) that the Retirement Benefit commences following the Participant’s Normal Retirement Date.

ARTICLE VI.
PAYMENT OF RETIREMENT BENEFITS

     6.1 Payment of Retirement Benefits. Except as set forth in Sections 6.3 and 6.4 below, all vested Retirement Benefits hereunder shall be payable in twenty (20) equal annual installments, and shall be payable commencing on the later of the Participant’s Normal Retirement Date or Separation from Service as provided in Section 6.2 below; provided, that the Participant may elect a different time and form of payment consistent with the requirements of Section 6.4 below and pursuant to the distribution election form approved by the Compensation Committee from time to time for use with this Plan.

     6.2 Timing of Payment. Unless a Participant elects otherwise pursuant to Section 6.4, a Participant’s vested Retirement Benefit shall commence on the later of the Participant’s Normal Retirement Date or the Participant’s Separation from Service. Notwithstanding any election to the contrary, the Participant’s Retirement Benefit shall commence upon the Participant’s death or Total Disability.

7

     6.3 Timing of Commencement of Benefits.

          (a) Separation from Service. In the event a Participant is entitled to distribution of his vested Retirement Benefit upon Separation from Service other than by reason of death or such Participant’s Total Disability, and prior to his Normal Retirement Date, such Retirement Benefit shall commence distribution on the one year anniversary of the date of such Participant’s Separation from Service.

          (b) Total Disability. In the event a Participant is entitled to distribution of his Retirement Benefit upon Total Disability, the Participant’s vested Retirement Benefit shall commence distribution on the sixtieth (60^th) day following the date that the Compensation Committee determines such Total Disability has occurred.

          (c) Death. In the event a Participant is entitled to distribution of his vested Retirement Benefit upon his death, such Retirement Benefit shall commence distribution on the sixtieth (60^th) day following the date of such Participant’s death.

          (d) Change in Control. In the event a Participant is entitled to receive a Retirement Benefit upon a Change in Control, such Retirement Benefit shall commence distribution on the thirtieth (30^th) day after the Change in Control, regardless of whether a Participant has had a Separation from Service or reached his Normal Retirement Date.

          (e) Normal Retirement. In the event a Participant is entitled to a distribution of his vested Retirement Benefit upon such Participant’s Normal Retirement Date, the Retirement Benefit shall commence distribution on the sixtieth (60^th) day following the Normal Retirement Date; provided, however, that if the Participant has a Separation from Service upon his Normal Retirement Date, the Retirement Benefit shall be commence distribution on the six month anniversary of the Normal Retirement Date.

     6.4 Timing of Elections. Prior to becoming eligible to participate in the Plan, each Participant may elect to receive his or her Retirement Benefit upon the earlier of Separation from Service (if such Separation from Service is prior to his Normal Retirement Date) or Normal Retirement Date (regardless of Separation from Service), or also upon a Change in Control, as set forth in the election form approved by the Committee. Additionally, each Participant may in such election elect to receive his or her Retirement Benefit in the form of a lump sum or installments, not to exceed twenty (20) years, and may elect a different form of payment for each distribution event. Once made, such election shall be irrevocable on the date of the Participant’s commencement of participation in the Plan. If no such election is made, then such Participant’s Retirement Benefits shall be paid in annual installments over twenty (20) years commencing on the later of the Participant’s (i) Normal Retirement Date or (ii) Separation from Service.

     6.5 Changes in Payments. A Participant may change his election after it has become irrevocable by submitting a modified distribution election to the Compensation Committee, and in accordance with the following criteria:

          (a) The election of the new form of payment shall have no effect until at least 12 months after the date on which the modified distribution election is made;

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          (b) The date on which the Participant’s distribution is to begin under the modified distribution election must be no sooner than five (5) years after the date the Participant’s Retirement Benefit would have commenced absent such modified distribution election; and

          (c) The modified distribution election must be made at least 12 months prior to the date the Participant’s Retirement Benefit previously would have commenced absent the modified distribution election.

     A Participant’s modified distribution election shall not be considered to be made until the date on which the election becomes irrevocable. Such an election shall become irrevocable no later than the date that is twelve (12) months prior to the date the Participant’s Retirement Benefit would otherwise have commenced absent the modified distribution election. For purposes of this Section 6.5 and Code Section 409A, installment payments shall be treated as being made in the form of a single payment commencing on the first date that such installment payment would otherwise commence. .

     6.6 Payments Rounded to Next Full Dollar. Each annual payment which is computed in accordance with this Plan will, if not in whole dollars, be increased or decreased to the nearest whole dollar. Such rounding shall be made after applying any applicable reduction factors.

     6.7 Permissible Acceleration. Notwithstanding Article VI, a Participant’s Retirement Benefit may be paid in the discretion of the Employer as follows upon the following events, in accordance with the requirements of Treasury Regulation § 1.409A-3(j)(4):

          (a) As necessary to comply with a domestic relations order (as defined in Code Section 414(p)(1)(B)).

          (b) If the Internal Revenue Service, makes a determination that a Participant is required to include in gross income the value of his Retirement Benefit, as soon as practicable following such determination, the Employer shall pay to the Participant, the amount required to be included in the Participant’s gross income.

          (c) If a Participant’s Retirement Benefit, or any remaining installments thereof is less than an amount applicable under Code Section 402(g) for the year in question, then the balance of such Retirement Benefit may be distributed in a lump sum.

          (d) Upon the termination and liquidation of the Plan, the Retirement Benefit shall be distributed in a lump sum twelve months following such termination and liquidation; provided that such termination or liquidation is not in connection with a downturn in the financial health of the Employer and shall conform to the requirements of Treasury Regulation §1.409A-3(j)(4)(ix).

     6.8 Payments upon Death. In the event of Participant’s death prior to a Participant’s Retirement Benefit being paid in full, then any remaining Retirement Benefit shall be made to the Participant’s Beneficiary in accordance with this Article VI.

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ARTICLE VII.
FUNDING

     7.1 The Employer may enter into a trust agreement creating an irrevocable grantor trust for the holding of cash and/or annuity contracts for pension benefits accrued by the Participants under the Plan. Any assets of such trust shall be subject to the claims of creditors of the Employer to the extent set forth in the trust and Participants’ interests in benefits under this Plan shall only be those of unsecured creditors of the Employer. In the event of a Change in Control, the Employer shall enter into a trust agreement creating an irrevocable grantor trust for the holding of cash and/or annuity contracts in respect of the Retirement Benefits accrued by the Participants (whether current or former); provided, further, that upon the occurrence of a Change in Control, the Employer shall transfer to the trustee of the foregoing trust the maximum amount of assets estimated to be necessary to satisfy the Employer’s obligations hereunder, as in effect immediately prior to the Change in Control, and to the extent permitted under Code Section 409A.

ARTICLE VIII.
PLAN ADMINISTRATION

     8.1 The general administration of this Plan and the responsibility for carrying out the provisions hereof shall be vested in the Compensation Committee. The Compensation Committee may adopt, subject to the approval of the Board of Directors, such rules and regulations as it may deem necessary for the proper administration of this Plan, and its decision in all matters shall be final, conclusive, and binding.

     8.2 The Compensation Committee may adopt, subject to the approval of the Board of Directors, such rules and regulations as it may deem necessary for the proper administration of this Plan, and its decision in all matters shall be final, conclusive, and binding. The Compensation Committee shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan, and (b) decide or resolve any and all questions, including benefit entitlement determinations and interpretations of this Plan, as may arise in connection with the Plan.

     8.3 To the extent applicable, this Plan shall be interpreted in accordance with Code Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder. If the Company determines that any benefits payable under this Plan do not comply with Code Section 409A and related Department of Treasury guidance, the Company may amend this Plan or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take such other actions as the Company deems necessary or appropriate to comply with the requirements of Code Section 409A and related Department of Treasury guidance; provided that no such amendment shall be effective without the Participant’s consent unless it preserves the Participant’s economic benefit prior to such amendment.

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ARTICLE IX.
AMENDMENT AND TERMINATION

     9.1 The Board of Directors of the Employer reserves in its sole and exclusive discretion the right at any time and from time to time to amend this Plan in any respect or terminate this Plan without restriction and without the consent of any Participant or Spouse, provided, however, that no amendment or termination of this Plan shall, without the Participant’s prior written consent, adversely affect the right of any Participant or Spouse with respect to any Retirement Benefit under this Plan, whether earned, vested or unvested, accrued or to be accrued, except as required by law or in order to satisfy Code Section 409A.

     9.2 Notwithstanding any other provisions of the Plan to the contrary and in addition to the restrictions under Section 9.1, following a Change in Control, or following any public announcement concerning an anticipated Change in Control (or until such time as the anticipated Change in Control is abandoned if not consummated, as determined by the Committee in its sole discretion), without the prior written consent of a Participant:

          (a) any Service accrued by the Participant as of the date of a Change in Control cannot be reduced;

          (b) no amendment or action of the Compensation Committee which adversely affects the Participant (including, without limitation, any amendment restricted by Section 9.1) is valid and enforceable; and

          (c) no termination of the Plan shall have the effect of reducing any benefits accrued by the Participant under the Plan prior to such termination.

ARTICLE X.
MISCELLANEOUS PROVISIONS

     10.1 No Guarantee of Employment. Nothing contained herein shall be deemed to give any individual the right to be retained in the service of the Employer or to interfere with the rights of the Employer to discharge any individual at any time, with or without cause.

     10.2 Non-Alienation of Benefits. No Retirement Benefit payable hereunder may be assigned, pledged, mortgaged or hypothecated and, to the extent permitted by law, no such Retirement Benefit shall be subject to legal process or attachment for the payment of any claims against any person entitled to receive the same. Notwithstanding any provision herein to the contrary, the Employer may, as the Compensation Committee in its sole and absolute discretion shall determine, offset any amount to be paid to a Participant, Spouse or Beneficiary hereunder in order to recoup amounts that have been misappropriated by such Participant against any amounts which such Participant may owe to the Employer or a subsidiary of the Employer.

     10.3 Payment to Incompetents. If a Participant entitled to receive any Retirement Benefit payments hereunder is deemed by the Compensation Committee or is adjudged by a court of competent jurisdiction to be legally incapable of giving valid receipt and discharge for such Retirement Benefit, such payments shall be paid to such person or persons as the Compensation Committee shall designate or to the duly appointed guardian. Such payments shall, to the extent made, be deemed a complete discharge for such payments under this Plan.

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     10.4 Withholding. Payments made by the Employer under this Plan to any Participant or Spouse shall be subject to withholding as shall, at the time for such payment, be required under any income tax or other laws, whether of the United States or any other jurisdiction.

     10.5 Expenses. All expenses and costs in connection with the operation of this Plan shall be borne by the Employer.

     10.6 Governing Law. The provisions of this Plan will be construed according to the laws of the State of Delaware, excluding the provisions of any such laws that would require the application of the laws of another jurisdiction.

     10.7 Gender and Number. The masculine pronoun wherever used herein shall include the feminine gender and the feminine the masculine and the singular number as used herein shall include the plural and the plural the singular unless the context clearly indicates a different meaning.

     10.8 Titles and Heading. The titles to articles and headings of sections of this Plan are for convenience of reference only and in case of any conflict, the text of the Plan, rather than such titles and headings, shall control.

     10.9 Non-Qualified Plan. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that “is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1).

     10.10 Unsecured Creditors. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Employer. For purposes of the payment of benefits under this Plan, any and all of the Employer’s assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. The Employer’s obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.

     10.11 Attorneys Fees and Expenses. In addition to all other amounts payable under this Plan, the Employer shall pay all legal fees and expenses incurred by a Participant in connection with any dispute arising after a Change in Control out of or relating to this Plan or the interpretation thereof (including, without limitation, all such fees and expenses, if any, incurred in seeking to obtain or enforce any right or benefit provided by this Plan), regardless of the outcome of such proceeding; provided, however, that a Participant shall not be entitled to recover such fees and costs if the court determines that the Participant’s claim was brought in bad faith or was frivolous. Any attorney’s fees incurred by a Participant with respect to such a dispute arising after a Change in Control shall be paid by the Employer in advance of the final disposition of such action or challenge, as such fees and expenses are incurred, if the Participant agrees to repay such amounts if it is ultimately determined by the court that the Participant’s claim was brought in bad faith or was frivolous.

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ARTICLE XI.
CLAIMS PROCEDURES

     11.1 Presentation of Claim. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the Compensation Committee (or such committee designated by the Compensation Committee) a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. For purposes of this Article XI, all references to the “Compensation Committee” shall include any committee designated by the Compensation Committee to determine claims under this Article XI.

     11.2 Notification of Decision. The Compensation Committee shall consider a Claimant’s claim within a reasonable time, but no later than 90 days after receiving the claim. If the Compensation Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 90 day period. In no event shall such extension exceed a period of 90 days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Compensation Committee expects to render the benefit determination. The Compensation Committee shall notify the Claimant in writing:

          (a) that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or

          (b) that the Compensation Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant:

     (i) the specific reason(s) for the denial of the claim, or any part of it;

     (ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based;

     (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary;

     (iv) an explanation of the claim review procedure set forth in Section 11.3 below; and

     (v) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

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     11.3 Review of a Denied Claim. On or before 60 days after receiving a notice from the Compensation Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Compensation Committee a written request for a review of the denial of the claim. The Claimant (or the Claimant’s duly authorized representative):

          (a) may, upon request and free of charge, have reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claim for benefits;

          (b) may submit written comments or other documents; and/or

          (c) may request a hearing, which the Compensation Committee, in its sole discretion, may grant.

     11.4 The Compensation Committee shall render its decision on review promptly, and no later than 60 days after the Compensation Committee receives the Claimant’s written request for a review of the denial of the claim. If the Compensation Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 60 day period. In no event shall such extension exceed a period of 60 days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Compensation Committee expects to render the benefit determination. In rendering its decision, the Compensation Committee shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The decision must be written in a manner calculated to be understood by the Claimant, and it must contain:

          (a) specific reasons for the decision;

          (b) specific reference(s) to the pertinent Plan provisions upon which the decision was based;

          (c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; and

          (d) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a).

     11.5 A Claimant’s compliance with the foregoing provisions of this Article XI is a mandatory prerequisite to a Claimant’s right to commence any legal action with respect to any claim for benefits under this Plan.

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EX-10.2

Exhibit 10.2

EXECUTION COPY

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made as of this 24th day of June, 2011 between MEDICIS PHARMACEUTICAL CORPORATION, a corporation organized under the laws of the State of Delaware (the “Company”) with offices located at 7720 North Dobson Road, Scottsdale, Arizona and Jonah Shacknai (the “Executive”) with an address of 7720 North Dobson Road, Scottsdale, Arizona:

WITNESSETH:

     WHEREAS, the Company and the Executive desire to enter into the Agreement whereby the Executive will continue to provide personal services to the Company as Chairman and Chief Executive officer; and

     WHEREAS, in its business, the Company has developed and uses valuable technical and nontechnical information including information relating to development, use, manufacture and marketing of certain biologically-active compounds, and it is necessary for the Company to protect certain of the information either by patents, copyrights, or by holding it secret or confidential; and

     WHEREAS, the aforesaid information is vital to the success of the Company’s business, and the Executive through his activities may become acquainted therewith, and may contribute thereto, either through research, inventions, discoveries or otherwise; and

     WHEREAS, in the course of his employment, the Executive has gained and will gain knowledge of the business affairs, finances, management, marketing programs and philosophy, customers and methods of operation of the Company; and

     WHEREAS, the Company would suffer irreparable harm if the Executive were to use such knowledge, information and business acumen in competition with the Company,

     NOW, THEREFORE, in consideration of the continued employment of Executive by the Company as Chairman and Chief Executive Officer, the above premises and the mutual agreements hereinafter set forth, the receipt, adequacy and sufficiency of which is hereby acknowledged, the parties agree as follows:

     1. Definitions.

     (a) “Business of the Company” shall mean and include the business of developing, manufacturing, marketing, selling and using certain chemical compounds for use in the dermatologic industry or such other businesses as the Company derived substantial revenues from, which revenues exceed twenty (20%) percent of the Company’s gross annual revenues in the Company’s most recent fiscal year.

     (b) “Competing Business” shall mean any business which is the same or essentially the same as the Business of the Company.

     (c) “Confidential Information” shall mean all non public customer lists, sales and marketing information, customer account records, training and operations material and memoranda, trade secrets, strategic planning materials and information product development plans, scientific and technical information, personnel records, pricing information, and financial information concerning or relating to the business, accounts, customers, employees and affairs of the Company, obtained by or furnished, disclosed or disseminated to the Executive, or obtained, assembled or compiled by the Executive or under his supervision during the course of his employment by the Company, and all physical embodiments of the foregoing, all of which are hereby agreed to be the property of and confidential to the Company, but Confidential Information shall not include any of the foregoing to the extent the same is or becomes publicly known through no fault or breach of this Agreement by the Executive.

     2. Terms of Employment; Duties.

     (a) The Company employs the Executive as Chairman of the Board of Directors of the Company, and Chief Executive Officer of the Company, and the Executive accepts such employment with the Company in that capacity subject to the terms and conditions hereof. The Executive shall in such office have the responsibilities which include presiding over and participating in deliberations of the Board as its Chairman and as a member of the Board; serving on the Executive Committee of the Board; exercising ultimate responsibility on a reporting basis for sales, marketing, research and development, operations, regulatory compliance, finance, personnel, corporate development, public and shareholder relations and governmental relations activities of the Company; exercising ultimate responsibility for strategic planning and evaluation, and serving as Company’s official spokesman and representative in all matters.

     (b) Throughout his employment hereunder, the Executive shall continue to work on average a minimum of four (4) days per week, including but not limited to, conventions, meetings and off-site activities, to the fulfillment of the duties of his employment, with full recognition of his other obligations as designated hereinafter which may occur outside the Company’s headquarters in the Phoenix Metropolitan area. The Executive shall conduct such business activities at the Company’s headquarters at 7720 North Dobson Road, Scottsdale, Arizona, or from such other headquarters located in the greater Phoenix area as the Company may determine. Alternatively, the Executive shall be available during the business week to meet with Company personnel, attend telephonic meetings, and participate in other corporate matters from his home during the normal business week and/or at such other times as the Executive may be available, provided that the Executive’s children are not in his care at such time. It is expressly understood and agreed that the Executive may not be available for corporate matters during such times that he is providing care for his children. Further, the Company acknowledges and agrees that the participation by the Executive in philanthropic, community education and/or charitable activities during the normal business week shall be considered to be in furtherance of the Executive’s duties of his employment with the Company.

     3. Compensation and Related Matters.

     (a) For his services hereunder, the Company shall pay to the Executive the compensation and provide the benefits set forth in Exhibit A attached hereto and incorporated herein as part of this Agreement and such benefits as are otherwise provided for herein.

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     (b) The Executive shall be eligible to fully participate in all present or future pension, retirement, medical, dental, disability, life insurance or any other employee benefit plans of the Company (including, without limitation, any supplemental executive retirement plan adopted by the Company), and in addition, the Executive shall be eligible to fully participate in all present or future incentive compensation, bonus, profit sharing, stock option or stock purchase plans of the Company as and to the extent granted or approved and determined by the Board of Directors of the Company, subject to the provisions of Exhibit A hereof.

     (c) Provided that the Executive maintains a satisfactory or better level of performance, he shall remain fully eligible for an annual cash bonus at the discretion of the Company’s executive compensation committee of its board of directors.

     (d) The Company shall provide the Executive with eight (8) weeks of paid vacation time per year. The Executive shall endeavor to schedule such vacation time in a manner that will not material detract from the Executive’s performance of his duties. In the event the Executive’s employment terminates for any reason, whether voluntary or involuntary, the Company shall, no later than thirty (30) days after the Date of Termination, make a payment to the Executive for the value of all unused vacation.

     4. Term and Termination of This Agreement.

     (a) The Executive’s employment under this Agreement shall be for the period commencing on June 24, 2011 and expiring on June 30, 2016 (the “Term”), subject however to the earlier termination thereof pursuant to the provisions of this Agreement.

     (b) The term of the Executive’s employment hereunder may be terminated prior to the expiration of the Term (or any extension thereof) in the following events:

          (i) termination by mutual agreement of the parties;

          (ii) termination by the Company without Cause upon sixty (60) days’ written notice to the Executive, as provided for in Section 5(a)(iii);

          (iii) termination upon the Executive’s death or Disability as defined in and as provided for in Section 5(a)(v);

          (iv) termination of the Executive for Cause, as provided for in Sections 5(a)(ii) and 7;

          (v) resignation by the Executive for Good Reason, as provided for in Sections 5(a)(iii) and 8;

          (vi) termination of the Executive arising as a result of Change in Ownership or Control, as provided for in Sections 5(a)(iii) and 9; or

          (vii) voluntary resignation by the Executive for reasons other than those falling within paragraph (i), (v) or (vi) herein.

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     5. Payments Upon Termination or Expiration of Term.

     (a) In the event that the Executive’s employment hereunder is terminated pursuant to Section 4(b) above, the Company shall pay to Executive the following amounts within thirty (30) days of such termination or as otherwise set forth below:

          (i) If the Executive’s employment is terminated pursuant to subsection 4(b)(i), the Company shall pay to the Executive all amounts owing to the Executive as Annual Compensation through the Date of Termination (as defined herein), consisting of Base Salary through the end of the calendar month from the Date of Termination and a pro rata bonus based upon the Executive’s prior year’s bonus.

          (ii) If the Executive’s employment is terminated by the Company for Cause (as defined in Section 7 herein) pursuant to subsection 4(b)(iv), or if the Executive voluntarily resigns his employment pursuant to Section 4(b)(vii), the Company shall pay to the Executive all amounts owing to the Executive as Base Salary through the end of the calendar month of the Date of Termination.

          (iii) (a) If the Executive’s employment is terminated by the Company without Cause (Section 4(b)(ii)), or in the event of the termination of this Employment Agreement pursuant to Section 4(b)(v) and Section 8 herein (Resignation by Executive For Good Reason), or in the event the Company shall terminate this Employment Agreement for any reason other than pursuant to Section 4(b)(iv) (Cause) or Section 4(b)(iii) (death or Disability), or Section 4(b)(vi) and Section 9 (Termination of Employment as a Result of Change in Ownership or Control):

• the Company shall pay the Executive his then current annual compensation, and a pro rata bonus based on the Executive’s prior year’s bonus, through the Date of Termination.

• in lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination, the Company shall pay as severance to the Executive within thirty (30) days following the Date of Termination (on such date as is determined by the Company), a lump sum payment equal to the number of months remaining from the Date of Termination until the expiration date of this Employment Agreement, divided by twelve (12), times the sum of (a) the Executive’s annual Base Salary at the highest rate in effect during the twelve (12) months immediately preceding the Date of Termination and (b) the average of the annual bonus payments, if any, paid to the Executive in the preceding three (3) years, provided, however, that in no event shall the amount of such payment exceed three (3) times the sum of (A) the Executive’s annual Base Salary at the highest rate in effect during the twelve (12) months immediately preceding the Date of Termination and (B) the average of the Annual bonus

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payments, if any, paid to the Executive in the preceding three (3) years.

•

the Company shall pay all other damages to which the executive may be entitled as a result of the Company’s termination of his employment under this Agreement, except for Cause, including damages for any and all loss of benefits to the Executive under the employee benefit plans which he would have received had this Agreement not been terminated for reasons set forth in subsections 4(b)(ii), 4(b)(v) and 4(b)(vi) herein, and had the Executive’s employment continued for the full Term, or for the full period of any extension of the term, and including all legal fees and expenses incurred by the Executive in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Employment Agreement.

          (iii) (b) In the event of the termination of this Employment Agreement pursuant to Section 4(b)(vi) and Section 9 herein (Termination of Employment as a Result of Change in Ownership or Control):

• the Company shall pay the Executive his then current annual compensation, and a pro rata bonus based on the Executive’s prior year’s bonus, through the Date of Termination.

• in lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination, the Company shall pay as severance to the Executive within thirty (30) days following the Date of Termination (on such date as is determined by the Company), a lump sum payment equal to three (3) times the sum of (a) the Executive’s annual Base Salary at the highest rate in effect during the twelve (12) months immediately preceding the Date of Termination and (b) the average of the annual bonus payments, if any, paid to the Executive in the preceding three (3) years.

• the Company shall pay all other damages to which the Executive may be entitled as a result of the Company’s termination of his employment under this Agreement, except for Cause, including damages for any and all loss of benefits to the Executive under the employee benefit plans which he would have received had this Agreement not been terminated for reasons set forth in subsections 4(b)(ii) 4(b)(v) and 4(b)(vi), herein, and had the Executive’s employment continued for the full Initial Term, or for the full period of any extension or automatic renewal, and including all legal fees and expenses incurred by the Executive in contesting or disputing any such

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termination or in seeking to obtain or enforce any right or benefit provided by this Employment Agreement.

          (iv) If Executive’s employment is terminated pursuant to subsection 4(b)(iii) by reason of Executive’s death, the Company agrees to pay to the legal representative of his estate, for a period of twenty-four (24) months (commencing with the Date of Termination), an amount equal to and payable at the same rate at his then current Base Salary.

          (v) During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to his physical or mental or emotional illness, the Executive shall continue to receive his full Base Salary along with any bonus payments awarded by the Board of Directors until the Executive returns to his duties or until his employment is terminated for reason of Disability pursuant to Section 4(b)(iii).

          “Disability” shall mean the inability of the Executive to perform the duties of Chairman and Chief Exchange Officer of the Company due to physical, mental or emotional incapacity or illness, where such inability is expected to result in death or to be of long-continued and indefinite duration, but in no event shall such duration be less than One Hundred Eighty (180) consecutive days. The determination of “Disability” shall be made by the Board of Directors of the Company (“the Board”) and the Executive, as determined by an independent physician selected by both the Board and the Executive. In the event of such Disability, the Company may, at its election and by providing written notice thereof to the Executive within sixty (60) days after such determination, terminate the Executive’s employment hereunder effective on the date set forth in such notice. If the Board or the Company does not timely give notice to the Executive of its election to terminate the Executive for such Disability, then the Company shall be deemed to have waived its right to terminate the Executive based upon such Disability.

          After such termination because of the Executive’s Disability, the Executive shall be paid, in substantially equal monthly installments, one hundred percent (100%) of his Base Salary (at the rate in effect at the time Notice of Termination is given) for twenty-four (24) months, and thereafter an annual amount equal to fifty percent (50%) of such Base Salary for the balance of the Term, but in no event for less than a twelve (12) month period.

     (b) Should any payment or provision of benefit provided for in Section 5 constitute an “excess parachute payment” as defined in Section 280G of the Internal Revenue Code of 1986 and the regulations and interpretations of the Internal Revenue Service promulgated thereunder, the successor to the Company shall make all payments and provide all benefits to the Executive as set forth in this Section 5, subject to the provisions of Exhibit B hereof.

     (c) Unless the Executive is terminated for Cause pursuant to Section 4(b)(iii) or voluntarily resigns his employment pursuant to Section 4(b)(vii), the Company shall maintain in full force and effect, for the continued benefit of the Executive, for a period of three (3) years following the Date of Termination all employee benefit plans and programs in which Executive was entitled to participate immediately prior to the Date of Termination, provided that the

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Executive’s continued participation in such employee benefit plans is possible under the general terms and provisions of such plans and programs. In the event that the Executive’s participation in any such plan or program is barred at any time during this three (3) year period, the Company shall arrange to provide the Executive with benefits substantially similar to those which the Executive would otherwise have been entitled to receive under such plans and programs from which his continued participation is barred, or alternatively, to provide to the Executive the economic after-tax equivalent of the participation in all of said employee benefit plans in which the Executive’s participation is barred. At the end of the period of coverage, the Executive shall have the option to have assigned to him at no cost and with no apportionment of prepaid premiums any assignable insurance policy owned by the Company which relate specifically to the Executive.

(d) (i) In addition to the foregoing, if the Executive’s employment is terminated by the Company without Cause pursuant to Section 4(b)(ii), upon the Executive’s death or Disability pursuant to Section 4(b)(iii), upon the Executive’s resignation for Good Reason pursuant to Section 4(b)(v), as a result of a Change in Ownership or Control pursuant to Section 4(b)(vi), or upon the expiration of the Term, all stock options, restricted stock, restricted stock units or stock appreciation rights, if any, awarded to the Executive on or before the Date of Termination under the Company’s equity incentive plans (the “Equity Incentives”), shall immediately vest to the Executive’s benefit or the benefit of the Executive’s estate, in the event of his death. Further, the Executive shall retain the right to exercise all options or stock appreciation rights that are Equity Incentives (the “Options”) for the full term(s) thereof, and the Company shall take all actions as are necessary to transfer the Options from the Company’s qualified stock option plan(s) to the Company’s nonqualified stock option plan(s) or such other plans as may be applicable. The intent of this provision is to ensure that in the event of termination of the Executive’s employment for reasons referenced in this subsection, or upon expiration of the Term, the Executive shall be fully vested in the Equity Incentives and shall have the full term of each such Option or Options to exercise the same.

          (ii) In the event the Executive’s employment is terminated in accordance with Section 4(b)(vi) and, as a consequence of such Change in Ownership or Control, the Executive’s right to exercise the Options is terminated prior to the expiration of such rights as provided under Section 5(d)(i) above without the receipt of cash compensation therefore, then the Executive shall have the right to a payment for such Options in an amount equal to the amount calculated under Section 9(b)(ii)(A).

     (e) The Executive shall not be required to mitigate the amount of any payment provided for in this Section 5 by seeking other employment or otherwise, and no compensation earned by the Executive after his termination of employment with the Company shall be applied to offset any payment provided for in this Agreement.

     (f) Any termination of the Executive’s employment by the Company or by the Executive (other than termination by reason of the Executive’s death) shall be communicated by written Notice of Termination to the other party hereto in accordance with provisions set forth in this Agreement.

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     (g) “Date of Termination” shall mean:

          (i) if the Executive’s employment is terminated by his death, the date of his death,

          (ii) if the Executive’s employment is terminated by reason of the Executive’s Disability, sixty (60) days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties on a reasonable full-time basis during such sixty (60) day period),

          (iii) if the Executive’s employment is terminated for any other reason, the date specified in the Notice of Termination; provided that if within sixty (60) days after the Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which said dispute is finally determined, either by mutual written agreement of the parties, or by a final arbitration award as provided for in Section 18 (the time for appeal therefrom having expired and no appeal having been perfected), and

          (iv) if the Term expires, the expiration date.

     (h) Except in the event the Agreement is terminated for Cause as defined in and pursuant to the terms of Section 7, the Company shall provide the Executive, at a cost to the Executive identical to the Executive’s health insurance premium, with coverage under the Company’s Health/Medical and Dental plans for the Executive and for all eligible dependents of the Executive. Such coverage shall be provided for the remainder of the life of the Executive. Pursuant to this subsection (h), the Company shall provide the Executive and the Executive’s eligible dependents with coverage identical to that provided by the Company to its senior officers at the time of this Agreement. Whether the Executive’s dependents are “eligible” dependents in a given calendar year shall be determined under the terms and conditions of the Health/Medical and dental plans, assuming that the Executive and the Executive’s dependents would have participated in such plans.

     (i) If the Executive’s employment is terminated by the Company without Cause (Section 4(b)(ii)), or in the event of a termination of the Executive’s employment arising as a result of a Change in Ownership or Control as provided for in Sections 5(a)(iii) and 9, the Company will provide the Executive with a STIPEND of Seventy Five Thousand ($75,000) annually for administrative support and services. Said STIPEND shall be made to the Executive for a period of three (3) years following the Date of Termination, or for the balance of the term of this amended Agreement, whichever is greater, and shall be provided semi-annually commencing on the first day of the month following the Date of Termination.

     (j) Notwithstanding anything to the contrary contained in the Agreement, in the event the Agreement is extended beyond June 30, 2016, the terms of the Agreement setting forth the payments by the Company to the Executive, and the other entitlements of the Executive, to be provided upon the termination by the Company of the Executive’s employment, including but not limited to a termination of employment as a result of Change in Ownership or Control of the

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Company as provided in Section 9 of the Agreement, or to be provided upon the resignation by the Executive of his employment for Good Reason as provided in Section 8 of the Agreement, shall remain in full force and effect for the duration of such extension term.

     (k) Effect of Section 409A of the Code. Notwithstanding anything to the contrary in this Agreement, if, upon the advice of its counsel, the Company determines that any payments or benefits to be provided to Executive pursuant to this Agreement is or may become subject to the additional tax under Section 409A(a)(1)(B) of the Code or any other taxes or penalties imposed under Section 409A (“409A Taxes”) if provided at the time otherwise required under this Agreement, then:

(A)	(i) Such payments shall be delayed until the date that is six months after the date of Executive’s “separation from service” (as such term is defined under Section 409A) with the Company, or such shorter period that, in the opinion of such counsel, is sufficient to avoid the imposition of 409A Taxes (the “Payments Delay Period”), and (ii) such payments shall be increased by an amount equal to interest on such payments for the Payments Delay Period at a rate equal to the rate of earnings then credited on accounts in the Company’s Deferred Compensation Plan, or any successor plan.
(B)	(i) With respect to the provision of such benefits, for a period of six months following the date of Executive’s “separation from service” (as such term is defined under Section 409A) with the Company, or such shorter period, that, in the opinion of such counsel, is sufficient to avoid the imposition of 409A Taxes (the “Benefits Delay Period”), Executive shall be responsible for the full cost of providing such benefits, and (ii) on the first day following the Benefits Delay Period, the Company shall reimburse Executive for the costs of providing such benefits imposed on Executive during the Benefits Delay Period, plus interest accrued at a rate equal to the rate of earnings then credited on accounts in the Company’s Deferred Compensation Plan, or any successor plan.
(C)	The Company shall fund any payments to Executive that are to be delayed as a result of the imposition of a Payment Delay Period (including the interest to be paid with respect to such delayed payments) and/or any payments that are expected to be paid to Executive as a result of the imposition of a Benefits Delay Period (including any interest to be paid with respect thereto) (collectively, the “Delayed Payments”) by establishing and irrevocably funding a trust for the benefit of Executive. Such trust shall be a grantor trust described in Section 671 of the Code. The trust shall provide for distribution of amounts to Executive in order to pay taxes, if any, that become due prior to payment of the

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Delayed Payments pursuant to the trust. The amount of such fund shall equal a good faith estimate of the Delayed Payments determined by the Company in consultation with Executive. The establishment and funding of such trust shall not affect the obligation of the Company to pay the Delayed Payments pursuant to this Section 5(k).

(D)	Executive will be considered to have terminated employment with the Company only when Executive incurs a “separation from service” with the Company within the meaning of Treasury Regulation Section 1.409A-1(h).
(E)	The severance and benefit payments payable under Sections 5(a)(i), 5(a)(ii), 5(a)(iii)(a), 5(a)(iii)(b), 5(c), and 5(h) and the stipend payable under Section 5(i), shall be construed to be compliant payments that are payable in connection with Executive’s “separation from service.” The lump sum severance payments payable under Sections 5(a)(i), 5(a)(ii), 5(a)(iii) and 5(c) shall be paid within thirty (30) days following the Date of Termination (on such date as is determined by the Company). The severance payments payable under Section 5(a)(iv) shall be construed to be compliant payments that are payable in connection with Executive’s death.
(F)	The provision of continued benefits pursuant to Sections 5(c), 5(h) and 6(b) shall be provided in a manner that is exempt from Section 409A of the Code in accordance with Treasury Regulation Section 1.409A-1(a)(5), and, to the extent such continued benefits are not exempt from Section 409A, in a manner that complies with Section 409A in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv). For the avoidance of doubt, the Executive shall not be entitled to payments under Section 5(c)(i) and 5(h) for the same benefit at the same time.
(G)	The payment of damages under the third paragraph of Section 5(a)(iii)(a) and the third paragraph of Section 5(a)(iii)(b) shall be construed to be exempt payments of settlements or awards resolving bona fide legal claims in accordance with Treasury Regulation Section 1.409A-1(b)(11) and paid in a manner consistent with such intent; provided, however, that if the payment of such damages cannot be provided in a manner that is exempt from Section 409A, such payment shall be made in a cash lump sum payment within five (5) days from the date such obligation arises.
(H)	The tax gross-up payments payable under Sections 5(b), 9(b)(A) and 9(c) shall be paid in a manner that complies with Section 409A

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in accordance with Treasury Regulation Section 1.409A-3(i)(1)(v), including, without limitation, that each such gross-up payment shall be made by the end of the Executive’s taxable year next following the Executive’s taxable year in which the Executive remits the related taxes.

(I)

The reimbursement of expenses and/or provision of in-kind benefits under Sections 9(c), 15, 16 and 17 shall be provided in a manner that complies with Section 409A in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv), including, without limitation, that the reimbursement of expenses or provision of in-kind benefits in Executive’s taxable year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.

     6. Reserved.

     7. Termination for Cause.

     (a) If the Company reasonably shall determine that there are grounds for discharging the Executive for Cause (as hereinafter defined), the Company may, through the Board, at its election within thirty (30) days thereafter, give the Executive notice of its intention to terminate the Executive for Cause, stating the grounds for termination and specifying a date, within thirty (30) days of such notice, on which the Executive shall be given an opportunity to discuss such grounds for termination at a meeting of the Board.

     (b) If the grounds for termination are those specified in clause (ii), (iii) or (iv) of paragraph (d) hereof, at such Board meeting the Board and the Executive shall discuss in good faith and shall determine and set forth in writing what actions the Executive might take, and by what date, to cure the material adverse impact or default, as the case may be, to the reasonable satisfaction of the Board, but in no event earlier than sixty (60) days after said meeting. When the Board and the Executive have agreed in writing upon a cure and the date by which it shall be provided, the Board shall take no further action regarding termination for Cause on such grounds until such date, and on such date it shall provide written notice to the Executive that either (i) the cure has been satisfactorily provided, and the Board shall continue to employ the Executive under this Agreement pursuant to the terms hereof, or (ii) the cure has not been satisfactorily provided and the Board is terminating the Executive’s employment for Cause effective immediately.

     (c) If the grounds for termination are those specified in clause (i) of paragraph (d) hereof, it is understood and agreed that no satisfactory cure is available. If following discussion with the Executive of the grounds for his termination (as specified in clause (i) of paragraph (d) hereof, at the Board meeting the Board shall continue intent on discharging the Executive for Cause on such grounds, the Company shall provide written notice of termination to the Executive within thirty (30) days of the date of such meeting, and such termination shall be effective upon the date set forth in such notice.

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     (d) For purposes of this Agreement the term “Cause” shall mean:

          (i) the conviction of the Executive for a felony involving fraud or moral turpitude;

          (ii) The Executive’s engaging in activities prohibited by Section 10 hereof;

          (iii) the Executive’s frequent willful gross neglect (other than as a result of physical, mental or emotional illness) of his duties and responsibilities under this Agreement that has a material adverse impact on the business or reputation of the Company; or

          (iv) the Executive’s willful gross misconduct that has a material adverse impact on the business or reputation of the Company.

     (e) For each act or occurrence giving rise to a basis for termination for Cause, failure by the Company to timely give all written notices as set forth in this Section, from the date the Board or any of its members were either (i) aware of such act or occurrence giving rise to a basis for termination for Cause, or (ii) with reasonable due diligence should have known of such act or occurrence giving rise to a basis for termination for Cause, shall constitute a waiver of the Company’s right to terminate based upon such Cause, but such waiver shall not prejudice the Company’s right to terminate pursuant to this Section based upon another act or occurrence giving rise to a basis for termination for Cause, whether of the same or a different type.

     8. Resignation by Executive for “Good Reason”. In the event that the Company shall during the term of this contract (i) fail to continue the appointment of the Executive as Chairman and Chief Executive Officer, (ii) reduce the Executive’s annual salary below the minimum amount specified in Appendix A, (iii) materially diminish the duties or responsibilities of the Executive as Chairman and Chief Executive Officer, as the same are set forth hereinabove, (iv) assign to the Executive such duties and responsibilities inconsistent with his position as Chairman and Chief Executive Officer, or (v) materially change the geographic location of the Executive’s principal office to a location that is more than thirty (30) miles away (each of the foregoing hereinafter referred to as a “Triggering Event”), then the Executive may give notice to the Company of his election to terminate this Agreement pursuant to this Section, effective sixty (60) days from the date of such notice, unless the Company shall have cured the default giving rise to his Notice of Termination. Such notice from the Executive shall state the Triggering Event that provides the grounds for his termination, and such notice must be given, if at all, within one hundred and twenty (120) days of the occurrence of the Triggering Event referred to as providing such grounds for termination. Within the sixty (60) day period specified in the Executive’s notice to the Company, the Executive and the Board shall discuss in good faith what actions the Board might take, and by what date, to cure the default involved in the Triggering Event specified by the Executive. If within that sixty (60) day period the Board and the Executive are unable to agree in writing upon a cure or the date by which such cure shall be provided, the Executive’s termination shall be effective on the date specified in his original notice to the Company. If within such sixty (60) day period the Board and the Executive shall agree in writing upon a cure and the date by which it shall be provided, then on such date the

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Executive shall notify the Board either (i) that the cure has been satisfactorily provided, and the Executive is willing to continue his employment under this Agreement pursuant to the terms hereof (except as such terms may have been altered by the agreed-upon cure), or (ii) that the cure has not been satisfactorily provided and the Executive is terminating his employment hereunder effective immediately.

9. Termination of Employment as a Result of Change in Ownership or Control of the Company.

     (a) In the event that the Company shall merge with, or sell or otherwise dispose of all or substantially all of its assets or stock to, or is acquired by another corporation or other entity (hereinafter, a “Change in Ownership or Control”), and the parties to such agreement (i) do not appoint the Executive as Chairman and Chief Executive Officer (or to such other position of authority and responsibility as may be acceptable to the Executive in his sole discretion) of the newly created or merged entity or purchaser, or (ii) in connection with or following such a Change in Ownership or Control, cause a material change in the geographic location of the Executive’s principal office to a location that is more than thirty (30) miles away from its location immediately prior to the Change in Ownership or Control, then the Board shall notify the Executive in writing, specifying such other senior executive position with the new entity purchaser, or controlling entity, in which the Executive is to serve, the duties to be assigned to such position, and any other amendments to the terms and provisions of this Agreement that the above-mentioned parties propose. In no event, however, shall the remuneration, benefit coverage, stock option entitlements or severance payments be less than that provided for in this Agreement. At any time during the period following such notice and ending six (6) months from the effective date of the Change in Ownership or Control, the Executive may elect to give notice to the Company, to the purchaser, to the new entity, or to the controlling entity as the case may be, that he is terminating this Agreement pursuant to this Section, effective on the date specified in such notice. If the Agreement is terminated pursuant to this Section the Company shall provide the Executive all benefits and obligations as provided in Section 5 hereof; provided, however, that prior to the effective date of the Change in Ownership or Control, the Company shall make arrangements satisfactory to the Executive by providing adequate security that the new entity, purchaser or controlling entity following the Change in Ownership or Control will have the financial resources to make the payments and provide for the payments and benefits (or the economic equivalent thereof) to the Executive on a timely basis in accordance with the terms of this Agreement.

     (b) In the event the Change in Ownership or Control results in the dissolution, elimination or modification of the Company’s equity incentive plans, and the Executive becomes employed by the successor entity in accordance with Section 9(a) above, the Executive may, at his sole discretion, elect to (i) accept participation in and the award of equity incentives in such plans of the successor or controlling entity, as offered to him by such successor or controlling entity, or (ii) have all Equity Incentives not previously vested, become vested and to receive a payment in cash for and in lieu of such Equity Incentives as calculated in accordance with the following formula:

(A) The cash equivalent of the Options shall be the average of the then present value of all options and stock appreciation rights granted to

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	the Executive over the prior three (3) years, and shall be determined pursuant to the “Black-Scholes” options pricing model. The cash equivalent of any restricted stock , restricted stock units or other stock payments which are vested by reasons of this Section 9(b)(ii) will equal the same amount as if such restricted stock, restricted stock units or stock payments were unrestricted stock at the time of the Change in Ownership or Control.
	The Executive will be provided with a lump-sum payment, within 30 days of the dissolution, elimination or modification of the Company’s equity incentive plans, equal to the calculated cash equivalent of the Equity Incentives, plus an additional cash amount (grossed up) to cover all taxes required to be paid by the Executive on this cash equivalent, provided, that Executive remains employed with the successor entity through the date of such dissolution, elimination or modification of the Company’s equity incentive plans.
(B)	In addition, the Executive will be credited, for the purpose of this Section 9(b), with additional equity incentives equal to 0.5 percent (0.5%) of the fully diluted capitalization of the Company calculated as of the day before the Change in Ownership or Control, multiplied by the number of years (including fraction thereof) from that date to the end of the Term of this Agreement as set forth in Section 4(a) (the “Cash Equivalency Obligation of Successor”).
	On the first anniversary date of this Agreement following the Change in Ownership or Control, the successor entity shall provide the Executive with a cash payment to be calculated as follows: the Cash Equivalency Obligation of Successor multiplied by a fraction the numerator of which is the number of months or fraction thereof from the effective date of the Change in Ownership or Control to the anniversary date and the denominator of which is the total number of months or fraction thereof from the effective date of the Change in Ownership or Control and the end of the Term of this Agreement; provided, that Executive remains employed with the successor entity through the date of the first anniversary following a Change in Ownership or Control, and such cash payment is paid in a lump sum within thirty (30) days following such date. On each succeeding anniversary date through the end of the Term of this Agreement, the successor entity shall provide the Executive with a cash payment to be calculated as follows: the Cash Equivalency Obligation of Successor multiplied by a fraction, the numerator of which is 12 and the denominator of which is the total number of months between the effective date of the Change in Ownership or Control and the end of the Term of this Agreement;

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provided, however, that Executive will be eligible to receive each such cash payment due upon each successive anniversary following a Change in Ownership or Control only if: (i) Executive remains employed with the successor entity through the date of such successive anniversary and the cash payment payable upon such anniversary is paid in a lump sum within thirty (30) days following such anniversary date, or (ii) if Executive is terminated by the Company without Cause (under Section 4(b)(ii)) or has an “involuntary separation from service” within the meaning of Treasury Regulation Section 1.409A-1(n)(2)(i), the cash payment payable during the period in which the Date of Termination occurs is paid in a lump sum within thirty (30) days following the Date of Termination.

     (c) In the event the Change in Ownership or Control results in the Executive’s participation in a medical insurance plan which provides a lesser amount of benefits or coverage than the Company’s medical plan for the Executive and/or members of his immediate family, the successor or controlling entity shall provide the Executive with a cash payment sufficient to reimburse the Executive for all medical expenses incurred by the Executive for himself and for members of his immediate family, and the successor or controlling entity shall provide the Executive with an additional cash amount (gross up) to cover all taxes required to be paid by the Executive on such medical expense reimbursement.

     10. Agreement Not to Compete. The Executive agrees that during his employment by the Company, and for a period of one (1) year following the termination of such employment, except if the Executive’s termination arises as a result of a Change in Ownership or Control as provided for in Section 5(a)(iii) and 9 herein, in which case the Executive shall not be bound by any post-termination agreement not to compete, he will not, without the prior written consent of the Company, either directly or indirectly, on his own behalf or in the service or on behalf of others as a shareholder (other than ownership of less than five percent (5%) of the outstanding voting securities of an entity whose voting securities are traded on a national securities exchange), officer, trustee, consultant, or executive or managerial employee, engage in, consult with or be employed by any Competing Business.

     11. Agreement Not to Solicit Customers. The Executive agrees that during his employment by the Company and for a period of one (1) year following the termination of such employment, except if the Executive’s termination is for Cause under Section 7 or voluntary resignation under Section 4(b)(vii), or if the Executive’s termination arises as a result of a Change in Ownership or Control as provided for in Section 5(a)(iii) and 9 herein, in which case the Executive shall not be bound by any post-termination agreement not to solicit customers, he will not without the prior written consent of the Company, either directly or indirectly, on his own behalf or in the service or on behalf of others, solicit, divert or appropriate, or attempt to solicit, divert or appropriate, to any Competing Business, any person or entity whose account with the Company was sold or serviced by or under the supervision of the Executive during the two (2) years preceding the termination of such employment. For the purposes hereof, such persons or entities shall not include wholesale pharmaceutical distributors, major drug chains or other distribution intermediaries.

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     12. Agreement Not to Solicit Employees. The Executive agrees that during his employment by the Company and for a period of one (1) year following the termination of such employment, except if the Executive’s termination is for Cause under Section 7, or voluntary resignation under Section 4(b)(vii), or if the Executive’s termination arises as a result of a Change in Ownership or Control as provided for in Section 5(a)(iii) and 9 herein, in which case the Executive shall not be bound by any post-termination agreement not to solicit employees, he will not, either directly or indirectly, on his own behalf or in the service or on behalf of others, solicit, divert or hire away, or attempt to solicit, divert or hire away, to any Competing Business any person employed by the Company, whether or not such employee is a full-time employee or a temporary employee of the Company, whether or not such employment is pursuant to written agreement and whether or not such employment is for a determined period or is at will.

     13. Ownership, Non-Disclosure and Non-Use of Confidential Information.

     (a) The Executive acknowledges and agrees that all Confidential Information as defined in Section 1(c), hereof, and all physical embodiments thereof, are confidential to and shall be and remain the sole and exclusive property of the Company. Upon request by the Company, and in any event upon termination of his employment with the Company for any reason, the Executive shall promptly deliver to the Company all property belonging to the Company, including without limitation, all Confidential Information (and all embodiments thereof), then in his custody, control or possession.

     (b) The Executive agrees that he will not, either during the term of his employment by the Company, or for a period of five (5) years after the termination of his employment, without the prior written consent of the Company, disclose or make available any Confidential Information, as defined in Section 1(c) hereof, to any person or entity, nor shall he make or cause to be made, or permit or allow, either on his own behalf or on behalf of others, any use of such Confidential Information other than in the proper performance of his duties hereunder.

     14. Ownership of Inventions.

     (a) The Executive shall promptly disclose to the Company all discoveries, inventions, and improvements, patentable or unpatentable, conceived or made by the Executive, individually or jointly with any other person or persons, during the period of his employment by the Company (whether or not during working hours) relating in any manner to the business or activities of the Company, whether such discovery, invention or improvement be a machine, apparatus, process, composition, article, or other subject. All such discoveries, inventions and improvements shall be the sole and exclusive property of the Company in respect to any and all countries, their territories and possessions. The Executive shall, during his employment within the Company and thereafter, perform at the request and expense of the Company all lawful acts and execute, acknowledge and deliver all such instruments deemed necessary by the Company to vest in the Company the entire right, title and interest in and to such discoveries, inventions and improvements, and to enable the Company to properly prepare, file and prosecute applications for and obtain patents (including like kinds of industrial property) thereon in any and all countries selected by the Company as well as reissues, renewals and extensions thereof, and to obtain and record title to such applications and patents so that the Company shall be the sole and absolute owner thereof in any and all countries in which it may desire patent or like protection.

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     (b) Any provision in this Agreement requiring the Executive to assign his rights in any invention does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on the Executive’s own time, and: (a) which does not relate (i) to the Business of the Company or (ii) to the Company’s actual or demonstrably anticipated research or development, or (b) which does not result from any work performed by the Executive for the Company.

     15. Business and Travel Expense. The Executive shall be reimbursed for his out-of-pocket expenses incurred in carrying out the Company’s business, including all travel and entertainment expenses reasonably required by the Executive in his position as Chairman and Chief Executive officer, in accordance with Company policy and upon proof of such expenditures. It is understood that the Executive’s significant other may accompany him on business travel when the Executive determines that her presence will enable him to further the interests of the Company and in such circumstances the Executive shall be reimbursed for her reasonable out-of-pocket travel and entertainment expenses as well.

     16. Financial Planning Expenses. The Company shall reimburse the Executive for reasonable costs and expenses incurred by the Executive for financial, estate and tax planning up to an aggregate of Ten Thousand Dollars ($10,000) annually.

     17. Legal and Consulting Fees. The Company shall pay all reasonable legal fees and consulting expenses incurred by the Executive in connection with the negotiation and preparation of this Agreement.

     18. Resolution of Disputes.

     (a) Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in the City of Phoenix, in accordance with the rules of the American Arbitration Association (the “AAA”). The arbitration shall be before three (3) arbitrators, all of whom shall be attorneys. One arbitrator shall be appointed by the Executive; one arbitrator shall be appointed by the Company, and the third Arbitrator shall be selected by the two appointed Arbitrators. In the event the two appointed Arbitrators are unable to agree upon the third Arbitrator, either party may petition the Superior Court of the State of Arizona, Maricopa County, for appointment of the third arbitrator. The arbitrators shall not have the authority to add to, subtract from or in any way modify the express written terms of the Agreement, and in rendering an award, the arbitrators shall be required to adhere to the express written provisions of this Agreement and the intention of the parties appearing therefrom. The decision of the arbitrators shall be final and binding on the parties hereto and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.

     (b) The costs for the arbitration shall be borne equally by both parties.

     (c) Pending the outcome or resolution of any arbitration, the Company shall continue payment of all amounts when and as due the Executive under this Agreement without regard to any dispute; provided, however, that if the arbitration shall be decided in favor of the Company, the, Executive shall promptly repay to the Company, with interest at the prime rate as published from time to time by Chemical Bank, all amounts he would not have been entitled to receive

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under this Agreement had the dispute not been taken to arbitration, and the arbitration award in favor of the Company shall be deemed an award in the amount of the repayment due to the Company.

     19. Compliance With Securities Laws. The Executive shall comply with all federal and state securities laws and Company policies and guidelines relating thereto concerning insider trading, reporting requirements, and confidentiality of undisclosed internal material information about the Company.

     20. Severability, etc.

     (a) The Executive agrees that the covenants and agreements contained in Sections 10, 11, 12 and 13 of this Agreement, and the subsections of those Sections, are of the essence of this Agreement; that each of such covenants is reasonable and necessary to protect and preserve the interests and properties of the Company and the Business of the Company; that the company is engaged in the Business of the company; that irreparable loss and damage will be suffered by the Company should the Executive breach any of such covenants and agreements; that each of such covenants and agreements is separate, distinct and severable not only from the other of such covenants and agreements but also from the other and remaining provisions of this Agreement; that the unenforceability of any such covenant or agreement shall not affect the validity or enforceability of any other such covenant or agreements or any other provision or provisions of this Agreement; and that, in addition to other remedies available to it, the Company shall be entitled to seek both temporary and permanent injunctive relief to prevent a breach or contemplated breach by the Executive of any of such covenants or agreements.

     (b) In the event any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable because it is invalid or in conflict with any law of any relevant jurisdiction, the validity of the remaining provisions shall not be affected, and the rights and obligations of the parties shall be construed and enforced as if this Agreement did not contain such invalid or unenforceable provisions.

     21. No Set-Off By the Company. The Company shall continue to provide to the Executive all compensation, benefits and prerequisites of the office of Chairman and Chief Executive Officer provided for in this Agreement notwithstanding the existence of any claim, dispute, action or cause of action by the Company against the Executive, whether based upon this Agreement or otherwise. Such dispute, claim or cause of action by the Company against the Executive shall be resolved in accordance with Section 18 hereof, with the exception of the Company’s right to seek injunctive relief provided for in Section 20 hereof.

     22. Headings. The headings of the Sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

     23. Notices. Any notice to either party hereunder shall be in writing, and shall be deemed to be sufficiently given to or served on such party, for all purposes, if the same shall be personally delivered to such party, or sent to such party by registered mail, postage prepaid, at the address of such party given above. Either party hereto may change the address to which

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notices are to be sent to such party hereunder by written notice of such new address given to the other party hereto.

     24. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Arizona applicable to contracts to be performed therein, without regard to conflict of laws principles.

     25. Assignment. This Agreement may not be assigned by the Company without the prior written consent of the Executive. The Executive shall have the right to designate a beneficiary, his executor, his administrator or his estate to receive any payments or benefits payable under this Agreement upon his death.

     26. Waiver. Except as otherwise provided for in this Agreement, no term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.

     27. Amendment of Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

     28. Entire Agreement. This Agreement represents the entire understanding of the parties hereto and supersedes any prior understandings or agreements between the parties, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Executive of a kind elsewhere provided and not expressly provided in this Agreement.

     29. Counterparts.

     This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument.

[Remainder of page intentionally left blank]

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     IN WITNESS WHEREOF, the Executive has executed this Agreement and the Company has caused this Agreement to be executed by its representative thereunto duly authorized as of the date set forth above.

MEDICIS PHARMACEUTICAL CORPORATION
By:	/s/ Jason D. Hanson
	Jason D. Hanson
	Chief Operating Officer
By:	/s/ Spencer Davidson
	Spencer Davidson
	Chairman, Stock Option and Compensation Committee, Member of Board of Directors
By:	/s/ Jonah Shacknai
	Jonah Shacknai

EXHIBIT A

     The following sets forth the Executive’s compensation in accordance with paragraph 3(a):

1. Annual base compensation* (“Base Salary”)	$1,100,000 per year
2. Health/Medical and other Employee benefits provided to other employees of the Company.	Actual cost
3. Stock Options and Restricted Stock Grants	Grants as determined by Stock Option and Compensation Committee from time to time
4. Annual Cash Bonus	The Board agrees to determine, in good faith, the annual cash bonus to be provided to the Executive based upon the Executive’s performance and the performance of the Company measured against the Company’s fiscal plan for the prior fiscal year calculated in accordance with the Company’s bonus plans as they may be in effect from time to time.

^*  The Stock Option and Compensation Committee will review the base salary amount annually and provide an increase in the Executive’s base annual compensation as appropriate and within its discretion.

Exhibit A — Page 1

EXHIBIT B

Limitation on Payments.

     (a) Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive (including any payment or benefit received in connection with a Change in Ownership or Control or the termination of the Executive’s employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments and benefits, including the payments and benefits under Sections 5, 8 and 9 of this Agreement, being hereinafter referred to as the “Total Payments”) would be subject (in whole or part), to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the cash severance payments shall first be reduced, and the noncash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced by the Company in its reasonable discretion in the following order: (A) reduction of any cash severance payments otherwise payable to the Executive that are exempt from Section 409A of the Code, (B) reduction of any other cash payments or benefits otherwise payable to the Executive that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any stock option or other equity award with respect to the Company’s Common Stock that are exempt from Section 409A of the Code, (C) reduction of any other payments or benefits otherwise payable to the Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any stock option or other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code, and (D) reduction of any payments attributable to the acceleration of vesting or payment with respect to any stock option or other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code.

     (b) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of independent auditors of nationally recognized standing (“Independent Advisors”) selected by the Company, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion

Exhibit B — Page 1

of Independent Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

Exhibit B — Page 2

EX-10.4

Exhibit 10.4

MEDICIS 2006 INCENTIVE AWARD PLAN

STOCK OPTION GRANT NOTICE

     Medicis Pharmaceutical Corporation, a Delaware corporation (the “Company”), pursuant to the its 2006 Incentive Award Plan attached hereto as Exhibit C (the “Plan”), hereby grants to the individual listed below (the “Participant”), an option to purchase the number of shares of the Company’s Class A common stock, par value $0.014 per share (“Stock”), set forth below (the “Option”). This Option is subject to all of the terms and conditions set forth herein and in the Stock Option Agreement attached hereto as Exhibit A (the “Stock Option Agreement”) and the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein or the Stock Option Agreement, the terms defined in the Plan shall have the same defined meanings in this Stock Option Grant Notice (the “Grant Notice”).

Participant:
Grant Date:
Exercise Price per Share:	$
Total Number of Shares Subject to the Option:
Expiration Date:

Type of Option:	o     Incentive Stock Option      o     Non-Qualified Stock Option
Vesting Schedule:	Subject to the terms and conditions of the Plan, this Grant Notice and the Stock Option Agreement, this Option shall vest and become exercisable as to:

(i)	10% of the total number of shares of Stock subject to the Option on ___________________, 20__,
(ii)	10% of the total number of shares of Stock subject to the Option on ___________________, 20__,
(iii)	20% of the total number of shares of Stock subject to the Option on ___________________, 20__,
(iv)	30% of the total number of shares of Stock subject to the Option on ___________________, 20__, and
(v)	30% of the total number of shares of Stock subject to the Option on ___________________, 20__.

Notwithstanding the foregoing, the Option shall become fully vested and exercisable immediately prior to the occurrence of a Change in Control. Except as otherwise provided in a written agreement between the Participant and the Company or any Subsidiary, in no event shall this Option vest and become exercisable for any additional shares of Stock following the Participant’s Termination of Employment, Termination of Consultancy, or Termination of Directorship, as applicable.

Remainder of page intentionally left blank.

     By his or her signature below, the Participant agrees to be bound by the terms and conditions of this Grant Notice, the Stock Option Agreement and the Plan. The Participant has reviewed this Grant Notice, the Stock Option Agreement and the Plan in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Stock Option Agreement and the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under or relating to this Grant Notice, the Stock Option Agreement and the Plan.

MEDICIS PHARMACEUTICAL CORPORATION:		PARTICIPANT:
By:		By:
Print Name:		Print Name:
Title:
Address:	7720 N. Dobson Road Scottsdale, Arizona 85256	Address:

Attachments:	Stock Option Agreement (Exhibit A)
	Form of Exercise Notice (Exhibit B)
	Medicis 2006 Incentive Award Plan (Exhibit C)
	Medicis 2006 Incentive Award Plan Prospectus (Exhibit D)

EXHIBIT A

TO STOCK OPTION GRANT NOTICE

STOCK OPTION AGREEMENT

     Pursuant to the Stock Option Grant Notice (the “Grant Notice”) to which this Stock Option Agreement (this “Agreement”) is attached, Medicis Pharmaceutical Corporation, a Delaware corporation (the “Company”), has granted to the Participant an option under the Medicis 2006 Incentive Award Plan (the “Plan”) to purchase the number of shares of the Company’s Class A common stock, par value $0.014 per share (“Stock”), indicated in the Grant Notice.

ARTICLE I

GENERAL

     1.1 Defined Terms. Wherever the following terms are used in this Agreement they shall have the meanings specified below, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings specified in the Grant Notice or, if not defined therein, the Plan.

          “Misconduct” shall mean (i) the commission of any act of fraud, embezzlement or dishonesty by Participant that adversely affects the Company or any Subsidiary, (ii) any unauthorized use or disclosure by Participant of confidential information or trade secrets of the Company or any Subsidiary that adversely affects the Company or any Subsidiary, (iii) any willful and continued failure by Participant to substantially perform his or her duties with the Company or any Subsidiary (other than any such failure resulting from Participant’s incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Participant by the Board, which demand specifically identifies the manner in which the Board believes that Participant has not substantially performed such duties, or (iv) any willful and continued failure by Participant to substantially follow and comply with the specific and lawful directives of the Board, as reasonably determined by the Board (other than any such failure resulting from Participant’s incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to Participant by the Board, which demand specifically identifies the manner in which the Board believes that Participant has not substantially performed such directives. The foregoing definition shall not in any way preclude or restrict the right of the Company (or any Subsidiary) to discharge or dismiss Participant or any other person in the service of the Company (or any Subsidiary) for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of this Agreement, to constitute grounds for termination for Misconduct.

     1.2 Incorporation of Terms of Plan. The Option is subject to the terms and conditions of the Plan, which are incorporated herein by reference.

ARTICLE II

GRANT OF OPTION

     2.1 Grant of Option. In consideration of the Participant’s past and/or continued employment with or service to the Company or a Parent or Subsidiary and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants to the Participant the Option to purchase any part or all of an aggregate of the number of shares of Stock set forth in the Grant Notice, upon the terms and conditions set forth in the

Plan and this Agreement. If the Option is designated as an Incentive Stock Option in the Grant Notice, the Option shall be an Incentive Stock Option to the maximum extent permitted by law.

     2.2 Exercise Price. The exercise price of the shares of Stock subject to the Option shall be as set forth in the Grant Notice, without commission or other charge; provided, however, that the exercise price per share of Stock subject to the Option shall not be less than 100% of the Fair Market Value of a share of Stock on the Grant Date. Notwithstanding the foregoing, if this Option is designated as an Incentive Stock Option and the Participant owns (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any “subsidiary corporation” of the Company or any “parent corporation” of the Company (each within the meaning of Section 424 of the Code), the exercise price per share of Stock subject to the Option shall not be less than 110% of the Fair Market Value of a share of Stock on the Grant Date.

     2.3 Consideration to the Company; No Employment Rights. In consideration of the grant of the Option by the Company, the Participant agrees to render faithful and efficient services to the Company or any Parent or Subsidiary. Nothing in the Plan or this Agreement shall confer upon the Participant any right to continue in the employ or service of the Company or any Parent or Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Parents and Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the employment or services of the Participant at any time for no reason or for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company, a Parent or a Subsidiary and the Participant.

ARTICLE III

PERIOD OF EXERCISABILITY

     3.1 Commencement of Exercisability.

          (a) Subject to Sections 3.2, 3.3, and 7.9, the Option shall become vested and exercisable in such number of shares of Stock and at such times as are set forth in the Grant Notice.

          (b) No portion of the Option which has not become vested and exercisable at the date of the Participant’s Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable, shall thereafter become vested and exercisable, except as may be otherwise provided by the Administrator or as set forth in a written agreement between the Company and the Participant.

     3.2 Duration of Exercisability. The installments provided for in the vesting schedule set forth in the Grant Notice are cumulative. Each such installment which becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and exercisable until it becomes unexercisable under Section 3.3.

     3.3 Expiration of Option. Subject to earlier termination pursuant to Section 5.1, the Option may not be exercised to any extent by anyone after the first to occur of the following events:

          (a) The expiration of ten years from the Grant Date;

          (b) If this Option is designated as an Incentive Stock Option and the Participant owned (within the meaning of Section 424(d) of the Code), on the Grant Date, more than 10% of the total combined voting power of all classes of stock of the Company or any “subsidiary corporation” of the

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Company or any “parent corporation” of the Company (each within the meaning of Section 424 of the Code), the expiration of five years from the Grant Date;

          (c) The expiration of 90 days following the date of the Participant’s Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable, unless such Termination of Employment, Termination of Directorship or Termination of Consultancy occurs by reason of the Participant’s death or Disability or the discharge of the Participant for Misconduct;

          (d) The expiration of twelve months following the date of the Participant’s Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable, by reason of the Participant’s Disability;

          (e) The expiration of 180 days from the date of the Participant’s Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable, by reason of the Participant’s death; or

          (f) The date of the Participant’s Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable, by the Company or any Parent or Subsidiary by reason of the discharge of the Participant for Misconduct.

     3.4 Special Tax Consequences. In the event the Option is designated an Incentive Stock Option, the Participant acknowledges that, to the extent that the aggregate Fair Market Value (determined as of the Grant Date) of all shares of stock with respect to which incentive stock options granted by the Company (or any “subsidiary corporation” or any “parent corporation” of the Company), including the Option, are exercisable for the first time by the Participant in any calendar year exceeds $100,000, the Option and such other options shall be non-qualified stock options to the extent necessary to comply with the limitations imposed by Section 422(d) of the Code. The Participant further acknowledges that the rule set forth in the preceding sentence shall be applied by taking the Option and other “incentive stock options” into account in the order in which they were granted, as determined under Section 422(d) of the Code and the Treasury Regulations thereunder.

ARTICLE IV

EXERCISE OF OPTION

     4.1 Person Eligible to Exercise. Except as provided in Section 7.2, during the lifetime of the Participant, only the Participant may exercise the Option or any portion thereof. After the death of the Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by the Participant’s personal representative or by any person empowered to do so under the deceased the Participant’s will or under then applicable laws of descent and distribution.

     4.2 Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3.

     4.3 Manner of Exercise. The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company or the Secretary’s office of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.3:

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          (a) An Exercise Notice in writing signed by the Participant or any other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Administrator. Such notice shall be substantially in the form attached as Exhibit B to the Grant Notice (or such other form as is prescribed by the Administrator, which may include, without limitation, electronic notice provided through a third-party administrator);

          (b) The receipt by the Company of full payment for the shares of Stock with respect to which the Option or portion thereof is exercised, including payment of any applicable withholding tax, which may be in one or more of the forms of consideration permitted under Section 4.4; and

          (c) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Option.

     4.4 Method of Payment. Payment of the exercise price shall be by any of the following, or a combination thereof, at the election of the Participant:

          (a) cash;

          (b) check;

          (c) to the extent permitted under applicable laws, delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate exercise price; provided, that payment of such proceeds is then made to the Company upon settlement of such sale;

          (d) with the consent of the Administrator, through the delivery of shares of Stock which have been owned by the Participant for at least six months, duly endorsed for transfer to the Company with a Fair Market Value on the date of exercise equal to the aggregate exercise price of the Option or exercised portion thereof;

          (e) through the surrender shares of Stock then issuable upon exercise of the Option with a Fair Market Value on the date of exercise equal to the aggregate exercise price of the Option or exercised portion thereof; provided, however, that the Participant shall only be entitled to elect this method of exercise during the six (6) month period ending on the date on which the Option expires pursuant to Section 3.3(a) or, if applicable, Section 3.3(b); or

          (f) any combination of the consideration provided in the foregoing.

     4.5 Conditions to Issuance of Stock Certificates. The shares of Stock deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any shares of Stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions:

          (a) The admission of such shares to listing on all stock exchanges on which such Stock is then listed;

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          (b) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable;

          (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;

          (d) The receipt by the Company (or the Parent or Subsidiary employing the Participant) of full payment for such shares, including payment of any applicable withholding tax, which may be in one or more of the forms of consideration permitted under Section 4.4; and

          (e) The lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to time establish for reasons of administrative convenience.

     4.6 Rights as Stockholder. The Participant (or other person entitled to exercise the Option) shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares of Stock purchasable upon the exercise of any part of the Option unless and until such shares shall have been issued by the Company to the Participant (or such other person) (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the shares of Stock are issued, except as provided in Section 11.3 of the Plan.

ARTICLE V

FORFEITURE FOR FRAUD,
DISHONESTY, UNLAWFUL COMPETITION
AND OTHER HARMFUL ACTS

     5.1 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 3.3 OR IN ANY EXHIBIT TO THIS AGREEMENT, THE PARTICIPANT’S RIGHTS WITH RESPECT TO THE PORTION OF THE OPTION GRANTED HEREUNDER BUT NOT YET EXERCISED SHALL IMMEDIATELY TERMINATE AND BE NULL AND VOID IF:

          (a) THE ADMINISTRATOR DETERMINES THAT THE PARTICIPANT ENGAGED IN ILLEGAL ACTS, FRAUD, DISHONESTY, WILLFUL MISCONDUCT OR OTHER INTENTIONAL CONDUCT DETRIMENTAL TO THE COMPANY OR ANY SUBSIDIARY, INCLUDING VIOLATION OF THE INSIDER TRADING POLICY OF THE COMPANY OR ANY SUBSIDIARY (EACH AN “IMPROPER ACT”);

          (b) THE PARTICIPANT’S EMPLOYMENT BY THE COMPANY OR ANY SUBSIDIARY IS TERMINATED FOR CAUSE AND THE PARTICIPANT HAS COMMITTED IMPROPER ACTS;

          (c) THE PARTICIPANT HAS AT ANY TIME DISCLOSED TO ANY PERSON, FIRM, CORPORATION OR OTHER ENTITY ANY “PROPRIETARY INFORMATION” (AS DEFINED BELOW) OF THE COMPANY OR ANY SUBSIDIARY WITHOUT THE EXPRESS WRITTEN CONSENT OF THE BOARD, OR EXCEPT AS SUCH DISCLOSURE MAY HAVE BEEN REQUIRED IN CONNECTION WITH THE PARTICIPANT’S SERVICE AS AN EMPLOYEE OF THE COMPANY OR ANY SUBSIDIARY OR AS OTHERWISE REQUIRED BY LAW;

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          (d) THE PARTICIPANT SOLICITS OR OTHERWISE INDUCES ANY EMPLOYEE OF THE COMPANY OR ANY SUBSIDIARY TO TERMINATE HIS EMPLOYMENT;

          (e) THE PARTICIPANT SOLICITS BUSINESS FROM ANY OF THE COMPANY’S OR ANY SUBSIDIARY’S CUSTOMERS WITH WHOM THE PARTICIPANT HAS A RELATIONSHIP OR THE IDENTITY OF WHOM BECAME KNOWN TO THE PARTICIPANT BY REASON OF THE PARTICIPANT’S RELATIONSHIP WITH THE COMPANY OR ANY SUBSIDIARY, FOR AND ON BEHALF OF ANY OF THE COMPANY’S COMPETITORS;

          (f) THE PARTICIPANT DISPARAGES THE COMPANY OR ANY SUBSIDIARY OR COMMITS ANY OTHER ACT OF DISLOYALTY;

          (g) THE PARTICIPANT ENGAGES IN ANY CONDUCT IN VIOLATION OF THE PARTICIPANT’S CONTRACTUAL OBLIGATIONS TO THE COMPANY OR ANY SUBSIDIARY, INCLUDING BUT NOT LIMITED TO A VIOLATION OF ANY VALID NON-COMPETITION, NON-DISCLOSURE, NON-SOLICITATION OR OTHER AGREEMENT;

          (h) THE PARTICIPANT FAILS TO ASSIGN TO THE COMPANY OR ANY SUBSIDIARY ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHT IN VIOLATION OF ANY OF THE POLICIES OF THE COMPANY OR ANY SUBSIDIARY OR ANY AGREEMENT BETWEEN THE PARTICIPANT AND THE COMPANY OR ANY SUBSIDIARY; OR

          (i) THE PARTICIPANT REFUSES TO BE AVAILABLE FOR REASONABLE CONSULTATION WITH RESPECT TO THE SUBJECT MATTER OF THE PARTICIPANT’S EMPLOYMENT OR ENGAGEMENT FOLLOWING TERMINATION OF SUCH EMPLOYMENT.

THE ACTS OR CIRCUMSTANCES DESCRIBED IN THIS SECTION 5.1 SHALL BE REFERRED TO AS “EVENTS OF FORFEITURE”.

     5.2 FOR PURPOSES OF THIS ARTICLE V, THE TERM “PROPRIETARY INFORMATION” SHALL MEAN ALL CONFIDENTIAL OR SECRET CUSTOMER LISTS, PROSPECTIVE CUSTOMER LISTS, TRADE SECRETS, PROCESSES, PRODUCT FORMULATIONS, INVENTIONS, IMPROVEMENTS, MANUFACTURING FORMULATION OR SYSTEMS TECHNIQUES, PRODUCT FORMULAS, DEVELOPMENT OR EXPERIMENTAL WORK, WORKS IN PROCESS, BUSINESS, MARKETING AND COMPETITIVE STRATEGIES, INFORMATION RELATING TO ANY PATENT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHT OF THE COMPANY OR ANY SUBSIDIARY, AND ANY OTHER SECRET OR CONFIDENTIAL PROPRIETARY MATTER RELATING TO OR PERTAINING TO THE PRODUCTS, SERVICES, SALES OR BUSINESS OF THE COMPANY OR ANY SUBSIDIARY.

     5.3 IN ADDITION TO THE FOREGOING RIGHTS AND ANY AND ALL OTHER RIGHTS WHICH THE COMPANY (OR ANY OF ITS SUBSIDIARIES OR AFFILIATES) MAY HAVE AGAINST THE PARTICIPANT AT LAW OR IN EQUITY, THE PARTICIPANT FURTHER AGREES THAT UPON THE OCCURRENCE OF ANY OF THE EVENTS OF FORFEITURE DESCRIBED IN SECTION 5.1, UPON THE DETERMINATION OF THE ADMINISTRATOR, THE PARTICIPANT SHALL OWE THE COMPANY THE EXCESS OF THE FAIR MARKET VALUE OVER THE EXERCISE PRICE (MEASURED AS OF THE DATE OF EXERCISE) OF ALL SHARES ACQUIRED THROUGH EXERCISE OF ANY OPTION WITHIN THE THREE YEARS PRECEDING THE ADMINISTRATOR’S DETERMINATION THAT AN EVENT OF FORFEITURE HAS OCCURRED. THE PARTICIPANT SHALL PAY SUCH AMOUNT TO THE COMPANY WITHIN 30

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DAYS OF THE ADMINISTRATOR’S WRITTEN DETERMINATION THAT AN EVENT OF FORFEITURE HAS OCCURRED, WHICH DETERMINATION MAY BE MADE BY NOTICE TO THE PARTICIPANT WITHIN ANY TIME UP TO TWO YEARS FOLLOWING THE PARTICIPANT’S TERMINATION OF EMPLOYMENT, TERMINATION OF DIRECTORSHIP OR TERMINATION OF CONSULTANCY, AS APPLICABLE.

     5.4 BY ACCEPTING THIS AGREEMENT, THE PARTICIPANT CONSENTS TO DEDUCTION FROM ANY AMOUNTS THE COMPANY MAY OWE TO THE PARTICIPANT FROM TIME TO TIME (INCLUDING AMOUNTS OWED TO THE PARTICIPANT AS WAGES OR OTHER COMPENSATION, FRINGE BENEFITS, VACATION PAY OR COMMISSIONS) TO THE EXTENT OF ANY AMOUNT WHICH THE PARTICIPANT OWES THE COMPANY PURSUANT TO THE PROVISIONS OF SECTION 5.3. WHETHER OR NOT THE COMPANY ELECTS TO MAKE ANY SET-OFF IN WHOLE OR IN PART, IF THE COMPANY DOES NOT RECOVER BY MEANS OF THE SET-OFF THE FULL AMOUNT OWED TO IT BY THE PARTICIPANT, THEN THE PARTICIPANT AGREES TO PAY IMMEDIATELY THE UNPAID BALANCE TO THE COMPANY.

     5.5 THE PARTICIPANT MAY BE RELEASED FROM THE PARTICIPANT’S OBLIGATIONS UNDER THIS ARTICLE V ONLY IF THE ADMINISTRATOR DETERMINES, IN ITS SOLE DISCRETION, THAT SUCH A RELEASE IS IN THE BEST INTERESTS OF THE COMPANY. SO LONG AS THEY ARE MADE IN GOOD FAITH, ALL DETERMINATIONS BY THE ADMINISTRATOR MADE PURSUANT TO THIS ARTICLE V SHALL BE FINAL, BINDING AND NON-APPEALABLE.

ARTICLE VI

MANDATORY ARBITRATION

     6.1 Mandatory Arbitration. In consideration of the terms and conditions set forth herein, including the Company’s grant of the Option to the Participant, the Participant and the Company voluntarily promise and agree to arbitrate any and all claims and disputes covered by this Agreement. The arbitration shall be binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) and the National Rules for the Resolution of Employment Disputes (“Employment Dispute Rules”) in effect on the date the arbitration is commenced in accordance with this Agreement. AAA’s Employment Dispute Rules shall govern disputes concerning the term or termination of the Participant’s employment; all federal, state, or local laws, regulations, statutes, or policies prohibiting employment discrimination and/or harassment (including, without limitation, discrimination or harassment based on race, sex, national origin, religion, age, or disability) and/or unlawful retaliation in termination of employment in violation of any public policy; any policy, compensation, or benefit plan of the Company, excluding the Company’s equity incentive plans; and claims for personal, emotional or physical injury not otherwise governed by workers’ compensation. The Commercial Arbitration Rules of AAA shall govern all other disputes relating to the Company’s equity incentive plans, including, without limitation, disputes relating to this Agreement. The provisions of this Agreement shall govern the rights of all parties hereto, including but not limited to any party claiming for or on behalf of the Participant, including the Participant’s heirs, successors, assigns, personal representatives and bankruptcy trustees. The Participant and the Company further agree that binding arbitration pursuant to this Agreement shall be the sole, exclusive, and final remedy for resolving any such claims and disputes.

     6.2 Claims Covered By Mandatory Arbitration Agreement. With the exception of only those claims specifically excluded in Section 6.3 below, the provisions of Section 6.1 cover all legally

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actionable claims that the Participant may currently, or in the future, have against Company, including without limitation, the following:

          (a) any and all claims arising under any alleged or actual contract, agreement, or covenant (oral, written, or implied), including this Agreement, between the Participant and Company relating to the Participant’s employment, the termination of the Participant’s employment, directorship and/or consultancy or an equity incentive award provided to the Participant;

          (b) any and all claims arising under any policy, compensation, or benefit plan of the Company or any Subsidiary, including the Company’s equity incentive plans, unless the decision at issue was made by an entity other than the Company or a Subsidiary, in which case the agreement that arbitration is the exclusive remedy applies only to the Participant’s claims against the Company or any Subsidiary;

          (c) any and all claims arising under any federal, state, or local law, regulation, statute, or policy prohibiting employment discrimination and/or harassment, (including, without limitation, discrimination or harassment based on race, sex, national origin, religion, age, or disability) and/or unlawful retaliation;

          (d) any and all claims arising under any public policy;

          (e) any and all claims for personal, emotional, physical, or economic injury; and

          (f) any and all claims relating to any other rights, obligations, or duties arising out of constitutions, statutes or common law, whether or not specifically referred to in this Agreement, and whether similar to or dissimilar to rights, obligations, or duties referred to in this Agreement, which are or may be granted to any party to this Agreement by the laws of any state or country in which either party resides or engages in the business of the Company.

     6.3 Claims Excluded From Arbitration Agreement. The only claims not subject to Section 6.1 are limited to:

          (a) any claim by the Participant for workers’ compensation benefits;

          (b) any claim by the Participant for benefits under a benefit plan of the Company which provides its own arbitration procedure;

          (c) any claim by a party involving violation of rules, regulations, or laws governing insider trading;

          (d) any claim prohibited from binding arbitration by applicable laws or public policy; and

          (e) any claim brought before the Equal Employment Opportunity Commission, however, notwithstanding the foregoing, the Participant agrees that the Participant’s sole recovery for any damages shall be through the binding arbitration process described herein.

     6.4 Procedures.

          (a) A written request for mediation/arbitration which contains a specific statement of the acts complained of and the statutory or other violation alleged, must be served by mail on the other

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party, and in duplicate (with a copy of this Agreement attached) on the AAA office in Phoenix, Arizona or the AAA regional office in which Phoenix is located. The Company shall be served at its principal place of business at such time, and Holder shall be served at the home address shown in his/her personnel file at such time. The request shall set forth the names, addresses, and telephone numbers of the parties; the amount in controversy, if any; the remedy sought; and that the hearing location agreed upon is Phoenix, Arizona. The request must be filed within the time limit established by the applicable statute of limitations necessary to perfect an administrative claim or initiate a lawsuit, whichever is sooner, if the dispute involves statutory rights, and when statutory rights are not at issue, within one year of the day on which the act complained of occurred, or notice thereof was given, whichever occurs first.

          (b) The parties shall attempt in good faith to select one person by agreement to mediate the dispute. The mediator, after consultation with the parties, will determine the mediation procedures to be followed. The fees and expenses of the mediator, if any, will be paid by the Company. If no mutual agreement can be reached as to such person, then the dispute will be settled by binding arbitration under the procedures set forth below. No mediation shall exceed two hours without the Company’s written agreement to lengthen the mediation. Mediation is not binding on either party.

          (c) If the dispute is not resolved by discussion or mediation within 30 days of the request for mediation/arbitration, AAA shall administer the arbitration. AAA shall appoint an arbitrator within 30 days of AAA’s receipt of notice that the matter was not, or will not be, resolved through mediation. The arbitrator must be licensed to practice law in the state in which the arbitration is convened, and the arbitrator shall, by virtue of background and similar experience, be knowledgeable in matters pertaining to equity compensation agreements and employment relationships and disputes.

          (d) The arbitrator may establish rules for the conduct of the arbitration consistent with the terms of this Agreement and the applicable AAA rules. Each party shall have the presumptive right to take two depositions at their own expense. The arbitrator may order additional depositions for good cause shown and such other discovery as the arbitrator considers necessary. Each party shall be entitled to counsel of its choice. All proceedings shall be deemed private and confidential and shall not be disclosed to the public by either the arbitrator or the parties to the arbitration, except as required by legal process or as necessary to judicially challenge an arbitration award under the grounds set forth below. The arbitrator shall have the authority to entertain motions to dismiss and/or motions for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure.

          (e) In arbitrations governed by the Commercial Arbitration Rules of AAA, not earlier than 30 nor more than 45 days after appointment, the arbitrator shall conduct a preliminary hearing in accordance with AAA’s “Guidelines for Expediting Large, Complex Commercial Arbitrations.” Not less than five days prior to the preliminary hearing, all parties to the arbitration shall serve upon all other parties to the arbitration a written list of witnesses and exhibits to be used in the arbitration hearing. Except for good cause shown, no witness or exhibit may be utilized at the arbitration hearing other than those set forth on such list. The arbitrator shall have the power to compel production of documents at the hearing by subpoena. Each party shall be entitled to counsel of its choice. All proceedings and information provided at the hearings shall be deemed private and confidential and shall not be disclosed to the public by either the arbitrator or the parties to the arbitration. The arbitrator shall have the authority to entertain motions to dismiss and/or motions for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure.

          (f) Also in arbitrations governed by the Commercial Arbitration Rules, the arbitrator shall receive evidence in a single hearing which shall be conducted in Phoenix, Arizona. The hearing shall commence not more than 60 days after the appointment of the arbitrator.

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          (g) In arbitrations governed by the Employment Dispute Rules, the arbitrator shall conduct an Arbitration Management Conference with the parties not later than 60 days after appointment, and shall thereafter conduct the Arbitration in Phoenix, Arizona at a time and date set after consultation with the parties during the Management Conference.

          (h) The arbitrator shall issue such award as is proper under the applicable substantive law of Arizona or of the United States, as the case may be, and the evidence. The arbitrator shall have no power or authority to add to or, except as otherwise provided in Section 7.7 hereof, to detract from the Agreement of the parties. The arbitrator shall not have authority to alter the terms or conditions of employment lawfully established by the Company, nor modify or disregard the standards of professional conduct and performance set by the Company in good faith, but shall only determine whether the law has been violated by the acts of either party as specifically alleged.

          (i) The arbitrator shall issue a final award not more than 20 days following the conclusion of the hearing. The arbitrator shall have authority to grant injunctive relief in a form substantially similar to that which would otherwise be granted by a court of law. The arbitrator shall issue a written opinion setting forth a statement of the grounds for the award and the method of determining damages, if any, awarded. The award shall be final and binding on all parties and may be entered as a judgment, under seal, and enforced, or injunctive relief maybe sought, in any court of competent jurisdiction. Judicial modification of the award shall be limited to situations in which the arbitrator fails or refuses to apply controlling law or the valid and enforceable terms of this Agreement.

          (j) The arbitrator shall be entitled to receive reasonable compensation at an hourly rate to be established by agreement between the arbitrator and AAA. All fees and expenses of the arbitration, including a transcript if either party requests, will be borne by the parties equally, except that in arbitrations governed by the Employment Dispute Rules, the fees and expenses will be borne by the parties as follows: the Participant shall pay an amount equivalent to the filing fee in Arizona District Court, plus one-half of the expense of the transcript, and any other amounts deemed fair and reasonable by the arbitrator; the Company shall bear the remaining fees and expenses of the arbitration. Each party will pay for the fees and expenses of its own attorneys, experts, witnesses and the presentation of proof and post-hearings briefs, unless the party prevails on a claim for which attorneys’ fees are recoverable by statute or contract, and the arbitrator awards such fees.

          (k) Either party may bring an action in a court of competent jurisdiction to compel arbitration under this Agreement, to seek to vacate an arbitration award, and to enforce an arbitration award. Except as otherwise provided in this Agreement, the Participant agrees that the Participant will not initiate or prosecute any lawsuit in any way related to any claim covered by this Agreement.

     6.5 Miscellaneous Provisions. For the purposes of the arbitration provisions of this Article VI:

          (a) The term “Company” includes all related entities, all directors, officers, employees, agents, representatives, benefit plans, benefit plan sponsors, fiduciaries, administrators, or affiliates of any of the above, and all successors and assigns of any of the above excluding the Participant.

          (b) If either party pursues a covered claim against the other by action, method or legal proceeding other than arbitration as provided herein, the responding party shall be entitled to dismissal or injunctive relief regarding such action and shall be entitled to recover all costs, losses, and attorneys’ fees related to such other action or proceeding.

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ARTICLE VII

OTHER PROVISIONS

     7.1 Administration. The Administrator shall have the power to interpret the Plan, this Agreement and the Grant Notice and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be binding, conclusive and final upon the Participant, the Company and all other interested persons. No member of the Administrator shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the Option. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Administrator under the Plan and this Agreement.

     7.2 Option Not Transferable.

          (a) Subject to Section 7.2(b), the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution. Neither the Option nor any interest or right therein shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

          (b) Notwithstanding any other provision in this Agreement, with the consent of the Administrator and to the extent the Option is not designated as an Incentive Stock Option, the Option may be transferred to one or more Permitted Transferees, subject to the terms and conditions set forth in Section 11.1(b) of the Plan.

          (c) Unless transferred to a Permitted Transferee in accordance with Section 7.2(b), during the lifetime of the Participant, only the Participant may exercise the Option or any portion thereof. Subject to such conditions and procedures as the Administrator may require, a Permitted Transferee may exercise the Option or any portion thereof during the Participant’s lifetime. After the death of the Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by the Participant’s personal representative or by any person empowered to do so under the deceased the Participant’s will or under then applicable laws of descent and distribution.

     7.3 Restrictive Legends and Stop-Transfer Orders.

          (a) The share certificate or certificates evidencing the shares of Stock purchased hereunder shall be endorsed with any legends that may be required by any applicable federal or state securities laws.

          (b) The Participant agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

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          (c) The Company shall not be required: (i) to transfer on its books any shares of Stock that have been sold or otherwise transferred in violation of any of the provisions of this Agreement, or (ii) to treat as owner of such shares of Stock or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such shares shall have been so transferred.

     7.4 Shares to Be Reserved. The Company shall at all times during the term of the Option reserve and keep available such number of shares of Stock as will be sufficient to satisfy the requirements of this Agreement.

     7.5 Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company at its principal place of business in care of the Secretary of the Company, and any notice to be given to Holder shall be addressed to Holder at the most recent address indicated in his or her personnel file at such time. By a notice given pursuant to this Section 7.5, either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the person entitled to exercise his or her Option pursuant to Section 4.1 by written notice under this Section 7.5. All notices and communications shall be deemed to have been received unless otherwise set forth herein: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of email, on the date of transmission; (iii) in the case of facsimile transmission, on the date on which the sender receives electronic confirmation that such notice was received by the addressee; (iv) in the case of overnight air courier, on the second business day following the day sent, with receipt confirmed by the courier; and (v) in the case of delivery by certified or registered mail (return receipt requested) on the fifth business day following the date such mailing is deposited in a post office or branch post office regularly maintained by the United States Postal Service.

     7.6 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

     7.7 Governing Law; Severability; Choice of Forum. This Agreement shall be administered, interpreted and enforced under the laws of the State of Delaware, without regard to the conflicts of law principles thereof. Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. To the extent that any provision of this Agreement is held to be illegal or unenforceable because it is overbroad, that provision shall not be void but shall be limited only to the extent required by applicable law and enforced as so limited. Any arbitration, application for injunctive relief, or litigation relating to the Option shall be filed and conducted in Maricopa County, Arizona.

     7.8 Non-Waiver of Rights. The Company’s failure to enforce at any time any of the versions of this Agreement or to require at any time performance by the Participant of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement, or any part hereof, or the right of Company thereafter to enforce each and every provision in accordance with the terms of this Agreement.

     7.9 Conformity to Securities Laws. The Participant acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

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     7.10 Amendments. This Agreement may not be modified, amended or terminated except by an instrument in writing, signed by the Participant or such other person as may be entitled to exercise the Option pursuant to Section 4.1 and by a duly authorized representative of the Company.

     7.11 Successors and Assigns. Subject to the terms and conditions of the Plan, this Agreement shall inure to the benefit of and be binding on the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 7.2, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.

     7.12 Notification of Disposition. If this Option is designated as an Incentive Stock Option, the Participant shall give prompt notice to the Company of any disposition or other transfer of any shares of Stock acquired under this Agreement if such disposition or transfer is made (a) within two years from the Grant Date with respect to such shares or (b) within one year after the transfer of such shares to the Participant. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Participant in such disposition or other transfer.

     7.13 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, the Plan, the Option and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

     7.14 Entire Agreement. The Plan, the Grant Notice (including all Exhibits thereto) and this Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof.

UPON ENTERING INTO THIS AGREEMENT, THE PARTICIPANT WARRANTS THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT, UNDERSTANDS ITS TERMS, AND HAS VOLUNTARILY AGREED TO ENTER INTO IT WITHOUT RELIANCE ON ANY REPRESENTATIONS OR PROMISES BY THE COMPANY OTHER THAN AS SET FORTH IN THIS AGREEMENT.

THE PARTICIPANT HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS THE PARTICIPANT HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL SUCH QUESTIONS.

THE PARTICIPANT UNDERSTANDS THE PARTICIPANT’S RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT AND VOLUNTARILY ENTERS INTO IT.

THE PARTICIPANT ACKNOWLEDGES THE PARTICIPANT’S “AT-WILL” EMPLOYMENT STATUS.

THE PARTICIPANT RECOGNIZES THE PARTICIPANT’S WAIVER OF RIGHT TO A JURY TRIAL BY AGREEING TO MANDATORY ARBITRATION.

THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION. THE ARBITRATION PROVISION MAY BE ENFORCED BY THE COMPANY AND BY YOU.

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EXHIBIT B

TO STOCK OPTION GRANT NOTICE

FORM OF EXERCISE NOTICE

     Effective as of today, ________________ ___, 20___, the undersigned hereby elects to exercise the option to purchase the number of shares of Class A common stock, par value $0.014 per share, specified below (the “Shares”) of Medicis Pharmaceutical Corporation, a Delaware corporation (the “Company”), granted pursuant to the Medicis 2006 Incentive Award Plan (the “Plan”), the Stock Option Grant Notice dated as of _____________, 20___ and the Stock Option Agreement attached thereto (the “Stock Option Agreement”). Capitalized terms used herein without definition shall have the meanings given in the Plan and, if not defined in the Plan, the Option Agreement.

Participant:
Grant Date:
Number of Shares as to which Option is Exercised:
Exercise Price per Share:	$
Total Exercise Price:	$
Certificate to be issued in name of:

Payment delivered herewith:	$                                                                                                           (Representing the full exercise price for the Shares, as well as any applicable withholding tax) Form of Payment:
	(Please specify)
Type of Option:	o     Incentive Stock Option      o     Non-Qualified Stock Option

     The Participant acknowledges that the Participant has received, read and understood the Plan and the Stock Option Agreement. The Participant agrees to abide by and be bound by their terms and conditions. The Participant understands that the Participant may suffer adverse tax consequences as a result of the Participant’s purchase or disposition of the Shares. The Participant represents that the Participant has consulted with any tax consultants the Participant deems advisable in connection with the purchase or disposition of the Shares and that the Participant is not relying on the Company for any tax advice. The Plan and Option Agreement are incorporated herein by reference.

Remainder of page intentionally left blank.

     This Exercise Notice, the Plan, the Stock Option Agreement and the Grant Notice constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof.

ACCEPTED BY:	SUBMITTED BY
MEDICIS PHARMACEUTICAL CORPORATION	PARTICIPANT:
By:	By:
Print Name:	Print Name:
Title:
	Address:

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EXHIBIT C

TO STOCK OPTION GRANT NOTICE

MEDICIS 2006 INCENTIVE AWARD PLAN

EXHIBIT D

TO STOCK OPTION GRANT NOTICE

MEDICIS 2006 INCENTIVE AWARD PLAN PROSPECTUS

EX-10.5

Exhibit 10.5

FORM OF AMENDMENT TO STOCK OPTION AWARD AGREEMENT (THE
“AMENDMENT”)

     The stock option (the “Option”) is herby amended to permit the holder of the Option (the “Holder”), in addition to the payment methods otherwise permitted to the Holder under the applicable equity plan and stock option agreement, to elect to pay (i) the aggregate exercise price of the Option and (ii) if the Holder is an employee of the Company, the minimum statutory federal, state or local tax required to be withheld with respect to the exercise of the Option (together, the “Exercise Payment”), by the surrender of shares of Company common stock then issuable upon exercise of the Option having a fair market value on the date of exercise equal to the Exercise Payment (“Net Share Exercise”); provided, however, that Net Share Exercise shall only be available to the Holder with respect to the Option during the six (6) month period ending on the date on which the maximum term of the Option expires.

     This Amendment shall also be deemed a part of the stock option agreement(s) evidencing such Option and shall be incorporated by reference. Except as set forth herein, all of the remaining terms of your Option, including but not limited to the vesting terms, will remain unchanged and in full force and effect. Please keep a copy of this Amendment and the memorandum to which it is attached with your stock option agreement(s) for your records and future reference.

     This Amendment is effective as of June 29, 2011, except as noted below.

     IF YOUR NONQUALIFIED STOCK OPTION WAS GRANTED UNDER THE AMENDED AND RESTATED 2006 INCENTIVE AWARD PLAN (THE “2006 PLAN”), YOU MUST TIMELY ELECT TO OPT-OUT OF THE PROGRAM BY JULY 15, 2011 IF YOU DO NOT WANT THE AMENDMENT TO APPLY TO YOUR NQSO. OTHERWISE, IF YOU DO NOT TIMELY OPT-OUT OF THE PROGRAM, THE AMENDMENT WILL BECOME EFFECTIVE WITH RESPECT TO YOUR NONQUALIFIED STOCK OPTION GRANTED AS OF JUNE 29, 2011. PLEASE SEE THE ATTACHED MEMORANDUM WITH INSTRUCTIONS ON HOW TO OPT-OUT OF THE PROGRAM, AND THE OPT-OUT ELECTION FORM PROVIDED ON EXHIBIT B TO THE MEMORANDUM.

     IF YOU HOLD INCENTIVE STOCK OPTIONS, YOU MUST AFFIRMATIVELY AND TIMELY CONSENT TO THE AMENDMENT TO YOUR INCENTIVE STOCK OPTION AGREEMENT, AS PROVIDED ON EXHIBIT C. OTHERWISE, THE AMENDMENT WILL NOT APPLY TO YOUR INCENTIVE STOCK OPTIONS.

EXHIBIT B

ELECTION TO OPT-OUT OF THE AMENDMENT TO YOUR 2006 PLAN NQSO

     You may elect to opt-out of the Amendment to your 2006 Plan NQSO. If you choose to opt-out of the Amendment to your 2006 Plan NQSO, please complete the election form below and sign where indicated. You must separately list each 2006 Plan NQSO for which you are opting out of the Amendment.

     If you wish to elect to opt-out of the Amendment to your 2006 Plan NQSO, you must sign and return the election form below no later than 11:59 p.m. (Eastern Time) on July 15, 2011. If you do not return the election form below by this deadline, all of your 2006 Plan NQSOs will be amended pursuant to the Amendment. Once submitted, your election will be irrevocable.

ELECTION TO OPT-OUT OF THE AMENDMENT TO YOUR 2006 PLAN NQSO

I have read and understood the above discussion of the Program and the Amendment and its potential effect on me and my tax situation. I acknowledge that I have been given the opportunity to discuss these matters and my election below with my own tax advisor and that I am solely responsible for my election.

I HAVE CHOSEN TO OPT-OUT OF THE AMENDMENT TO MY 2006 PLAN NQSOs. I wish to opt-out of the Amendment for the following 2006 NQSOs.

o I OPT-OUT OF THE AMENDMENT FOR ALL OF MY 2006 PLAN NQSOS

o I OPT-OUT OF THE AMENDMENT FOR ONLY THE FOLLOWING 2006 PLAN NQSOS:

List by Date of Grant:

Signature	Date
Print Name

You must return this form to the Stock Plan Administration Department at
stockplanadmin@medicis.com by 11:59 PM (Eastern Time) on July 15, 2011.

IF YOU DO NOT RETURN THIS ELECTION FORM BY THIS DEADLINE, ALL OF YOUR
2006 PLAN NQSOS WILL BE AMENDED UNDER THE PROGRAM.

EXHIBIT C

CONSENT TO AMEND INCENTIVE STOCK OPTION

     You must consent to the Amendment for your incentive stock option (ISO) in order for the Amendment to apply to such ISO. If you do not provide this consent, the Amendment will not apply to your ISO. You must complete a separate election form for each ISO. If you choose to consent to the Amendment for your ISO, please complete the election form below and sign where indicated. Once the Company receives your timely completed consent, the equity plan administrator or its delegate will approve the Amendment to your ISO.

     If you wish to consent to the Amendment for your ISO, you must sign and return the election form below no later than 21 days prior to the expiration of your ISOs. If you do not return the election form below by this deadline, your ISO will NOT be amended pursuant to the Amendment. Once submitted, your election will be irrevocable.

ELECTION TO AMEND YOUR ISO

I have read and understood the above discussion of the Program and the Amendment and their potential effect on me and my tax situation. I acknowledge that I have been given the opportunity to discuss these matters and my election below with my own tax advisor and that I am solely responsible for my election.

I HAVE CHOSEN TO AMEND MY ISO. I wish the Amendment to apply to the following ISO:

                                                                                      [list grant date]

Signature	Date
Print Name

You must return this form to Stock Plan Administration Department at
stockplanadmin@medicis.com no later than 21 days prior to the expiration of your ISO.

IF YOU DO NOT RETURN THIS ELECTION FORM BY THIS DEADLINE, YOUR ISO WILL
NOT BE AMENDED UNDER THE PROGRAM.

EX-10.6

Exhibit 10.6

AMENDMENT NO. 1
TO THE
MEDICIS 1992 STOCK OPTION PLAN

          This Amendment No. 1 (“Amendment”) to the Medicis 1992 Stock Option Plan (the “Plan”), is adopted by Medicis Pharmaceutical Corporation, a Delaware corporation (the “Company”), as of June 29, 2011.

RECITALS

          A. The Board of Directors of the Company (the “Board”) deems it advisable and in the best interest of the Company and its stockholders to amend the Plan, as provided below.

          B. Pursuant to Section 16 of the Plan, the Board has the authority to amend the Plan.

AMENDMENT

     1. Section 5 of the Plan is hereby amended and restated in its entirety to read as follows:

          Section 5. COMMITTEE

     This Plan shall be administered by the Committee. The Committee acting in its absolute discretion shall exercise such powers and take such action as expressly called for under this Plan. Furthermore, the Committee shall have the power to interpret this Plan and to take such other action in the administration and operation of this Plan as the Committee deems equitable under the circumstances, which action shall be binding on the Corporation, on each affected Key Employee, Key Consultant or Non-employee Director and on each other person directly or indirectly affected by such action. To the extent not prohibited by applicable law or the rules of any securities exchange or automated quotation system on which the Stock is listed, quoted or traded, the Board or Committee may from time to time delegate to a subcommittee comprised of one or more members of the Board or officers of the Company the authority to grant or amend Options or such other actions with respect to the administration of the Plan as determined by the Board or Committee in its discretion. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board or Committee may at any time rescind the authority so delegated or appoint a new delegatee. Any actions duly taken by the subcommittee shall be deemed to have been taken by the Committee for purposes of the Plan.

     2. Section 8 of the Plan is hereby amended and restated in its entirety to read as follows:

          Section 8. OPTION PRICE

     The Option Price for each share of Stock subject to an Option shall not be less than the Fair Market Value of a share of Stock on the date the Option is granted or, if the Option is an ISO and the Key Employee is a Ten Percent Shareholder, the Option Price

for each share of Stock subject to such Option shall not be less than 110% of the Fair Market Value of a share of Stock on the date the Option is granted. The Option Price shall be payable in full upon the exercise of any Option, and an Option Certificate at the discretion of the Committee may provide for the payment of the Option Price either in cash or in Stock acceptable to the Committee or in any combination of cash and Stock acceptable to the Committee. Any payment made in Stock shall be treated as equal to the Fair Market Value of such Stock on the date the properly endorsed certificate for such Stock is delivered to the Committee.

     3. Capitalized terms used in this Amendment and not otherwise defined shall have the same meanings assigned to them in the Plan. Except as otherwise expressly set forth in this Amendment, the Plan shall remain in full force and effect in accordance with its terms.

     4. This Amendment shall be governed by, interpreted under, and construed and enforced in accordance with the internal laws, and not the laws relating to conflicts or choice of laws, of the State of Delaware applicable to agreements made and to be performed wholly within the State of Delaware.

* * * * *

          I hereby certify that this Amendment No. 1 was adopted by the Board on June 29, 2011.

          Executed this 29^th day of June, 2011.

MEDICIS PHARMACEUTICAL CORPORATION
 

/s/ Mark A. Prygocki Sr.  

Mark A. Prygocki Sr. 

President 

2

EX-10.7

Exhibit 10.7

AMENDMENT NO. 1
TO THE
MEDICIS 1995 STOCK OPTION PLAN

          This Amendment No. 1 (“Amendment”) to the Medicis 1995 Stock Option Plan, as amended (the “Plan”), is adopted by Medicis Pharmaceutical Corporation, a Delaware corporation (the “Company”), as of June 29, 2011.

RECITALS

          A. The Board of Directors of the Company (the “Board”) deems it advisable and in the best interest of the Company and its stockholders to amend the Plan, as provided below.

          B. Pursuant to Section 16 of the Plan, the Board has the authority to amend the Plan.

AMENDMENT

     1. Section 5 of the Plan is hereby amended and restated in its entirety to read as follows:

          Section 5. COMMITTEE

     This Plan shall be administered by the Committee. The Committee acting in its absolute discretion shall exercise such powers and take such action as expressly called for under this Plan. Furthermore, the Committee shall have the power to interpret this Plan and to take such other action in the administration and operation of this Plan as the Committee deems equitable under the circumstances, which action shall be binding on the Corporation, on each affected Key Employee, Key Consultant or Non-employee Director and on each other person directly or indirectly affected by such action. To the extent not prohibited by applicable law or the rules of any securities exchange or automated quotation system on which the Stock is listed, quoted or traded, the Board or Committee may from time to time delegate to a subcommittee comprised of one or more members of the Board or officers of the Company the authority to grant or amend Options or such other actions with respect to the administration of the Plan as determined by the Board or Committee in its discretion. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board or Committee may at any time rescind the authority so delegated or appoint a new delegatee. Any actions duly taken by the subcommittee shall be deemed to have been taken by the Committee for purposes of the Plan.

     2. Section 8 of the Plan is hereby amended and restated in its entirety to read as follows:

          Section 8. OPTION PRICE

     The Option Price for each share of Stock subject to an Option shall not be less than the Fair Market Value of a share of Stock on the date the Option is granted or, if the Option is an ISO and the Key Employee is a Ten Percent Shareholder, the

Option Price for each share of Stock subject to such Option shall not be less than 110% of the Fair Market Value of a share of Stock on the date the Option is granted. The Option Price shall be payable in full upon the exercise of any Option, and an Option Certificate at the discretion of the Committee may provide for the payment of the Option Price either in cash or in Stock acceptable to the Committee or in any combination of cash and Stock acceptable to the Committee. Any payment made in Stock shall be treated as equal to the Fair Market Value of such Stock on the date the properly endorsed certificate for such Stock is delivered to the Committee.

     3. Capitalized terms used in this Amendment and not otherwise defined herein shall have the same meanings assigned to them in the Plan. Except as otherwise expressly set forth in this Amendment, the Plan shall remain in full force and effect in accordance with its terms.

     4. This Amendment shall be governed by, interpreted under, and construed and enforced in accordance with the internal laws, and not the laws relating to conflicts or choice of laws, of the State of Delaware applicable to agreements made and to be performed wholly within the State of Delaware.

* * * * *

          I hereby certify that this Amendment No. 1 was adopted by the Board on June 29, 2011.

          Executed this 29^th day of June, 2011.

MEDICIS PHARMACEUTICAL CORPORATION
 

/s/ Mark A. Prygocki Sr.  

Mark A. Prygocki Sr. 

President 

2

EX-10.8

Exhibit 10.8

AMENDMENT NO. 2
TO THE
MEDICIS 1996 STOCK OPTION PLAN

          This Amendment No. 2 (“Amendment”) to the Medicis 1996 Stock Option Plan, as amended (the “Plan”), is adopted by Medicis Pharmaceutical Corporation, a Delaware corporation (the “Company”), as of June 29, 2011.

RECITALS

          A. The Board of Directors of the Company (the “Board”) deems it advisable and in the best interest of the Company and its stockholders to amend the Plan, as provided below.

          B. Pursuant to Section 15 of the Plan, the Board has the authority to amend the Plan.

AMENDMENT

     1. Section 8 of the Plan is hereby amended and restated in its entirety to read as follows:

          Section 8. OPTION PRICE

     The Option Price for each share of Stock subject to an Option shall not be less than the Fair Market Value of a share of Stock on the date the Option is granted or, if the Option is an ISO and the Key Employee is a Ten Percent Shareholder, the Option Price for each share of Stock subject to such Option shall not be less than 110% of the Fair Market Value of a share of Stock on the date the Option is granted. The Option Price shall be payable in full upon the exercise of any Option, and an Option Certificate at the discretion of the Committee may provide for the payment of the Option Price either in cash or in Stock acceptable to the Committee or in any combination of cash and Stock acceptable to the Committee. Any payment made in Stock shall be treated as equal to the Fair Market Value of such Stock on the date the properly endorsed certificate for such Stock is delivered to the Committee.

     2. Capitalized terms used in this Amendment and not otherwise defined herein shall have the same meanings assigned to them in the Plan. Except as otherwise expressly set forth in this Amendment, the Plan shall remain in full force and effect in accordance with its terms.

     3. This Amendment shall be governed by, interpreted under, and construed and enforced in accordance with the internal laws, and not the laws relating to conflicts or choice of laws, of the State of Delaware applicable to agreements made and to be performed wholly within the State of Delaware.

* * * * *

          I hereby certify that this Amendment No. 2 was adopted by the Board on June 29, 2011.

          Executed this 29^th day of June, 2011.

MEDICIS PHARMACEUTICAL CORPORATION
 

/s/ Mark A. Prygocki Sr.  

Mark A. Prygocki Sr. 

President 

2

EX-10.9

Exhibit 10.9

AMENDMENT NO. 3
TO THE
MEDICIS 1998 STOCK OPTION PLAN

          This Amendment No. 3 (“Amendment”) to the Medicis 1998 Stock Option Plan, as amended (the “Plan”), is adopted by Medicis Pharmaceutical Corporation, a Delaware corporation (the “Company”), as of June 29, 2011.

RECITALS

          A. The Board of Directors of the Company (the “Board”) deems it advisable and in the best interest of the Company and its stockholders to amend the Plan, as provided below.

          B. Pursuant to Section 15 of the Plan, the Board has the authority to amend the Plan.

AMENDMENT

     1. Section 5 of the Plan is hereby amended and restated in its entirety to read as follows:

          Section 5. COMMITTEE

     This Plan shall be administered by a Committee consisting solely of not less than two (2) Non-Employee Directors. The Committee acting in its absolute discretion shall exercise such powers and take such action as expressly called for under this Plan. Furthermore, the Committee shall have the power to interpret this Plan and to take such other action in the administration and operation of this Plan as the Committee deems equitable under the circumstances, which action shall be binding on the Company, on each affected Key Employee, Key Consultant or Outside Director and on each other person directly or indirectly affected by such action. To the extent not prohibited by applicable law or the rules of any securities exchange or automated quotation system on which the Stock is listed, quoted or traded, the Board or Committee may from time to time delegate to a committee comprised of one or more members of the Board or officers of the Company (the “Designated Committee”) the authority to grant or amend Options or such other actions with respect to the administration of the Plan as determined by the Board or Committee in its discretion. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board or Committee may at any time rescind the authority so delegated or appoint a new delegatee. Any actions duly taken by the Designated Committee shall be deemed to have been taken by the Committee for purposes of the Plan.

     2. Section 8 of the Plan is hereby amended and restated in its entirety to read as follows:

          Section 8. OPTION PRICE

     The Option Price for each share of Stock subject to an Option shall not be less than the Fair Market Value of a share of Stock on the date the Option is granted or, if the Option is an ISO and the Key Employee is a Ten Percent Shareholder, the Option Price for each share of Stock subject to such Option shall not be less than 110% of the Fair Market Value of a share of Stock on the date the Option is granted. The Option Price shall be payable in full upon the exercise of any Option, and an Option Certificate at the discretion of the Committee may provide for the payment of the Option Price either in cash or in Stock acceptable to the Committee or in any combination of cash and Stock acceptable to the Committee. Any payment made in Stock shall be treated as equal to the Fair Market Value of such Stock on the date the properly endorsed certificate for such Stock is delivered to the Committee.

     3. Capitalized terms used in this Amendment and not otherwise defined herein shall have the same meanings assigned to them in the Plan. Except as otherwise expressly set forth in this Amendment, the Plan shall remain in full force and effect in accordance with its terms.

     4. This Amendment shall be governed by, interpreted under, and construed and enforced in accordance with the internal laws, and not the laws relating to conflicts or choice of laws, of the State of Delaware applicable to agreements made and to be performed wholly within the State of Delaware.

* * * * *

          I hereby certify that this Amendment No. 3 was adopted by the Board on June 29, 2011.

          Executed this 29^th day of June, 2011.

MEDICIS PHARMACEUTICAL CORPORATION
 

/s/ Mark A. Prygocki Sr.  

Mark A. Prygocki Sr. 

President 

2

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Jonah Shacknai, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Medicis Pharmaceutical Corporation;
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.

Date: August 9, 2011

JONAH SHACKNAI
 

/s/ JONAH SHACKNAI  

(Jonah Shacknai) 

Chairman of the Board and
Chief Executive Officer 

EX-31.2

Exhibit 31.2

I, Richard D. Peterson, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Medicis Pharmaceutical Corporation;
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.

Date: August 9, 2011

RICHARD D. PETERSON
 

/s/ RICHARD D. PETERSON  

(Richard D. Peterson) 

Executive Vice President, Chief Financial Officer
and Treasurer 

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)

          In connection with the quarterly report of Medicis Pharmaceutical Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2011, as filed with the Securities and Exchange Commission (the “Report”), Jonah Shacknai, Chief Executive Officer of the Company, and Richard D. Peterson, Chief Financial Officer of the Company, respectively, do each hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to his knowledge:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial conditions and results of operations of the Company.

	/s/ JONAH SHACKNAI
	Jonah Shacknai
	Chairman of the Board and Chief Executive Officer
August 9, 2011

	/s/ RICHARD D. PETERSON
	Richard D. Peterson
	Executive Vice President, Chief Financial Officer and Treasurer
August 9, 2011

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification will not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Nor will this certification be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

XML



CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Jun. 30, 2011	Dec. 31, 2010
Balance Sheet Parentheticals [Line Items]
Preferred stock par value	$ 0.01	$ 0.01
Preferred stock shares authorized	5,000,000	5,000,000
Preferred stock shares issued	0	0
Common stock in treasury, shares	13,059,002	12,897,610
Class A
Balance Sheet Parentheticals [Line Items]
Common Stock Shares Issued and Outstanding	74,272,334	71,863,191
Common Stock Par Value	$ 0.014	$ 0.014
Common Stock Shares Authorized	150,000,000	150,000,000
Class B
Balance Sheet Parentheticals [Line Items]
Common Stock Shares Issued and Outstanding	0	0
Common Stock Par Value	$ 0.014	$ 0.014
Common Stock Shares Authorized	1,000,000	1,000,000

XML



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Sales
Net product revenues	$ 189,819	$ 171,734	$ 353,715	$ 335,326
Net contract revenues	1,008	1,862	2,025	3,812
Net Revenues Total	190,827	173,596	355,740	339,138
Cost of product revenues (1)	18,237	16,330	32,568	31,437
Gross profit	172,590	157,266	323,172	307,701
Operating Expenses:
Selling, general and administrative (2)	90,393	77,091	175,023	149,375
Research And Development Expense	15,195	7,420	29,468	13,979
Depreciation and amortization	7,110	6,916	14,434	13,649
Operating income (loss)	59,892	65,839	104,247	130,698
Interest and investment income	(1,238)	(780)	(2,512)	(1,940)
Interest Expense	1,141	1,061	2,199	2,119
Other (income) expense, net	0	(2)	0	257
Income from continuing operations before income tax expense	59,989	65,560	104,560	130,262
Income tax expense	25,477	24,632	43,363	49,316
Income from continuing operations	34,512	40,928	61,197	80,946
Loss from discontinued operations, net of income tax benefit	5,729	4,428	13,054	9,078
Net income (loss)	$ 28,783	$ 36,500	$ 48,143	$ 71,868
Basic net income (loss) per share - continuing operations	$ 0.55	$ 0.68	$ 0.99	$ 1.35
Basic net income (loss) per share - discontinued operations	$ (0.09)	$ (0.08)	$ (0.22)	$ (0.16)
Basic net income (loss) per share	$ 0.46	$ 0.61	$ 0.78	$ 1.19
Diluted net income (loss) per share - continuing operations	$ 0.51	$ 0.62	$ 0.91	$ 1.24
Diluted net income (loss) per shares - discontinued operations	$ (0.09)	$ (0.08)	$ (0.22)	$ (0.16)
Diluted net income (loss) per share	$ 0.43	$ 0.56	$ 0.72	$ 1.10
Cash dividend declared per common share	$ 0.08	$ 0.06	$ 0.08	$ 0.12
Common shares used in calculating:
Basic net income per share	60,308	58,271	59,719	58,161
Weighted Average Number Of Diluted Shares Outstanding	67,140	64,395	66,347	64,294

XML



COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

COMMITMENTS AND CONTINGENCIES

17.       COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is currently party to various legal proceedings, including those noted in this section. Unless specifically noted below, any possible range of loss associated with the legal proceedings described below is not reasonably estimable at this time. The Company is engaged in numerous other legal actions not described below arising in the ordinary course of its business and, while there can be no assurance, the Company believes that the ultimate outcome of these actions will not have a material adverse effect on its operating results, liquidity or financial position.

From time to time the Company may conclude it is in the best interests of its stockholders, employees, and customers to settle one or more litigation matters, and any such settlement could include substantial payments; however, other than as noted below, the Company has not reached this conclusion with respect to any particular matter at this time. There are a variety of factors that influence the Company's decisions to settle and the amount the Company may choose to pay, including the strength of its case, developments in the litigation, the behavior of other interested parties, the demand on management time and the possible distraction of the Company's employees associated with the case and/or the possibility that the Company may be subject to an injunction or other equitable remedy. It is difficult to predict whether a settlement is possible, the amount of an appropriate settlement or when is the opportune time to settle a matter in light of the numerous factors that go into the settlement decision. Unless otherwise specified below, any settlement payment made pursuant to any of the completed settlement agreements described below is immaterial to the Company for financial reporting purposes.

Stockholder Class Action Litigation

On October 3, 10 and 27, 2008, purported stockholder class action lawsuits styled Andrew Hall v. Medicis Pharmaceutical Corp., et al. (Case No. 2:08-cv-01821-MHB); Steamfitters Local 449 Pension Fund v. Medicis Pharmaceutical Corp., et al. (Case No. 2:08-cv-01870-DKD); and Darlene Oliver v. Medicis Pharmaceutical Corp., et al. (Case No. 2:08-cv-01964-JAT) were filed in the United States District Court for the District of Arizona on behalf of stockholders who purchased securities of the Company during the period between October 30, 2003 and approximately September 24, 2008. The Court consolidated these actions into a single proceeding and on May 18, 2009 an amended complaint was filed alleging violations of the federal securities laws arising out of the Company's restatement of its consolidated financial statements in 2008. On December 2, 2009, the Court granted the Company's and other defendants' dismissal motions and dismissed the consolidated amended complaint without prejudice. On January 18, 2010 the lead plaintiff filed a second amended complaint, and on or about August 9, 2010, the Court denied the Company's and other defendants' related dismissal motions. On December 17, 2010, the lead plaintiff filed a motion for class certification, and the defendants filed an opposition to the motion on March 8, 2011. On June 6, 2011, the Company, certain of its current officers who are named in the complaint, and the Company's outside auditors entered into a Memorandum of Understanding (the “Class Action MOU”) with the plaintiffs' representatives to memorialize an agreement in principle to settle the pending action. Under the terms of the settlement agreement, which remains subject to Court approval among other customary conditions, the Company's portion of the settlement will be paid entirely by insurance. The Company's outside auditors also will contribute to this settlement. The Company itself is not required to make any payments to fund the settlement. The settlement agreement contains no admission of liability by the Company or the named individuals in the action, the allegations of which are expressly denied in the Class Action MOU. In the event the settlement is not approved by the Court, the Company will continue to vigorously defend the claims in the class action lawsuits. There can be no assurance that the Court will approve the settlement, or that the Company will otherwise ultimately be successful in settling the lawsuits or in defending the lawsuits, and an adverse resolution of the lawsuits could have a material adverse effect on the Company's financial position and results of operations in the period in which the lawsuits are resolved.

Stockholder Derivative Lawsuits

On January 21, 2009, the Company received a letter from an alleged stockholder demanding that its Board of Directors take certain actions, including potentially legal action, in connection with the restatement of its consolidated financial statements in 2008. The letter stated that, if the Board of Directors did not take the demanded action, the alleged stockholder would commence a derivative action on behalf of the Company. The Company's Board of Directors reviewed the letter during the course of 2009 and established a special committee of the Board of Directors, comprised of directors who are independent and disinterested with respect to the allegations in the letter, to assess the allegations contained in the letter. The special committee engaged outside counsel to assist with the investigation. The special committee completed its investigation, and on or about February 16, 2010, the Board of Directors, pursuant to the report and recommendation of the special committee, resolved to decline the derivative demand. On February 26, 2010, Company counsel sent a declination letter to opposing counsel. On or about October 21, 2010, the stockholder filed a derivative complaint against the Company and its directors and certain officers in the Superior Court of the State of Arizona in and for the County of Maricopa, alleging that such individuals breached their fiduciary duties to the Company in connection with the restatement. The stockholder seeks to recover unspecified damages and costs, including counsel and expert fees.

On or about October 20, 2010, a second alleged stockholder of the Company filed a derivative complaint against the Company and its directors and certain officers in the Superior Court of the State of Arizona in and for the County of Maricopa. The complaint alleges, among other things, that such individuals breached their fiduciary duties to the Company in connection with the restatement. The complaint further alleges that a demand upon the Board of Directors to institute an action in the Company's name would be futile and that the stockholder is therefore excused under Delaware law from making such a demand prior to filing the complaint. The stockholder seeks, among other things, to recover unspecified damages and costs, including counsel and expert fees.

On June 6, 2011, the Company and certain of its current officers and directors who are named in the complaints entered into a Memorandum of Understanding (the “Derivative Lawsuits MOU”) with the plaintiffs' representatives to memorialize an agreement in principle to settle the pending actions. The only financial component under the settlement agreement, which remains subject to Court approval among other customary conditions, involves payment of plaintiffs' attorneys' fees, which will be paid entirely by insurance. The Company itself is not required to make any payments to fund the settlement. The settlement also reflects certain control and other enhancements taken by the Company in connection with and subsequent to the restatement of its consolidated financial statements in 2008. The settlement agreement contains no admission of liability by the Company or the named individuals in the lawsuits, the allegations of which are expressly denied in the Derivative Lawsuits MOU. In the event the settlement is not approved by the Court, the Company will continue to vigorously defend the claims in the derivative lawsuits. There can be no assurance that the Court will approve the settlement, or that the Company will otherwise ultimately be successful in settling the lawsuits or in defending the lawsuits, and an adverse resolution of the lawsuits could have a material adverse effect on the Company's financial position and results of operations in the period in which the lawsuits are resolved.

Hyperion Arbitration

On June 23, 2011, Hyperion Therapeutics, Inc. (“Hyperion”) filed a demand for arbitration before the American Arbitration Association for a judgment declaration of the rights and obligations of Hyperion and Ucyclyd Pharma, Inc., a subsidiary of the Company (“Ucyclyd”), under a collaboration agreement between the parties, dated August 23, 2007, as amended (the “Collaboration Agreement”). Pursuant to the terms of the Collaboration Agreement, Hyperion is responsible for the ongoing research and development of a compound referred to as HPN-100 (formerly known as GT4P) for the treatment of urea cycle disorder, hepatic encephalopathies and other indications. In addition, if certain specified conditions are satisfied, then Hyperion will have certain purchase rights under the Collaboration Agreement with respect to HPN-100, as well as Ucyclyd's existing on-market products, AMMONUL® and BUPHENYL®, and will be required to pay Ucyclyd royalties and regulatory and sales milestone payments in connection with certain licenses that will be granted to Hyperion upon exercise of the purchase rights. In its demand for arbitration, Hyperion requested a judgment regarding the rights of the parties in connection with the development activities relating to HPN-100, including relating to the submission of a NDAto the FDA for HPN-100 for the treatment of urea cycle disorder. The Company responded to the demand for arbitration on July 28, 2011.  In its response, the Company denied the allegations of Hyperion and requested the arbitration panel deny Hyperion's requested declaratory relief. Additionally, the Company brought counterclaims against Hyperion and sought a declaration of rights in the Company's favor and an award of damages.

In addition to the matters discussed above, in the ordinary course of business, the Company is involved in a number of legal actions, both as plaintiff and defendant, and could incur uninsured liability in any one or more of them.  Although the outcome of these actions is not presently determinable, it is the opinion of the Company's management, based upon the information available at this time, that the expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on the results of operations, financial condition or cash flows of the Company.

XML



DOCUMENT AND ENTITY INFORMATION (USD $)	6 Months Ended
	Jun. 30, 2011	Aug. 03, 2011 Class A	Aug. 03, 2011 Class B
Document And Entity Information [Line Items]
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Entity Registration Name	Medicis Pharmaceutical Corporation
Entity Central Index Key	0000859368
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Well Knows Season Issuer	Yes
Entity Public Float	$ 2,092,313,017
Entity Common Stock Shares Outstanding		63,358,951	0
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2

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COMPREHENSIVE INCOME (DETAILS) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Other Comprehensive Income Loss Net Of Tax Period Increase Decrease Abstract
Total Comprehensive Income (Loss)	$ 7.4	$ 36.9	$ 27.0	$ 72.9
Other Comprehensive Income Defined Benefit Plan Net Prior Service Costs Credit Arising During Period Net Of Tax	$ 21.4		$ 21.4

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DISCONTINUED OPERATIONS (TABLES)

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

Schedule Of Disposal Groups Including Discontinued Operations Income Statement Balance Sheet And Additional Disclosures Text Block

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2011		2010		2011		2010
Net revenues	$	200	$	448	$	356	$	1,397
Cost of revenues		82		196		2,456		846
Gross profit		118		252		(2,100)		551
Operating expenses:
Selling, general and administrative		5,731		3,782		11,594		7,542
Research and development		3,302		3,091		6,648		6,601
Depreciation and amortization		-		323		-		643
Loss from discontinued operations
before income tax benefit		(8,915)		(6,944)		(20,342)		(14,235)
Income tax benefit		(3,186)		(2,516)		(7,288)		(5,157)
Loss from discontinued operations,
net of income tax benefit	$	(5,729)	$	(4,428)	$	(13,054)	$	(9,078)

	June 30, 2011		December 31, 2010
Cash and cash equivalents	$	878	$	629
Accounts receivable, net		83		129
Inventories, net		3,815		4,495
Deferred tax assets, net		5,191		7,328
Other assets		281		546
Assets held for sale from discontinued operations	$	10,248	$	13,127
Accounts payable	$	2,228	$	1,802
Other liabilities		4,944		5,474
Liabilities held for sale from discontinued operations	$	7,172	$	7,276

	Six Months Ended
	June 30,		June 30,
	2011		2010
Loss from discontinued operations, net of income tax benefit	$	(13,054)	$	(9,078)
Depreciation and amortization		-		643
Share-based compensation expense		1,795		327
Decrease in assets held for sale from discontinued operations		2,879		3,563
Decrease in liabilities held for sale from discontinued operations		(1,598)		(729)
Net cash used in operating activities from
discontinued operations	$	(9,978)	$	(5,274)

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DIVIDENDS (DETAILS) (USD $) In Millions, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Notes To Consolidated Financial Statement Abstract
Cash dividend declared per common share	$ 0.08	$ 0.06	$ 0.08	$ 0.12
Dividends Payable Current	$ 5.1		$ 5.1

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

FAIR VALUE MEASUREMENTS

6.       FAIR VALUE MEASUREMENTS

As of June 30, 2011, the Company held certain assets that are required to be measured at fair value on a recurring basis.  These included certain of the Company's short-term and long-term investments, including investments in auction rate floating securities.

The Company has invested in auction rate floating securities, which are classified as available-for-sale securities and reflected at fair value.  Due to events in credit markets, the auction events for some of these instruments held by the Company failed during the three months ended March 31, 2008 (see Note 5).  Therefore, the fair values of these auction rate floating securities, which are primarily rated AAA, are estimated utilizing a discounted cash flow analysis as of June 30, 2011.  These analyses consider, among other items, the collateralization underlying the security investments, the creditworthiness of the counterparty, the timing of expected future cash flows, and the expectation of the next time the security is expected to have a successful auction.  These investments were also compared, when possible, to other observable market data with similar characteristics to the securities held by the Company. Changes to these assumptions in future periods could result in additional declines in fair value of the auction rate floating securities.

The Company's assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820, Fair Value Measurements and Disclosures, at June 30, 2011, were as follows (in thousands):

			Fair Value Measurement at Reporting Date Using
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
			Markets		Inputs		Inputs
	June 30, 2011		(Level 1)		(Level 2)		(Level 3)
Corporate notes and bonds	$	361,104	$	361,104	$	-	$	-
Federal agency notes and bonds		251,897		251,897		-		-
Auction rate floating securities		19,884		-		-		19,884
Asset-backed securities		45,049		45,049		-		-
Total assets measured at fair value	$	677,934	$	658,050	$	-	$	19,884

The following tables present the Company's assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months endedJune 30, 2011 (in thousands):

	Fair Value Measurements
	Using Significant Unobservable
	Inputs (Level 3)
	Auction Rate
	Floating
	Securities
Balance at March 31, 2011	$	20,772
Transfers to (from) Level 3		-
Total gains (losses) included in other
(income) expense, net		-
Total gains included in other
comprehensive income		12
Purchases		-
Settlements		(900)
Balance at June 30, 2011	$	19,884
	Fair Value Measurements
	Using Significant Unobservable
	Inputs (Level 3)
	Auction Rate
	Floating
	Securities
Balance at December 31, 2010	$	21,480
Transfers to (from) Level 3		-
Total gains (losses) included in other
(income) expense, net		-
Total gains included in other
comprehensive income		404
Purchases		-
Settlements		(2,000)
Balance at June 30, 2011	$	19,884

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SHARE BASED COMPENSATION (TABLES)

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

Schedule Of Share Based Compensation Stock Options Activity Table Text Block

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Term	Value
Balance at December 31, 2010	6,491,353	$	30.01
Granted	79,933	$	34.30
Exercised	(1,984,481)	$	27.64
Terminated/expired	(80,705)	$	36.82
Balance at June 30, 2011	4,506,100	$	31.01	2.7	$	32,807,450

Schedule Of Share Based Payment Award Stock Options Valuation Assumptions Table Text Block

	Six Months Ended
	June 30, 2011	June 30, 2010
Expected dividend yield	0.77% to 0.88%	1.02% to 1.06%
Expected stock price volatility	0.33	0.33
Risk-free interest rate	2.47% to 2.81%	2.82% to 3.04%
Expected life of options	7.0 Years	7.0 Years

Schedule Of Sharebased Compensation Restricted Stock And Restricted Stock Units Activity Table Text Block

		Weighted
		Average
		Grant-Date
Nonvested Shares	Shares	Fair Value
Nonvested at December 31, 2010	1,794,445	$	17.94
Granted	757,310	$	31.47
Vested	(445,912)	$	19.11
Forfeited	(25,373)	$	23.96
Nonvested at June 30, 2011	2,080,470	$	22.54

Schedule Of Share Based Payment Award Stock Appreciation Rights Valuation Assumptions Table Text Block

	SARs Granted During the	SARs Granted During the	Remeasurement
	Six Months Ended	Six Months Ended	as of
	June 30, 2011	June 30, 2010	June 30, 2011
Expected dividend yield	0.87%	0.95% to 1.06%	0.84%
Expected stock price volatility	0.32	0.32 to 0.33	0.31
Risk-free interest rate	3.12%	3.04% to 3.07%	1.76% to 2.50%
Expected life of SARs	7.0 Years	7.0 Years	4.7 to 6.6 Years

Schedule Of Share Based Compensation Stock Appreciation Rights Award Activity Table Text Block

				Weighted
		Weighted			Average
		Average			Remaining	Aggregate
	Number	Exercise			Contractual	Intrinsic
	of SARs	Price			Term	Value
Balance at December 31, 2010	3,030,142	$	16.99
Granted	64,135	$	27.56
Exercised	(272,120)	$	15.48
Terminated/expired	(166,185)	$	15.99
Balance at June 30, 2011	2,655,972	$	17.46	5.2	$	54,994,411

Schedule Of Compensation Cost For Share Based Payment Arrangements Allocation Of Share Based Compensation Costs By Plan Table Text Block

	Three Months Ended				Six Months Ended
	June 30, 2011		June 30, 2010		June 30, 2011		June 30, 2010
Stock options	$	234	$	385	$	484	$	838
Restricted stock awards		3,197		1,291		5,799		3,176
Stock appreciation rights		5,889		438		9,726		1,043
Total share-based
compensation expense	$	9,320	$	2,114	$	16,009	$	5,057

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INVENTORIES (DETAILS) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Inventory Net Abstract
Inventory Raw Materials	$ 12,103	$ 15,801
Inventory Work In Process	3,370	3,236
Inventory Finished Goods	19,930	24,838
Inventory Valuation Reserves	(4,574)	(8,593)
Inventories, net	$ 30,829	$ 35,282

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INVESTMENTS (DETAILS) (USD $)	3 Months Ended	6 Months Ended
	Mar. 31, 2010	Jun. 30, 2011	Jun. 30, 2010
Available For Sale Securities Balance Sheet Reported Amounts Abstract
Available For Sale Securities Current		$ 655,600,000
Available For Sale Securities Noncurrent		22,400,000
Schedule Of Available For Sale Securities [Line Items]
Available For Sale Debt Securities Amortized Cost Basis		683,480,000
Available For Sale Securities Gross Unrealized Gains		1,281,000
Available For Sale Securities Gross Unrealized Losses		(6,827,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities		0
Available For Sale Securities Fair Value Disclosure		677,934,000
Available For Sale Securities Continuous Unrealized Loss Position Fair Value Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than Twelve Months Fair Value		99,986,000
Available For Sale Securities Continuous Unrealized Loss Position Twelve Months Or Longer Fair Value		19,884,000
Available For Sale Securities Continuous Unrealized Loss Position Aggregate Losses Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than 12 Months Aggregate Losses		136,000
Available For Sale Securities Continuous Unrealized Loss Position 12 Months Or Longer Aggregate Losses		6,691,000
Available For Sale Securities Gross Realized Gain Loss Abstract
Other Comprehensive Income Available For Sale Securities Adjustment Before Tax Period Increase Decrease		200,000
Available For Sale Securities Debt Maturities Amortized Cost Abstract
Available For Sale Securities Debt Maturities Within One Year Amortized Cost		327,303,000
Available For Sale Securities Debt Maturities After One Through Five Years Amortized Cost		329,602,000
Available For Sale Securities Debt Maturities After Ten Years Amortized Cost		26,575,000
Available For Sale Securities Debt Maturities Fair Value Abstract
Available For Sale Securities Debt Maturities Within One Year Fair Value		327,965,000
Available For Sale Securities Debt Maturities After One Through Five Years Fair Value		330,085,000
Available For Sale Securities Debt Maturities After Ten Years Fair Value		19,884,000
Available For Sale Securities Other Disclosure Items Abstract
Other Than Temporary Impairment Loss Recognized	300,000	0	260,000
Corporate Debt Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Available For Sale Debt Securities Amortized Cost Basis		360,758,000
Available For Sale Securities Gross Unrealized Gains		474,000
Available For Sale Securities Gross Unrealized Losses		(128,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities		0
Available For Sale Securities Fair Value Disclosure		361,104,000
Available For Sale Securities Continuous Unrealized Loss Position Fair Value Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than Twelve Months Fair Value		79,304,000
Available For Sale Securities Continuous Unrealized Loss Position Twelve Months Or Longer Fair Value		0
Available For Sale Securities Continuous Unrealized Loss Position Aggregate Losses Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than 12 Months Aggregate Losses		128,000
Available For Sale Securities Continuous Unrealized Loss Position 12 Months Or Longer Aggregate Losses		0
US Treasury And Government [Member]
Schedule Of Available For Sale Securities [Line Items]
Available For Sale Debt Securities Amortized Cost Basis		251,136,000
Available For Sale Securities Gross Unrealized Gains		769,000
Available For Sale Securities Gross Unrealized Losses		(8,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities		0
Available For Sale Securities Fair Value Disclosure		251,897,000
Available For Sale Securities Continuous Unrealized Loss Position Fair Value Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than Twelve Months Fair Value		18,892,000
Available For Sale Securities Continuous Unrealized Loss Position Twelve Months Or Longer Fair Value		0
Available For Sale Securities Continuous Unrealized Loss Position Aggregate Losses Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than 12 Months Aggregate Losses		8,000
Available For Sale Securities Continuous Unrealized Loss Position 12 Months Or Longer Aggregate Losses		0
Auction Rate Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Available For Sale Debt Securities Amortized Cost Basis		26,575,000
Available For Sale Securities Gross Unrealized Gains		0
Available For Sale Securities Gross Unrealized Losses		(6,691,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities		0
Available For Sale Securities Fair Value Disclosure		19,884,000
Available For Sale Securities Continuous Unrealized Loss Position Fair Value Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than Twelve Months Fair Value		0
Available For Sale Securities Continuous Unrealized Loss Position Twelve Months Or Longer Fair Value		19,884,000
Available For Sale Securities Continuous Unrealized Loss Position Aggregate Losses Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than 12 Months Aggregate Losses		0
Available For Sale Securities Continuous Unrealized Loss Position 12 Months Or Longer Aggregate Losses		6,691,000
Asset Backed Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Available For Sale Debt Securities Amortized Cost Basis		45,011,000
Available For Sale Securities Gross Unrealized Gains		38,000
Available For Sale Securities Gross Unrealized Losses		0
Other Than Temporary Impairment Losses Investments Available For Sale Securities		0
Available For Sale Securities Fair Value Disclosure		45,049,000
Available For Sale Securities Continuous Unrealized Loss Position Fair Value Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than Twelve Months Fair Value		1,790,000
Available For Sale Securities Continuous Unrealized Loss Position Twelve Months Or Longer Fair Value		0
Available For Sale Securities Continuous Unrealized Loss Position Aggregate Losses Abstract
Available For Sale Securities Continuous Unrealized Loss Position Less Than 12 Months Aggregate Losses		0
Available For Sale Securities Continuous Unrealized Loss Position 12 Months Or Longer Aggregate Losses		$ 0

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

SUBSEQUENT EVENTS

19.       SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date of issuance of its financial statements.

License and Settlement Agreement with Lupin

On July 21, 2011, the Company entered into a License and Settlement Agreement (the “Settlement Agreement”) with Lupin Limited and Lupin Pharmaceuticals, Inc. (together, “Lupin”). Under the terms of the Settlement Agreement, the Company agreed to grant to Lupin a future license to make and sell its generic versions of SOLODYN®in 45mg, 90mg and 135mg strengths under the SOLODYN® intellectual property rights belonging to the Company, with the license grant effective November 26, 2011, or earlier under certain conditions. The Company also agreed to grant to Lupin future licenses to make and sell its generic versions of SOLODYN® in 65mg and 115mg strengths effective in February 2018, or earlier under certain conditions, and its generic versions of SOLODYN® in 55mg (against which Lupin's Paragraph IV Patent Certification was the first received by the Company), 80mg and 105mg strengths effective in February 2019, or earlier under certain conditions. The Settlement Agreement provides that Lupin will be required to pay the Company royalties based on sales of Lupin's generic SOLODYN® products pursuant to the foregoing licenses.

Pursuant to the Settlement Agreement, the companies agreed to terminate all legal disputes between them relating to SOLODYN®. In addition, Lupin confirmed that the Company's patents relating to SOLODYN® are valid and enforceable, and cover Lupin's activities relating to Lupin's generic SOLODYN® products under an ANDA. Lupin also agreed to be permanently enjoined from any distribution of generic SOLODYN® products in the U.S. except as described above.

On July 21, 2011, the Company entered into a Joint Development Agreement (the “Joint Development Agreement”) with Lupin Limited, on behalf of itself and its affiliates (hereinafter collectively referred to in this paragraph as “Lupin”), whereby the Company and Lupin will collaborate to develop multiple novel proprietary therapeutic products. Pursuant to the Joint Development Agreement, subject to the terms and conditions contained therein, the Company will make an up-front $20 million payment to Lupin and will make additional payments to Lupin of up to $38 million upon the achievement of certain research, development, regulatory and other milestones, as well as royalty payments on sales of the products covered under the agreement. In addition, the Company will receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Joint Development Agreement. The $20 million up-front payment will be recognized as research and development expense during the three months ended September 30, 2011.

Stock Repurchase Plan

On August 8, 2011, the Company announced that its Board of Directors approved a Stock Repurchase Plan to purchase up to $200 million in aggregate value of shares of Medicis Class A common stock. Any repurchases will be made in compliance with the Securities and Exchange Commission's Rule 10b-18.

The number of shares to be repurchased and the timing of repurchases (if any) will depend on a variety of factors, including, but not limited to, stock price, economic and market conditions and corporate and regulatory requirements. The plan does not obligate the Company to repurchase any common stock. The plan is scheduled to terminate on the earlier of the first anniversary of the plan or the time at which the purchase limit is reached, but may be suspended or terminated at any time at the Company's discretion without prior notice.

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OTHER CURRENT LIABILITIES

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

OTHER CURRENT LIABILITIES

11.       OTHER CURRENT LIABILITIES

Other current liabilities are as follows (in thousands):

	June 30, 2011		December 31, 2010
Accrued incentives, including SARs liability	$	33,346	$	33,923
Deferred revenue		13,799		16,422
Other accrued expenses		26,619		24,883
	$	73,764	$	75,228

Deferred revenue is comprised of the following (in thousands):

	June 30, 2011		December 31, 2010
Deferred revenue - aesthetics products, net
of cost of revenue	$	9,802	$	10,334
Deferred contract revenue		1,467		3,014
Deferred revenue - sales into distribution
channel in excess of eight weeks of
projected demand		2,441		582
Other deferred revenue		89		2,492
	$	13,799	$	16,422

The Company defers revenue, and the related cost of revenue, of its aesthetics products, including DYSPORT®, PERLANE® and RESTYLANE®, until its exclusive U.S. distributor ships the product to physicians. Deferred contract revenue primarily relates to the Company's strategic collaboration with Hyperion Therapeutics, Inc. The Company also defers the recognition of revenue for certain sales of inventory into the distribution channel that are in excess of eight (8) weeks of projected demand.

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DISCONTINUED OPERATIONS

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

DISCONTINUED OPERATIONS

2.DISCONTINUED OPERATIONS

On February 25, 2011, the Company announced that as a result of the Company's strategic planning process and the current regulatory and commercial capital equipment environment, the Company has determined to explore strategic alternatives for its LipoSonix business including, but not limited to, the sale of the stand-alone business. The Company has engaged an investment banking firm to assist the Company in its exploration of strategic alternatives for LipoSonix. The Company expects the disposal of the LipoSonix business to take place by February 2012 or before. As a result of this decision, the Company now classifies the LipoSonix business as a discontinued operation for financial statement reporting purposes, including comparable period results.

Intangible assets and property and equipment related to LipoSonix were determined to be impaired as of December 31, 2010, based on the Company's analysis of the long-lived assets' carrying value and projected future cash flows. As a result of the impairment analysis, the Company recorded a write-down of approximately $7.7 million related to LipoSonix intangible assets and $2.1 million related to LipoSonix property and equipment during the three months ended December 31, 2010. The write-down of intangible assets and property and equipment related to LipoSonix represented the full carrying value of the respective assets as of December 31, 2010. Therefore, no depreciation or amortization expense was recognized during the six months ended June 30, 2011 related to the discontinued operations, as the long-lived assets of the discontinued operations were written down to $0 as of December 31, 2010.

The following is a summary of loss from discontinued operations, net of income tax benefit, for the three and six months ended June 30, 2011 and 2010 (in thousands):

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2011		2010		2011		2010
Net revenues	$	200	$	448	$	356	$	1,397
Cost of revenues		82		196		2,456		846
Gross profit		118		252		(2,100)		551
Operating expenses:
Selling, general and administrative		5,731		3,782		11,594		7,542
Research and development		3,302		3,091		6,648		6,601
Depreciation and amortization		-		323		-		643
Loss from discontinued operations
before income tax benefit		(8,915)		(6,944)		(20,342)		(14,235)
Income tax benefit		(3,186)		(2,516)		(7,288)		(5,157)
Loss from discontinued operations,
net of income tax benefit	$	(5,729)	$	(4,428)	$	(13,054)	$	(9,078)

The Company includes only revenues and costs directly attributable to the discontinued operations, and not those attributable to the ongoing entity. Accordingly, no interest expense or general corporate overhead costs have been allocated to the LipoSonix discontinued operations. Included in cost of revenues for the six months ended June 30, 2011 was a $1.9 million charge related to an increase in the valuation reserve for LipoSonix inventory that is not expected to be sold.

The following is a summary of assets and liabilities held for sale associated with the LipoSonix discontinued operations as of June 30, 2011 and December 31, 2010 (in thousands):

	June 30, 2011		December 31, 2010
Cash and cash equivalents	$	878	$	629
Accounts receivable, net		83		129
Inventories, net		3,815		4,495
Deferred tax assets, net		5,191		7,328
Other assets		281		546
Assets held for sale from discontinued operations	$	10,248	$	13,127
Accounts payable	$	2,228	$	1,802
Other liabilities		4,944		5,474
Liabilities held for sale from discontinued operations	$	7,172	$	7,276

The following is a summary of net cash used in operating activities from discontinued operations for the six months ended June 30, 2011 and 2010 (in thousands):

	Six Months Ended
	June 30,		June 30,
	2011		2010
Loss from discontinued operations, net of income tax benefit	$	(13,054)	$	(9,078)
Depreciation and amortization		-		643
Share-based compensation expense		1,795		327
Decrease in assets held for sale from discontinued operations		2,879		3,563
Decrease in liabilities held for sale from discontinued operations		(1,598)		(729)
Net cash used in operating activities from
discontinued operations	$	(9,978)	$	(5,274)

Net cash used in investing activities from discontinued operations of $0.6 million for the six months ended June 30, 2010 represents purchases of property and equipment.

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DISCONTINUED OPERATIONS (DETAILS) (USD $)	3 Months Ended			6 Months Ended
	Jun. 30, 2011	Dec. 31, 2010	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Notes To Consolidated Financial Statement Abstract
Impairment Of Intangible Assets Discontinued Operations		$ 7,700,000
Impairment Of Property And Equipment Discontinued Operations		2,100,000
Disposal Group Including Discontinued Operation Income Statement Disclosures [Abstract]
Net Revenues Discontinued Operations	200,000		448,000	356,000	1,397,000
Cost Of Revenues Discontinued Operations	82,000		196,000	2,456,000	846,000
Gross Profit Discontinued Operations	118,000		252,000	(2,100,000)	551,000
Selling General And Administrative Expense Discontinued Operations	5,731,000		3,782,000	11,594,000	7,542,000
Research And Development Expense Discontinued Operations	3,302,000		3,091,000	6,648,000	6,601,000
Depreciation And Amortization Expense Discontinued Operations	0		323,000	0	643,000
Discontinued Operation Income Loss From Discontinued Operation Before Income Tax	(8,915,000)		(6,944,000)	(20,342,000)	(14,235,000)
Income Tax Benefit Discontinued Operation	(3,186,000)		(2,516,000)	(7,288,000)	(5,157,000)
Loss from discontinued operations, net of income tax benefit	(5,729,000)		(4,428,000)	(13,054,000)	(9,078,000)
Increase In Inventory Valuation Reserve Discontinued Operations				1,900,000
Assets Of Disposal Group Including Discontinued Operation Current [Abstract]
Cash And Cash Equivalents Discontinued Operations	878,000	629,000		878,000
Accounts Receivable Net Discontinued Operations	83,000	129,000		83,000
Inventories Net Discontinued Operations	3,815,000	4,495,000		3,815,000
Deferred Tax Assets Net Discontinued Operations	5,191,000	7,328,000		5,191,000
Other Current Assets Discontinued Operations	281,000	546,000		281,000
Assets of Disposal Group, Including Discontinued Operation, Current, Total	10,248,000	13,127,000		10,248,000
Liabilities Of Disposal Group Including Discontinued Operation Current Abstract
Accounts Payable Discontinued Operations	2,228,000	1,802,000		2,228,000
Other Current Liabilities Discontinued Operations	4,944,000	5,474,000		4,944,000
Liabilities of Disposal Group, Including Discontinued Operation, Current, Total	7,172,000	7,276,000		7,172,000
Net Cash Provided By Used In Discontinued Operations Abstract
Income Loss From Discontinued Operations Net Of Tax	(5,729,000)		(4,428,000)	(13,054,000)	(9,078,000)
Depreciation And Amortization Discontinued Operations				0	643,000
Share Based Compensation Discontinued Operations				1,795,000	327,000
Increase Decrease In Assets Of Disposal Group Including Discontinued Operation Current				2,879,000	3,563,000
Increase Decrease In Liabilities Of Disposal Group Including Discontinued Operation Current				(1,598,000)	(729,000)
Cash Provided By Used In Operating Activities Discontinued Operations				(9,978,000)	(5,274,000)
Cash Provided By Used In Investing Activities Discontinued Operations				$ 0	$ (577,000)

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STRATEGIC COLLABORATIONS

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

Strategic Collaborations Disclosure Textblock

8.       STRATEGIC COLLABORATIONS

Collaboration with a privately-held U.S. biotechnology company

On September 10, 2010, the Company and a privately-held U.S. biotechnology company entered into a sublicense and development agreement to develop an agent for specific dermatological conditions in the Americas and Europe and a purchase option to acquire the privately-held U.S. biotechnology company.

Under the terms of the agreements, the Company paid the privately-held U.S. biotechnology company $5.0 million in connection with the execution of the agreement, and will pay additional potential milestone payments totaling approximately $100.5 million upon successful completion of certain clinical, regulatory and commercial milestones.

During the three months ended December 31, 2010 and June 30, 2011, development milestones were achieved, and the Company made a $10.0 million and a $5.5 million payment, respectively, pursuant to the agreements. The initial $5.0 million payment, the $10.0 million milestone payment and the $5.5 million milestone payment were recognized as research and development expense during the three months ended September 30, 2010, December 31, 2010 and June 30, 2011, respectively.

Anacor

On February 9, 2011, the Company entered into a research and development agreement with Anacor Pharmaceuticals, Inc. (“Anacor”) for the discovery and development of boron-based small molecule compounds directed against a target for the potential treatment of acne. Under the terms of the agreement, the Company paid Anacor $7.0 million in connection with the execution of the agreement, and will pay up to $153.0 million upon the achievement of certain research, development, regulatory and commercial milestones, as well as royalties on sales by the Company. Anacor will be responsible for discovering and conducting the early development of product candidates which utilize Anacor's proprietary boron chemistry platform, while the Company will have an option to obtain an exclusive license for products covered by the agreement. The initial $7.0 million payment was recognized as research and development expense during the three months ended March 31, 2011.

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INCOME TAXES

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

INCOME TAXES

13.       INCOME TAXES

Income taxes are determined using an annual effective tax rate, which generally differs from the U.S. Federal statutory rate, primarily because of state and local income taxes, enhanced charitable contribution deductions for inventory, tax credits available in the U.S., the treatment of certain share-based payments that are not designed to normally result in tax deductions, various expenses that are not deductible for tax purposes, changes in valuation allowances against deferred tax assets and differences in tax rates in certain non-U.S. jurisdictions. The Company's effective tax rate may be subject to fluctuations during the year as new information is obtained which may affect the assumptions it uses to estimate its annual effective tax rate, including factors such as its mix of pre-tax earnings in the various tax jurisdictions in which it operates, changes in valuation allowances against deferred tax assets, reserves for tax audit issues and settlements, utilization of tax credits and changes in tax laws in jurisdictions where the Company conducts operations. The Company recognizes tax benefits only if the tax position is more likely than not of being sustained. The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of its assets and liabilities, along with net operating losses and credit carryforwards. The Company records valuation allowances against its deferred tax assets to reduce the net carrying value to amounts that management believes is more likely than not to be realized.

At June 30, 2011, the Company has an unrealized tax loss of $21.0 million related to the Company's option to acquire Revance or license Revance's topical product that is under development. The Company will not be able to determine the character of the loss until the Company exercises or fails to exercise its option. A realized loss characterized as a capital loss can only be utilized to offset capital gains. At June 30, 2011, the Company has recorded a valuation allowance of $7.6 million against the deferred tax asset associated with this unrealized tax loss in order to reduce the carrying value of the deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

At June 30, 2011, the Company has an unrealized tax loss of $21.9 million related to the Company's option to acquire a privately-held U.S. biotechnology company. If the Company fails to exercise its option, a capital loss will be recognized. A loss characterized as a capital loss can only be used to offset capital gains. At June 30, 2011, the Company has recorded a valuation allowance of $7.9 million against the deferred tax asset associated with this unrealized tax loss in order to reduce the carrying value of the deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

During the three months endedJune 30, 2011 and June 30, 2010, the Company made net tax payments of $32.0 million and $30.9 million, respectively. During the six months ended June 30, 2011 and June 30, 2010, the Company made net tax payments of $38.0 million and $47.7 million, respectively.

The Company operates in multiple tax jurisdictions and is periodically subject to audit in these jurisdictions. These audits can involve complex issues that may require an extended period of time to resolve and may cover multiple years. The Company and its domestic subsidiaries file a consolidated U.S. federal income tax return. Such returns have either been audited or settled through statute expiration through 2006. The state of California conducted an examination on the Company's tax returns for the periods ending June 30, 2005, December 31, 2005, December 31, 2006 and December 31, 2007. During the three months ended March 31, 2011, the Company reached a settlement for all periods with the state of California and paid approximately $0.5 million. The state of California has also notified the Company of an upcoming examination of the Company's tax returns for the periods ending December 31, 2008 and December 31, 2009.

The Company owns two subsidiaries that file corporate tax returns in Sweden. The Swedish tax authorities examined the tax return of one of the subsidiaries for fiscal 2004. The examiners issued a no change letter, and the examination is complete. The Company's other subsidiary in Sweden has not been examined by the Swedish tax authorities. The Swedish statute of limitations may be open for up to five years from the date the tax return was filed. Thus, all returns filed for periods ending December 31, 2006 forward are open under the statute of limitations.

At June 30, 2011 and December 31, 2010, the Company had unrecognized tax benefits of $1.0 million and $1.4 million, respectively. The amount of unrecognized tax benefits which, if ultimately recognized,could favorablyaffect the Company's effective tax rate in a future period is $0.6 million and $0.9 million as of June 30, 2011 and December 31, 2010, respectively.During the next twelve months, the Company estimates that it is reasonably possible that the amount of unrecognized tax benefits will decrease by $0.7 million.

The Company recognizes accrued interest and penalties, if applicable, related to unrecognized tax benefits in income tax expense. The Company had approximately $0.5million for the payment of interest and penalties accrued (net of tax benefit) at June 30, 2011 and December 31, 2010.

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SEGMENT AND PRODUCT INFORMATION

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

SEGMENT AND PRODUCT INFORMATION

9.       SEGMENT AND PRODUCT INFORMATION

       The Company operates in one business segment: pharmaceuticals. The Company's current pharmaceutical franchises are divided between the dermatological and non-dermatological fields. The dermatological field represents products for the treatment of acne and acne-related dermatological conditions and non-acne dermatological conditions. The non-dermatological field represents products for the treatment of urea cycle disorderand contract revenue. The acne and acne-related dermatological product lines include SOLODYN® and ZIANA®. During early 2011, the Company discontinued its TRIAZ® branded products and decided to no longer promote its PLEXION® branded products. The non-acne dermatological product lines include DYSPORT®, LOPROX®, PERLANE®, RESTYLANE® and VANOS®. The non-dermatological product lines include AMMONUL®and BUPHENYL®.The non-dermatological field also includes contract revenues associated with licensing agreements and authorized generics.

The Company's pharmaceutical products, with the exception of AMMONUL® and BUPHENYL®, are promoted to dermatologists and plastic surgeons. Such products are often prescribed by physicians outside these two specialties, including family practitioners, general practitioners, primary-care physicians and OB/GYNs, as well as hospitals, government agencies, and others. Currently, the Company's products are sold primarily to wholesalers and retail chain drug stores.

       Net revenues and the percentage of net revenues for each of the product categories are as follows (amounts in thousands):

	Three Months Ended					Six Months Ended
	June 30,		June 30,			June 30,		June 30,
	2011		2010			2011		2010
Acne and acne-related dermatological products	$	123,130	$	124,763		$	226,592	$	244,976
Non-acne dermatological products		57,719		41,017			109,940		75,269
Non-dermatological products		9,978		7,816			19,208		18,893
Total net revenues	$	190,827	$	173,596		$	355,740	$	339,138
		Three Months Ended					Six Months Ended
		June 30,		June 30,			June 30,		June 30,
		2011		2010			2011		2010
Acne and acne-related dermatological products		65	%	72	%		64	%	72	%
Non-acne dermatological products		30		24			31		22
Non-dermatological products		5		4			5		6
Total net revenues		100	%	100	%		100	%	100	%

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INVENTORIES (TABLES)

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

Schedule Of Inventory Current Table Text Block

	June 30, 2011		December 31, 2010
Raw materials	$	12,103	$	15,801
Work-in-process		3,370		3,236
Finished goods		19,930		24,838
Valuation reserve		(4,574)		(8,593)
Total inventories	$	30,829	$	35,282

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RESEARCH AND DEVELOPMENT

6 Months Ended

Jun. 30, 2011

Research And Development Disclosure Abstract

Research Development And Computer Software Disclosure Text Block

7.RESEARCH AND DEVELOPMENT

All research and development costs, including payments related to products under development and research consulting agreements, are expensed as incurred. The Company may continue to make non-refundable payments to third parties for new technologies and for research and development work that has been completed. These payments may be expensed at the time of payment depending on the nature of the payment made.

       The Company's policy on accounting for costs of strategic collaborations determines the timing of the recognition of certain development costs. In addition, this policy determines whether the cost is classified as development expense or capitalized as an asset. Management is required to form judgments with respect to the commercial status of such products in determining whether development costs meet the criteria for immediate expense or capitalization. For example, when the Company acquires certain products for which there is already an Abbreviated New Drug Application (“ANDA”) or a New Drug Application (“NDA”) approval related directly to the product, and there is net realizable value based on projected sales for these products, the Company capitalizes the amount paid as an intangible asset. If the Company acquires product rights which are in the development phase and to which the Company has no assurance that the third party will successfully complete its development milestones, the Company expenses such payments.

Research and development expense for the three and six months endedJune 30, 2011 and 2010 are as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2011		2010		2011		2010
Ongoing research and development costs	$	7,080	$	7,376	$	13,948	$	13,879
Payments related to strategic collaborations		7,500		-		14,500		-
Share-based compensation expense		615		44		1,020		100
Total research and development	$	15,195	$	7,420	$	29,468	$	13,979

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Operating Activities:
Net income (loss)	$ 48,143	$ 71,868
Loss from discontinued operations, net of income tax benefit	13,054	9,078
Income from continuing operations	61,197	80,946
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	14,434	13,649
Defined Benefit Plan Amortization Of Prior Service Cost Credit	400	0
Adjustment to impairment of available-for-sale investments	0	260
Gain on sale of available-for-sale investments, net	(27)	750
Share-based compensation expense	16,009	5,057
Deferred income tax benefit	(877)	7,099
Tax expense from exercise of stock options and vesting of restricted stock awards	1,864	(269)
Excess tax benefits from share-based payment arrangements	(2,872)	(320)
Increase Decrease Provision For Sales Discounts And Chargebacks	1,163	1,031
Accretion (amortization) of premium/(discount) on investments	2,604	1,811
Changes in operating assets and liabilities:
Accounts receivable	(36,940)	(42,849)
Inventories	4,453	(10,413)
Other current assets	(3,995)	(3,810)
Accounts payable	4,378	14,972
Reserve for sales returns	17,528	1,131
Income taxes payable	(4,628)	(13,923)
Other current liabilities	(17,338)	(2,282)
Other liabilities	128	(1,958)
Accrued consumer rebate and loyalty programs	23,244	17,053
Managed care and Medicaid reserves	1,863	(2,668)
Net cash provided by operating activities from continuing operations	82,588	65,267
Net Cash Used In Operating Activities From Discontinued Operations	(9,978)	(5,274)
Net cash provided by operating activities	72,610	59,993
Investing Activities:
Purchase of property and equipment	(2,834)	(3,922)
Payments for purchase of product rights	(12,824)	768
Purchase of available-for-sale investments	(474,810)	(273,402)
Sale of available-for-sale investments	112,379	41,238
Maturity of available-for-sale investments	188,865	69,515
Net cash provided by (used in) investing activities from continuing operations	(189,224)	(165,803)
Net cash used in investing activities from discontinued operations	0	(577)
Net cash provided by (used in) investing activities	(189,224)	(166,380)
Financing Activities
Payment of dividends	(8,535)	(5,993)
Excess tax benefits from share based payment arrangements	2,872	320
Proceeds from exercise of stock options	54,049	2,206
Net cash provided by (used in) financing activities	48,386	(3,467)
Effect Of Exchange Rate On Cash And Cash Equivalents	67	(34)
Net increase (decrease) in cash and cash equivalents	(68,161)	(109,888)
Cash and cash equivalents at beginning of period	218,362	207,941
Cash and cash equivalents at end of period	$ 150,201	$ 98,053

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SHARE BASED COMPENSATION

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

SHARE-BASED COMPENSATION

3.       SHARE-BASED COMPENSATION

At June 30, 2011, the Company had seven active share-based employee compensation plans. Of these seven share-based compensation plans, only the 2006 Incentive Award Plan is eligible for the granting of future awards.

Stock Option Awards

Stock option awards are granted at the fair market value on the date of grant. The option awards vest over a period determined at the time the options are granted, ranging from one to five years, and generally have a maximum term of ten years. Certain options provide for accelerated vesting if there is a change in control (as defined in the plans). When options are exercised, new shares of the Company's Class A common stock are issued.

The total value of the stock option awards is expensed ratably over the service period of the employees receiving the awards. As of June 30, 2011, total unrecognized compensation cost related to stock option awards, to be recognized as expense subsequent to June 30, 2011, was approximately $1.5 million and the related weightedaverage period over which it is expected to be recognized is approximately 2.6 years.All of the unrecognized compensation cost related to stock option awards relates to continuing operations.

A summary of stock option activity within the Company's stock-based compensation plans and changes for the six months endedJune 30, 2011, is as follows:

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Term	Value
Balance at December 31, 2010	6,491,353	$	30.01
Granted	79,933	$	34.30
Exercised	(1,984,481)	$	27.64
Terminated/expired	(80,705)	$	36.82
Balance at June 30, 2011	4,506,100	$	31.01	2.7	$	32,807,450

The intrinsic value of options exercised during the six months ended June 30, 2011 was $16,015,062. Options exercisable under the Company's share-based compensation plans at June 30, 2011 were 4,352,288, with a weighted average exercise price of $31.18, a weighted average remaining contractual term of 2.6 years, and an aggregate intrinsic value of $30,957,994.

A summary of outstanding and exercisable stock options that are fully vested and are expected to vest, based on historical forfeiture rates, as of June 30, 2011, is as follows:

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Term	Value
Outstanding, net of expected forfeitures	4,238,744	$	31.19	2.7	$	30,085,482
Exercisable, net of expected forfeitures	4,124,910	$	31.27	2.6	$	28,950,668

The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

	Six Months Ended
	June 30, 2011	June 30, 2010
Expected dividend yield	0.77% to 0.88%	1.02% to 1.06%
Expected stock price volatility	0.33	0.33
Risk-free interest rate	2.47% to 2.81%	2.82% to 3.04%
Expected life of options	7.0 Years	7.0 Years

The expected dividend yield is based on expected annual dividends to be paid by the Company as a percentage of the market value of the Company's stock as of the date of grant. The Company determined that a blend of implied volatility and historical volatility is more reflective of market conditions and a better indicator of expected volatility than using purely historical volatility. The risk-free interest rate is based on the U.S. treasury security rate in effect as of the date of grant. The expected lives of options are based on historical data of the Company.

The weighted average fair value of stock options granted during the six months ended June 30, 2011 and 2010, was $12.25 and $8.28, respectively.

Restricted Stock Awards

The Company also grants restricted stock awards to certain employees. Restricted stock awards are valued at the closing market value of the Company's Class A common stock on the date of grant, and the total value of the award is expensed ratably over the service period of the employees receiving the grants. As of June 30, 2011, the total amount of unrecognized compensation cost related to nonvested restricted stock awards, to be recognized as expense subsequent to June 30, 2011, was approximately $40.7 million, and the related weighted average period over which it is expected to be recognized is approximately 3.4 years. Included in the $40.7 million of total unrecognized compensation cost related to nonvested restricted stock awards is $2.6 million related to discontinued operations.

A summary of restricted stock activity within the Company's share-based compensation plans and changes for the six months ended June 30, 2011, is as follows:

		Weighted
		Average
		Grant-Date
Nonvested Shares	Shares	Fair Value
Nonvested at December 31, 2010	1,794,445	$	17.94
Granted	757,310	$	31.47
Vested	(445,912)	$	19.11
Forfeited	(25,373)	$	23.96
Nonvested at June 30, 2011	2,080,470	$	22.54

The total fair value of restricted shares vested during the six months ended June 30, 2011 and 2010 was approximately $8.5 million and $6.6 million, respectively.

Stock Appreciation Rights

During 2009, the Company began granting cash-settled stock appreciation rights (“SARs”) to many of its employees. SARs generally vest over a graduated five-year period and expire seven years from the date of grant, unless such expiration occurs sooner due to the employee's termination of employment, as provided in the applicable SAR award agreement. SARs allow the holder to receive cash (less applicable tax withholding) upon the holder's exercise, equal to the excess, if any, of the market price of the Company's Class A common stock on the exercise date over the exercise price, multiplied by the number of shares relating to the SAR with respect to which the SAR is exercised.  The exercise price of the SAR is the fair market value of a share of the Company's Class A common stock relating to the SAR on the date of grant. The total value of the SAR is expensed over the service period of the employee receiving the grant, and a liability is recognized in the Company's condensed consolidated balance sheets until settled. The fair value of SARs is required to be remeasured at the end of each reporting period until the award is settled, and changes in fair value must be recognized as compensation expense to the extent of vesting each reporting period based on the new fair value. As of June 30, 2011, the total measured amount of unrecognized compensation cost related to outstanding SARs, to be recognized as expense subsequent to June 30, 2011, based on the remeasurement at June 30, 2011, was approximately $42.1 million, and the related weighted average period over which it is expected to be recognized is approximately3.2 years. Included in the $42.1 million of total measured unrecognized compensation cost related to outstanding SARs is $5.3 million related to discontinued operations.

The fair value of each SAR was estimated on the date of the grant, and was remeasured at quarter-end, using the Black-Scholes option pricing model with the following assumptions:

	SARs Granted During the	SARs Granted During the	Remeasurement
	Six Months Ended	Six Months Ended	as of
	June 30, 2011	June 30, 2010	June 30, 2011
Expected dividend yield	0.87%	0.95% to 1.06%	0.84%
Expected stock price volatility	0.32	0.32 to 0.33	0.31
Risk-free interest rate	3.12%	3.04% to 3.07%	1.76% to 2.50%
Expected life of SARs	7.0 Years	7.0 Years	4.7 to 6.6 Years

The weighted average fair value of SARs granted during the six months endedJune 30, 2011 and 2010, as of the respective grant dates, was $9.90 and $8.14, respectively. The weighted average fair value of all SARs outstanding as of the remeasurement date of June 30, 2011 was $22.40.

A summary of SARs activity for the six months ended June 30, 2011 is as follows:

				Weighted
		Weighted			Average
		Average			Remaining	Aggregate
	Number	Exercise			Contractual	Intrinsic
	of SARs	Price			Term	Value
Balance at December 31, 2010	3,030,142	$	16.99
Granted	64,135	$	27.56
Exercised	(272,120)	$	15.48
Terminated/expired	(166,185)	$	15.99
Balance at June 30, 2011	2,655,972	$	17.46	5.2	$	54,994,411

The intrinsic value of SARs exercised during the six months ended June 30, 2011 was $4,937,860.

As of June 30, 2011, 88,455SARs were exercisable, with a weighted average exercise price of $14.69, a weighted average remaining contractual term of 4.7 years, and an aggregate intrinsic value of $1,911,063.       

Total share-based compensation expense related to continuing operations recognized during the three months and six months ended June 30, 2011 and 2010 was as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30, 2011		June 30, 2010		June 30, 2011		June 30, 2010
Stock options	$	234	$	385	$	484	$	838
Restricted stock awards		3,197		1,291		5,799		3,176
Stock appreciation rights		5,889		438		9,726		1,043
Total share-based
compensation expense	$	9,320	$	2,114	$	16,009	$	5,057

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RESEARCH & DEVELOPMENT (DETAILS) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Research And Development Expense Abstract
Ongoing Research And Development Costs	$ 7,080	$ 7,376	$ 13,948	$ 13,879
Research And Development Expense Payments Related To Strategic Collaborations	7,500	0	14,500	0
Research And Development Expense	15,195	7,420	29,468	13,979
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Share Based Compensation Expense	9,320	2,114	16,009	5,057
Research And Development Expense [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Share Based Compensation Expense	$ 615	$ 44	$ 1,020	$ 100

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SEGMENTS (TABLES)

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

Reconciliation Of Revenue From Segments To Consolidated Text Block

	Three Months Ended					Six Months Ended
	June 30,		June 30,			June 30,		June 30,
	2011		2010			2011		2010
Acne and acne-related dermatological products	$	123,130	$	124,763		$	226,592	$	244,976
Non-acne dermatological products		57,719		41,017			109,940		75,269
Non-dermatological products		9,978		7,816			19,208		18,893
Total net revenues	$	190,827	$	173,596		$	355,740	$	339,138
		Three Months Ended					Six Months Ended
		June 30,		June 30,			June 30,		June 30,
		2011		2010			2011		2010
Acne and acne-related dermatological products		65	%	72	%		64	%	72	%
Non-acne dermatological products		30		24			31		22
Non-dermatological products		5		4			5		6
Total net revenues		100	%	100	%		100	%	100	%

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SERP

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

4.       SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

On June 24, 2011, the Company's Compensation Committee adopted the Medicis Pharmaceutical Supplemental Executive Retirement Plan (the “SERP”), a non-qualified, noncontributory, defined benefit pension plan that provides supplemental retirement income for a select group of officers, including the Company's named executive officers. The SERP is effective as of June 1, 2011. Retirement benefits are based on a SERP participant's years of service and average earnings (base salary plus cash bonus or incentive payments) during any three calendar years of service (regardless of whether the years are consecutive), beginning with the 2009 calendar year.

A SERP participant vests in 1/6th of his or her retirement benefit per plan year, effective as of the first day of the plan year, and becomes fully vested in his or her accrued retirement benefit upon (1) the participant's normal retirement date, provided that the participant has at least fifteen years of service with the Company and is employed by the Company on such date, (2) the participant's separation from service due to a discharge without “cause” or resignation for “good reason” (as such terms are defined in the participant's employment agreement, or in the absence of such employment agreement or definitions, in the Company's Executive Retention Plan), or (3) a “change in control” of the Company. A SERP participant accrues his or her retirement benefit based on (x) the participant's number of years of service with the Company (including prior years of service), divided by (y) the number of years designated for such participant's tier (which ranges from five to twenty years).

Participants in the SERP received credit for prior service with the Company. The prior service accrued benefit of approximately $33.8 million was recorded as other comprehensive income within stockholders' equity, and is amortized as compensation expense over the remaining service years of each participant. Amortization of prior service costs recognized as compensation expense during the three months ended June 30, 2011, was approximately $0.4 million, representing one month of amortization. The Company also established a deferred tax asset of approximately $12.0 million, the benefit of which was also recorded in other comprehensive income.

No investments were held by the Company related to the SERP as of June 30, 2011.

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SEGMENTS (DETAILS) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Segment Reporting Revenue Reconciling Item [Line Items]
Net Revenues	$ 190,827	$ 173,596	$ 355,740	$ 339,138
Net Revenues Total	190,827	173,596	355,740	339,138
Net Revenues Percent	100.00%	100.00%	100.00%	100.00%
Acne And Acne Related Dermatological Products [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Net Revenues	123,130	124,763	226,592	244,976
Net Revenues Total	123,130	124,763	226,592	244,976
Net Revenues Percent	65.00%	72.00%	64.00%	72.00%
Non Acne Dermatological Products [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Net Revenues	57,719	41,017	109,940	75,269
Net Revenues Total	57,719	41,017	109,940	75,269
Net Revenues Percent	30.00%	24.00%	31.00%	22.00%
Non Dermatological Products [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Net Revenues	9,978	7,816	19,208	18,893
Net Revenues Total	$ 9,978	$ 7,816	$ 19,208	$ 18,893
Net Revenues Percent	5.00%	4.00%	5.00%	6.00%

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INVESTMENTS (TABLES)

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

Schedule Of Available For Sale Securities Reconciliation Table Text Block

	June 30, 2011
							Other-Than-
			Gross		Gross		Temporary
			Unrealized		Unrealized		Impairment		Fair
	Cost		Gains		Losses		Losses		Value
Corporate notes and bonds	$	360,758	$	474	$	(128)	$	-	$	361,104
Federal agency notes and bonds		251,136		769		(8)		-		251,897
Auction rate floating securities		26,575		-		(6,691)		-		19,884
Asset-backed securities		45,011		38		-		-		45,049
Total securities	$	683,480	$	1,281	$	(6,827)	$	-	$	677,934

Investments Classified By Contractual Maturity Date Table Text Block

	June 30, 2011
			Estimated
	Cost		Fair Value
Available-for-sale
Due in one year or less	$	327,303	$	327,965
Due after one year through five years		329,602		330,085
Due after 10 years		26,575		19,884
	$	683,480	$	677,934

Schedule Of Unrealized Loss On Investments Table Text Block

	Less Than 12 Months				Greater Than 12 Months
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss
Corporate notes and bonds	$	79,304	$	128	$	-	$	-
Federal agency notes and bonds		18,892		8		-		-
Auction rate floating securities		-		-		19,884		6,691
Asset-backed securities		1,790		-		-		-
Total securities	$	99,986	$	136	$	19,884	$	6,691

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OTHER CURRENT LIABILITIES (TABLES)

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

Schedule Of Other Current Liabilities Table Text Block

	June 30, 2011		December 31, 2010
Accrued incentives, including SARs liability	$	33,346	$	33,923
Deferred revenue		13,799		16,422
Other accrued expenses		26,619		24,883
	$	73,764	$	75,228

Schedule Of Other Deferred Revenue Table Text Block

	June 30, 2011		December 31, 2010
Deferred revenue - aesthetics products, net
of cost of revenue	$	9,802	$	10,334
Deferred contract revenue		1,467		3,014
Deferred revenue - sales into distribution
channel in excess of eight weeks of
projected demand		2,441		582
Other deferred revenue		89		2,492
	$	13,799	$	16,422

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STRATEGIC COLLABORATIONS (DETAILS) (USD $) In Millions	3 Months Ended	6 Months Ended	3 Months Ended
	Mar. 31, 2011 Research And Development Arrangement Anacor [Member]	Jun. 30, 2011 Research And Development Arrangement Anacor [Member]	Jun. 30, 2011 Research And Development Arrangement Privately Held Biotechnology Company [Member]	Dec. 31, 2010 Research And Development Arrangement Privately Held Biotechnology Company [Member]	Sep. 30, 2010 Research And Development Arrangement Privately Held Biotechnology Company [Member]
Long Term Purchase Commitment [Line Items]
Long Term Purchase Commitment Milestone Payments Made	$ 7.0		$ 5.5	$ 10.0	$ 5.0
Long Term Purchase Commitment Future Potential Milestone Payments		$ 153.0			$ 100.5

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RESEARCH & DEVELOPMENT (TABLES)

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

Research And Development Expense Detail Table Text Block

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2011		2010		2011		2010
Ongoing research and development costs	$	7,080	$	7,376	$	13,948	$	13,879
Payments related to strategic collaborations		7,500		-		14,500		-
Share-based compensation expense		615		44		1,020		100
Total research and development	$	15,195	$	7,420	$	29,468	$	13,979

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CONTINGENT CONVERTIBLE SENIOR NOTES

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

CONTINGENT CONVERTIBLE SENIOR NOTES

12.       CONTINGENT CONVERTIBLE SENIOR NOTES

       In June 2002, the Company sold $400.0 million aggregate principal amount of its 2.5% Contingent Convertible Senior Notes Due 2032 (the “Old Notes”) in private transactions. As discussed below, approximately $230.8 million in principal amount of the Old Notes was exchanged for New Notes on August 14, 2003. The Old Notes bear interest at a rate of 2.5% per annum, which is payable on June 4 and December 4 of each year, beginning on December 4, 2002. The Company also agreed to pay contingent interest at a rate equal to 0.5% per annum during any six-month period, with the initial six-month period commencing June 4, 2007, if the average trading price of the Old Notes reaches certain thresholds.Contingent interest of $0.1 million was payable at June 30, 2011. No contingent interest related to the Old Notes was payable at December 31, 2010. The Old Notes will mature on June 4, 2032.

       The Company may redeem some or all of the Old Notes at any time on or after June 11, 2007, at a redemption price, payable in cash, of 100% of the principal amount of the Old Notes, plus accrued and unpaid interest, including contingent interest, if any. Holders of the Old Notes may require the Company to repurchase all or a portion of their Old Notes on June 4, 2012 and June 4, 2017, or upon a change in control, as defined in the indenture governing the Old Notes, at 100% of the principal amount of the Old Notes, plus accrued and unpaid interest to the date of the repurchase, payable in cash. Under GAAP, if an obligation is due on demand or will be due on demand within one year from the balance sheet date, even though liquidation may not be expected within that period, it should be classified as a current liability. Accordingly, the outstanding balance of Old Notes along with the deferred tax liability associated with accelerated interest deductions on the Old Notes will be classified as a current liability during the respective twelve month periods prior to June 4, 2012 and June 4, 2017. As of June 30, 2011, $169.1 million of the Old Notes and $57.9 million of deferred tax liabilities were classified as current liabilities in the Company's condensed consolidated balance sheets. The $57.9 million of deferred tax liabilities were included within current deferred tax assets, net. If all of the Old Notes are put back to the Company on June 4, 2012, the Company would be required to pay $169.1 million in outstanding principal, plus accrued interest. The Company would also be required to pay the accumulated deferred tax liability related to the Old Notes.

The Old Notes are convertible, at the holders' option, prior to the maturity date into shares of the Company's Class A common stock in the following circumstances:

• during any quarter commencing after June 30, 2002, if the closing price of the Company's Class A common stock over a specified number of trading days during the previous quarter, including the last trading day of such quarter, is more than 110% of the conversion price of the Old Notes, or $31.96. The Old Notes are initially convertible at a conversion price of $29.05 per share, which is equal to a conversion rate of approximately 34.4234 shares per $1,000 principal amount of Old Notes, subject to adjustment;

• if the Company has called the Old Notes for redemption;

• during the five trading day period immediately following any nine consecutive day trading period in which the trading price of the Old Notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of the Company's Class A common stock on that day multiplied by the number of shares of the Company's Class A common stock issuable upon conversion of $1,000 principal amount of the Old Notes; or

• upon the occurrence of specified corporate transactions.

       The Old Notes, which are unsecured, do not contain any restrictions on the payment of dividends, the incurrence of additional indebtedness or the repurchase of the Company's securities and do not contain any financial covenants.

       The Company incurred $12.6 million of fees and other origination costs related to the issuance of the Old Notes. The Company amortized these costs over the first five-year Put period, which ran through June 4, 2007.

       On August 14, 2003, the Company exchanged approximately $230.8 million in principal amount of its Old Notes for approximately $283.9 million in principal amount of its 1.5% Contingent Convertible Senior Notes Due 2033 (the “New Notes”). Holders of Old Notes that accepted the Company's exchange offer received $1,230 in principal amount of New Notes for each $1,000 in principal amount of Old Notes. The terms of the New Notes are similar to the terms of the Old Notes, but have a different interest rate, conversion rate and maturity date. Holders of Old Notes that chose not to exchange continue to be subject to the terms of the Old Notes.

       The New Notes bear interest at a rate of 1.5% per annum, which is payable on June 4 and December 4 of each year, beginning December 4, 2003. The Company will also pay contingent interest at a rate of 0.5% per annum during any six-month period, with the initial six-month period commencing June 4, 2008, if the average trading price of the New Notes reaches certain thresholds. No contingent interest related to the New Notes was payable at June 30, 2011 or December 31, 2010. The New Notes mature on June 4, 2033.

       As a result of the exchange, the outstanding principal amounts of the Old Notes and the New Notes were $169.2 million and $283.9 million, respectively. The Company incurred approximately $5.1 million of fees and other origination costs related to the issuance of the New Notes. The Company amortized these costs over the first five-year Put period, which ran through June 4, 2008.

Holders of the New Notes were able to require the Company to repurchase all or a portion of their New Notes on June 4, 2008, at 100% of the principal amount of the New Notes, plus accrued and unpaid interest, including contingent interest, if any, to the date of the repurchase, payable in cash. Holders of approximately $283.7 million of New Notes elected to require the Company to repurchase their New Notes on June 4, 2008. The Company paid $283.7 million, plus accrued and unpaid interest of approximately $2.2 million, to the holders of New Notes that elected to require the Company to repurchase their New Notes. The Company was also required to pay an accumulated deferred tax liability of approximately $34.9 million related to the repurchased New Notes. This $34.9 million deferred tax liability was paid during the second half of 2008. Following the repurchase of these New Notes, $181,000 of principal amount of New Notes remained outstanding as of June 30, 2011 and December 31, 2010.

The remaining New Notes are convertible, at the holders' option, prior to the maturity date into shares of the Company's Class A common stock in the following circumstances:

• during any quarter commencing after September 30, 2003, if the closing price of the Company's Class A common stock over a specified number of trading days during the previous quarter, including the last trading day of such quarter, is more than 120% of the conversion price of the New Notes, or $46.51. The Notes are initially convertible at a conversion price of $38.76 per share, which is equal to a conversion rate of approximately 25.7998 shares per $1,000 principal amount of New Notes, subject to adjustment;

• if the Company has called the New Notes for redemption;

• during the five trading day period immediately following any nine consecutive day trading period in which the trading price of the New Notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of the Company's Class A common stock on that day multiplied by the number of shares of the Company's Class A common stock issuable upon conversion of $1,000 principal amount of the New Notes; or

• upon the occurrence of specified corporate transactions.

       The remaining New Notes, which are unsecured, do not contain any restrictions on the incurrence of additional indebtedness or the repurchase of the Company's securities and do not contain any financial covenants. The New Notes require an adjustment to the conversion price if the cumulative aggregate of all current and prior dividend increases above $0.025 per share would result in at least a one percent (1%) increase in the conversion price. This threshold has not been reached and no adjustment to the conversion price has been made.

During the quarter ended June 30, 2011, the Old Notes met the criteria for the right of conversion into shares of the Company's Class A common stock. This right of conversion of the holders of Old Notes was triggered by the stock closing above $31.96 on 20 of the last 30 trading days and the last trading day of the quarter ended June 30, 2011. The holders of Old Notes have this conversion right only until September 30, 2011.At the end of each future quarter, the conversion rights will be reassessed in accordance with the bond indenture agreement to determine if the conversion trigger rights have been achieved. During the quarter ended June 30, 2011, the New Notes did not meet the criteria for the right of conversion.

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SHORT-TERM AND LONG-TERM INVESTMENTS

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

SHORT-TERM AND LONG-TERM INVESTMENTS

5.       SHORT-TERM AND LONG-TERM INVESTMENTS

The Company's policy for its short-term and long-term investments is to establish a high-quality portfolio that preserves principal, meets liquidity needs, avoids inappropriate concentrations and delivers an appropriate yield in relationship to the Company's investment guidelines and market conditions. Short-term and long-term investments consist of corporate and various government agency and municipal debt securities. The Company's investments in auction rate floating securities consist of investments in student loans. Management classifies the Company's short-term and long-term investments as available-for-sale. Available-for-sale securities are carried at fair value with unrealized gains and losses reported in stockholders' equity. Realized gains and losses and declines in value judged to be other than temporary, if any, are included in other expense in the condensed consolidated statement of operations. A decline in the market value of any available-for-sale security below cost that is deemed to be other than temporary, results in impairment of the fair value of the investment. The impairment is charged to earnings and a new cost basis for the security is established. Premiums and discounts are amortized or accreted over the life of the related available-for-sale security. Dividends and interest income are recognized when earned. The cost of securities sold is calculated using the specific identification method. At June 30, 2011, the Company has recorded the estimated fair value of available-for-sale securities in short-term and long-term investments of approximately $655.6million and $22.4million, respectively.

Available-for-sale securities consist of the following at June 30, 2011 (in thousands):

	June 30, 2011
							Other-Than-
			Gross		Gross		Temporary
			Unrealized		Unrealized		Impairment		Fair
	Cost		Gains		Losses		Losses		Value
Corporate notes and bonds	$	360,758	$	474	$	(128)	$	-	$	361,104
Federal agency notes and bonds		251,136		769		(8)		-		251,897
Auction rate floating securities		26,575		-		(6,691)		-		19,884
Asset-backed securities		45,011		38		-		-		45,049
Total securities	$	683,480	$	1,281	$	(6,827)	$	-	$	677,934

During the three and six months ended June 30, 2011, there were no significant gross realized gains and losses on sales of available-for-sale securities. Gross unrealized gains and lossesare determined based on the specific identification method. The net adjustment to unrealized losses during the six months ended June 30, 2011, on available-for-sale securities included in stockholders' equity totaled $0.2 million.The amortized cost and estimated fair value of the available-for-sale securities at June 30, 2011, by maturity,are shown below (in thousands):

	June 30, 2011
			Estimated
	Cost		Fair Value
Available-for-sale
Due in one year or less	$	327,303	$	327,965
Due after one year through five years		329,602		330,085
Due after 10 years		26,575		19,884
	$	683,480	$	677,934

Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties, and the Company views its available-for-sale securities as available for current operations.At June 30, 2011, approximately $ 22.4 million in estimated fair value expected to mature greater than one year has been classified as long-term investments since these investments are in an unrealized loss position, and management has both the ability and intent to hold these investments until recovery of fair value, which may be maturity.

As of June 30, 2011, the Company's investments included auction rate floating securities with a fair value of $19.9 million. The Company's auction rate floating securities are debt instruments with a long-term maturity and with an interest rate that is reset in short intervals through auctions. The negative conditions in the credit markets from 2008 through the first half of 2011 have prevented some investors from liquidating their holdings, including their holdings of auction rate floating securities. During the three months ended March 31, 2008, the Company was informed that there was insufficient demand at auction for the auction rate floating securities. As a result, these affected auction rate floating securities are now considered illiquid, and the Company could be required to hold them until they are redeemed by the holder at maturity. The Company may not be able to liquidate the securities until a future auction on these investments is successful.

During the three months ended March 31, 2010, the Company became aware of new circumstances that directly impacted the valuation of an asset-backed security that is owned by the Company. An unrealized loss on the asset-backed security, based on the Company's intent to hold the security until recovery of the fair value, had previously been recorded in stockholders' equity. Based on the new circumstances related to the investment, the Company determined that the impairment of the asset-backed security was other-than-temporary, as the Company believed it would not recover its investment even if the asset were held to maturity. A $0.3 million impairment charge was therefore recorded in other expense, net, during the three months ended March 31, 2010 related to the asset-backed security. The asset-backed security was sold in April 2010.

The following table shows the gross unrealized losses and the fair value of the Company's investments, with unrealized losses that are not deemed to be other-than-temporarily impaired aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2011 (in thousands):

	Less Than 12 Months				Greater Than 12 Months
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss
Corporate notes and bonds	$	79,304	$	128	$	-	$	-
Federal agency notes and bonds		18,892		8		-		-
Auction rate floating securities		-		-		19,884		6,691
Asset-backed securities		1,790		-		-		-
Total securities	$	99,986	$	136	$	19,884	$	6,691

As of June 30, 2011, the Company has concluded that the unrealized losses on its investment securities are temporary in nature and are caused by changes in credit spreads and liquidity issues in the marketplace.  Available-for-sale securities are reviewed quarterly for possible other-than-temporary impairment. This review includes an analysis of the facts and circumstances of each individual investment such as the severity of loss, the length of time the fair value has been below cost, the expectation for that security's performance and the creditworthiness of the issuer.  Additionally, the Company does not intendto sell and it is not more-likely-than-not that the Company will be required to sell any of the securities before the recovery of their amortized cost basis.

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COMPREHENSIVE INCOME

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

COMPREHENSIVE INCOME

15.       COMPREHENSIVE INCOME

Total comprehensive income includes net income and other comprehensive income (loss), which consists of foreign currency translation adjustments, unrealized gains and losses on available-for-sale investments and unamortized prior service costs related to the Company's supplemental executive retirement plan. Total comprehensive income for the three months endedJune 30, 2011 and 2010, was $7.4 million and $36.9 million, respectively. Total comprehensive income for the six months ended June 30, 2011 and 2010, was $27.0 million and $72.9 million, respectively. Included as a reduction of total comprehensive income for the three and six months ended June 30, 2011 is $21.4 million related to the establishment of prior service costs related to the Company's supplemental executive retirement plan, net of income tax benefit.

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FAIR VALUE (DETAILS) (USD $) In Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2011
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Corporate Debt Securities Fair Value Disclosure	$ 361,104	$ 361,104
US Treasury And Government Fair Value Disclosure	251,897	251,897
Auction Rate Securities Fair Value Disclosure	19,884	19,884
Asset Backed Securities Fair Value Disclosure	45,049	45,049
Total Assets Measured At Fair Value	677,934	677,934
Fair Value Inputs Level 1 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Corporate Debt Securities Fair Value Disclosure	361,104	361,104
US Treasury And Government Fair Value Disclosure	251,897	251,897
Auction Rate Securities Fair Value Disclosure	0	0
Asset Backed Securities Fair Value Disclosure	45,049	45,049
Total Assets Measured At Fair Value	658,050	658,050
Fair Value Inputs Level 2 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Corporate Debt Securities Fair Value Disclosure	0	0
US Treasury And Government Fair Value Disclosure	0	0
Auction Rate Securities Fair Value Disclosure	0	0
Asset Backed Securities Fair Value Disclosure	0	0
Total Assets Measured At Fair Value	0	0
Fair Value Inputs Level 3 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Corporate Debt Securities Fair Value Disclosure	0	0
US Treasury And Government Fair Value Disclosure	0	0
Auction Rate Securities Fair Value Disclosure	19,884	19,884
Asset Backed Securities Fair Value Disclosure	0	0
Total Assets Measured At Fair Value	19,884	19,884
Auction Rate Securities [Member]
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Fair Value, Measurement With Unobservable Inputs Reconciliation, Recurring Basis, Asset Value, Beginning Balance	20,772	21,480
Transfers To (From) Level 3	0	0
Total Gains (Losses) Included In Other (Income) Expense, Net	0	0
Total Gains Included In Other Comprehensive Income	12	404
Purchases	0	0
Settlements	(900)	(2,000)
Fair Value, Measurement With Unobservable Inputs Reconciliation, Recurring Basis, Asset Value, Ending Balance	$ 19,884	$ 19,884

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FAIR VALUE (TABLES)

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

Fair Value Assets Measured On Recurring Basis Text Block

			Fair Value Measurement at Reporting Date Using
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
			Markets		Inputs		Inputs
	June 30, 2011		(Level 1)		(Level 2)		(Level 3)
Corporate notes and bonds	$	361,104	$	361,104	$	-	$	-
Federal agency notes and bonds		251,897		251,897		-		-
Auction rate floating securities		19,884		-		-		19,884
Asset-backed securities		45,049		45,049		-		-
Total assets measured at fair value	$	677,934	$	658,050	$	-	$	19,884

Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation Text Block

	Fair Value Measurements
	Using Significant Unobservable
	Inputs (Level 3)
	Auction Rate
	Floating
	Securities
Balance at March 31, 2011	$	20,772
Transfers to (from) Level 3		-
Total gains (losses) included in other
(income) expense, net		-
Total gains included in other
comprehensive income		12
Purchases		-
Settlements		(900)
Balance at June 30, 2011	$	19,884
	Fair Value Measurements
	Using Significant Unobservable
	Inputs (Level 3)
	Auction Rate
	Floating
	Securities
Balance at December 31, 2010	$	21,480
Transfers to (from) Level 3		-
Total gains (losses) included in other
(income) expense, net		-
Total gains included in other
comprehensive income		404
Purchases		-
Settlements		(2,000)
Balance at June 30, 2011	$	19,884

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CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Parentheticals (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Income Statement Parentheticals [Line Items]
Amounts include share-based compensation expense	$ 9,320	$ 2,114	$ 16,009	$ 5,057
Cost of product revenues
Income Statement Parentheticals [Line Items]
Amounts exclude amortization of intangible assets related to acquired products	5,266	5,184	10,718	10,368
Selling, general and administrative
Income Statement Parentheticals [Line Items]
Amounts include share-based compensation expense	8,705	2,070	14,989	4,957
Research and Development
Income Statement Parentheticals [Line Items]
Amounts include share-based compensation expense	$ 615	$ 44	$ 1,020	$ 100

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NET INCOME PER COMMON SHARE

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

NET INCOME PER COMMON SHARE

16.       NET INCOME PER COMMON SHARE

The following table sets forth the computation of basic and diluted net income per common share (in thousands, except per share amounts):

	Three Months Ended
	June 30, 2011							June 30, 2010
	Continuing			Discontinued		Net		Continuing		Discontinued		Net
	Operations			Operations		Income		Operations		Operations		Income
BASIC
Net income (loss)	$	34,512	$	(5,729)	$	28,783	$	40,928	$	(4,428)	$	36,500
Less: income (loss) allocated to
participating securities		1,113		-		916		1,355		-		1,206
Net income (loss) available to
common stockholders		33,399		(5,729)		27,867		39,573		(4,428)		35,294
Weighted average number of common
shares outstanding		60,308		60,308		60,308		58,271		58,271		58,271
Basic net income (loss) per
common share	$	0.55	$	(0.09)	$	0.46	$	0.68	$	(0.08)	$	0.61
DILUTED
Net income (loss)	$	34,512	$	(5,729)	$	28,783	$	40,928	$	(4,428)	$	36,500
Less: income (loss) allocated to
participating securities		1,113		-		916		1,355		-		1,206
Net income (loss) available to
common stockholders		33,399		(5,729)		27,867		39,573		(4,428)		35,294
Less:
Undistributed earnings allocated to
unvested stockholders		(987)		-		(796)		(1,263)		-		(1,113)
Add:
Undistributed earnings re-allocated to
unvested stockholders		971		-		783		1,256		-		1,107
Add:
Tax-effected interest expense
related to Old Notes		711		-		711		666		-		666
Net income (loss) assuming dilution	$	34,094	$	(5,729)	$	28,565	$	40,232	$	(4,428)	$	35,954
Weighted average number of common
shares outstanding		60,308		60,308		60,308		58,271		58,271		58,271
Effect of dilutive securities:
Old Notes		5,823		-		5,823		5,823		-		5,823
New Notes		4		-		4		4		-		4
Stock options		1,005		-		1,005		297		-		297
Weighted average number of common
shares assuming dilution		67,140		60,308		67,140		64,395		58,271		64,395
Diluted net income (loss) per
common share	$	0.51	$	(0.09)	$	0.43	$	0.62	$	(0.08)	$	0.56

	Six Months Ended
	June 30, 2011							June 30, 2010
	Continuing			Discontinued		Net		Continuing		Discontinued		Net
	Operations			Operations		Income		Operations		Operations		Income
BASIC
Net income (loss)	$	61,197	$	(13,054)	$	48,143	$	80,946	$	(9,078)	$	71,868
Less: income (loss) allocated to
participating securities		1,905		-		1,469		2,673		-		2,368
Net income (loss) available to
common stockholders		59,292		(13,054)		46,674		78,273		(9,078)		69,500
Weighted average number of common
shares outstanding		59,719		59,719		59,719		58,161		58,161		58,161
Basic net income (loss) per
common share	$	0.99	$	(0.22)	$	0.78	$	1.35	$	(0.16)	$	1.19
DILUTED
Net income (loss)	$	61,197	$	(13,054)	$	48,143	$	80,946	$	(9,078)	$	71,868
Less: income (loss) allocated to
participating securities		1,905		-		1,469		2,673		-		2,368
Net income (loss) available to
common stockholders		59,292		(13,054)		46,674		78,273		(9,078)		69,500
Less:
Undistributed earnings allocated to
unvested stockholders		(1,668)		-		(1,245)		(2,474)		-		(2,170)
Add:
Undistributed earnings re-allocated to
unvested stockholders		1,647		-		1,229		2,461		-		2,159
Add:
Tax-effected interest expense
related to Old Notes		1,376		-		1,376		1,332		-		1,332
Tax-effected interest expense
related to New Notes		1		-		1		1		-		1
Net income (loss) assuming dilution	$	60,648	$	(13,054)	$	48,035	$	79,593	$	(9,078)	$	70,822
Weighted average number of common
shares outstanding		59,719		59,719		59,719		58,161		58,161		58,161
Effect of dilutive securities:
Old Notes		5,823		-		5,823		5,823		-		5,823
New Notes		4		-		4		4		-		4
Stock options		801		-		801		306		-		306
Weighted average number of common
shares assuming dilution		66,347		59,719		66,347		64,294		58,161		64,294
Diluted net income (loss) per
common share	$	0.91	$	(0.22)	$	0.72	$	1.24	$	(0.16)	$	1.10

Diluted net income per common share must be calculated using the “if-converted” method. Diluted net income per share using the “if-converted” method is calculated by adjusting net income for tax-effected net interest on the Old Notes and New Notes, divided by the weighted average number of common shares outstanding assuming conversion.

Unvested share-based payment awards that contain rights to receive nonforfeitable dividends or dividend equivalents (whether paid or unpaid) are participating securities, and thus, are included in the two-class method of computing earnings per share. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common stockholders. Restricted stock granted to certain employees by the Company (see Note 3) participate in dividends on the same basis as common shares, and these dividends are not forfeitable by the holders of the restricted stock. As a result, the restricted stock grants meet the definition of a participating security.

The diluted net income per common share computation for the three months endedJune 30, 2011and 2010 excludes 1,797,876 and 8,027,204 shares of stock, respectively, that represented outstanding stock options whose impact would be anti-dilutive.The diluted net income per common share computation for the six months ended June 30, 2011 and 2010 excludes 3,291,806 and 8,559,315 shares of stock, respectively, that represented outstanding stock options whose impact would be anti-dilutive.

Due to the net loss from discontinued operations during the three and six months ended June 30, 2011 and 2010, diluted earnings per share and basic earnings per share from discontinued operations are the same, as the effect of potentially dilutive securities would be anti-dilutive.

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OTHER CURRENT LIABILITIES (DETAILS) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Accrued Liabilities Current Abstract
Accrued Incentives Including SARs Liability	$ 33,346	$ 33,923
Deferred Revenue Current	13,799	16,422
Other Accrued Liabilities Current	26,619	24,883
Total Other Current Liabilities	73,764	75,228
Deferred Revenue Abstract
Deferred Revenue Aesthetics Products Net Of Cost Of Revenue	9,802	10,334
Deferred Contract Revenue	1,467	3,014
Deferred Revenue Sales Into Distribution Channel In Excess Of Eight Weeks Of Projected Demand	2,441	582
Other Deferred Revenue	89	2,492
Deferred Revenue Current	$ 13,799	$ 16,422

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

18.       RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (Topic 820) – Fair Value Measurement, to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU No. 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements. ASU No. 2011-04 is effective for interim and annual reporting periods beginning after December 15, 2011 and must be applied prospectively. The Company is currently assessing what impact, if any, the revised guidance will have on its results of operations and financial condition.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The updated guidance amends the FASB Accounting Standards Codification (“Codification”) to allow 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 alternatives, 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. ASU No. 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments to the Codification in the ASU 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 No. 2011-05 will be applied retrospectively. ASU No. 2011-05 is effective for annual reporting periods beginning after December 15, 2011, with early adoption permitted, and will be applied retrospectively. It is expected that the adoption of this amendment will only impact the presentation of comprehensive income within the Company's consolidated financial statements.

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NATURE OF BUSINESS

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

NATURE OF BUSINESS

1.NATURE OF BUSINESS

       Medicis Pharmaceutical Corporation (“Medicis” or the “Company”) is a leading specialty pharmaceutical company focusing primarily on the development and marketing of products in the United States (“U.S.”) for the treatment of dermatological and aesthetic conditions. Medicis also markets products in Canada for the treatment of dermatological and aesthetic conditions and began commercial efforts in Europe with the Company's acquisition of LipoSonix, Inc. (“LipoSonix”) in July 2008.

The Company offers a broad range of products addressing various conditions or aesthetic improvements including facial wrinkles, glabellar lines, acne, fungal infections, hyperpigmentation, photoaging, psoriasis, seborrheic dermatitis and cosmesis (improvement in the texture and appearance of skin). Medicis currently offers 13 branded products. Its primary brands are DYSPORT®, PERLANE®, RESTYLANE®, SOLODYN®, VANOS® and ZIANA®. Medicis entered the non-invasive body contouring market with its acquisition of LipoSonix in July 2008. Beginning in the first quarter of 2011, the Company classifies the LipoSonix business as a discontinued operation for financial statement reporting purposes. See Note 2.

The consolidated financial statements include the accounts of Medicis and its wholly owned subsidiaries. The Company does not have any subsidiaries in which it does not own 100% of the outstanding stock. All of the Company's subsidiaries are included in the consolidated financial statements. All significantintercompany accounts and transactions have been eliminated in consolidation.

The accompanying interim condensed consolidated financial statements of Medicis have been prepared in conformity with U.S. generally accepted accounting principles, consistent in all material respects with those applied in the Company's Annual Report on Form 10-K for the year ended December 31, 2010. The financial information is unaudited, but reflects all adjustments, consisting only of normal recurring adjustments and accruals, which are, in the opinion of the Company's management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

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INVENTORIES

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

INVENTORIES

10.       INVENTORIES

The Company primarily utilizes third parties to manufacture and package inventories held for sale, takes title to certain inventories once manufactured, and warehouses such goods until packaged for final distribution and sale. Inventories consist of salable products held at the Company's warehouses, as well as raw materials and components at the manufacturers' facilities, and are valued at the lower of cost or market using the first-in, first-out method. The Company provides valuation reserves for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.

Inventory costs associated with products that have not yet received regulatory approval are capitalized if, in the view of the Company's management, there is probable future commercial use and future economic benefit. If future commercial use and future economic benefit are not considered probable, then costs associated with pre-launch inventory that has not yet received regulatory approval are expensed as research and development expense during the period the costs are incurred. As of June 30, 2011 and December 31, 2010, there wereno costs capitalized into inventory for products that had not yet received regulatory approval.

Inventories are as follows (in thousands):

	June 30, 2011		December 31, 2010
Raw materials	$	12,103	$	15,801
Work-in-process		3,370		3,236
Finished goods		19,930		24,838
Valuation reserve		(4,574)		(8,593)
Total inventories	$	30,829	$	35,282

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EARNINGS PER SHARE (TABLES)

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

Schedule Of Earnings Per Share Basic And Diluted Table Text Block

	Three Months Ended
	June 30, 2011							June 30, 2010
	Continuing			Discontinued		Net		Continuing		Discontinued		Net
	Operations			Operations		Income		Operations		Operations		Income
BASIC
Net income (loss)	$	34,512	$	(5,729)	$	28,783	$	40,928	$	(4,428)	$	36,500
Less: income (loss) allocated to
participating securities		1,113		-		916		1,355		-		1,206
Net income (loss) available to
common stockholders		33,399		(5,729)		27,867		39,573		(4,428)		35,294
Weighted average number of common
shares outstanding		60,308		60,308		60,308		58,271		58,271		58,271
Basic net income (loss) per
common share	$	0.55	$	(0.09)	$	0.46	$	0.68	$	(0.08)	$	0.61
DILUTED
Net income (loss)	$	34,512	$	(5,729)	$	28,783	$	40,928	$	(4,428)	$	36,500
Less: income (loss) allocated to
participating securities		1,113		-		916		1,355		-		1,206
Net income (loss) available to
common stockholders		33,399		(5,729)		27,867		39,573		(4,428)		35,294
Less:
Undistributed earnings allocated to
unvested stockholders		(987)		-		(796)		(1,263)		-		(1,113)
Add:
Undistributed earnings re-allocated to
unvested stockholders		971		-		783		1,256		-		1,107
Add:
Tax-effected interest expense
related to Old Notes		711		-		711		666		-		666
Net income (loss) assuming dilution	$	34,094	$	(5,729)	$	28,565	$	40,232	$	(4,428)	$	35,954
Weighted average number of common
shares outstanding		60,308		60,308		60,308		58,271		58,271		58,271
Effect of dilutive securities:
Old Notes		5,823		-		5,823		5,823		-		5,823
New Notes		4		-		4		4		-		4
Stock options		1,005		-		1,005		297		-		297
Weighted average number of common
shares assuming dilution		67,140		60,308		67,140		64,395		58,271		64,395
Diluted net income (loss) per
common share	$	0.51	$	(0.09)	$	0.43	$	0.62	$	(0.08)	$	0.56

	Six Months Ended
	June 30, 2011							June 30, 2010
	Continuing			Discontinued		Net		Continuing		Discontinued		Net
	Operations			Operations		Income		Operations		Operations		Income
BASIC
Net income (loss)	$	61,197	$	(13,054)	$	48,143	$	80,946	$	(9,078)	$	71,868
Less: income (loss) allocated to
participating securities		1,905		-		1,469		2,673		-		2,368
Net income (loss) available to
common stockholders		59,292		(13,054)		46,674		78,273		(9,078)		69,500
Weighted average number of common
shares outstanding		59,719		59,719		59,719		58,161		58,161		58,161
Basic net income (loss) per
common share	$	0.99	$	(0.22)	$	0.78	$	1.35	$	(0.16)	$	1.19
DILUTED
Net income (loss)	$	61,197	$	(13,054)	$	48,143	$	80,946	$	(9,078)	$	71,868
Less: income (loss) allocated to
participating securities		1,905		-		1,469		2,673		-		2,368
Net income (loss) available to
common stockholders		59,292		(13,054)		46,674		78,273		(9,078)		69,500
Less:
Undistributed earnings allocated to
unvested stockholders		(1,668)		-		(1,245)		(2,474)		-		(2,170)
Add:
Undistributed earnings re-allocated to
unvested stockholders		1,647		-		1,229		2,461		-		2,159
Add:
Tax-effected interest expense
related to Old Notes		1,376		-		1,376		1,332		-		1,332
Tax-effected interest expense
related to New Notes		1		-		1		1		-		1
Net income (loss) assuming dilution	$	60,648	$	(13,054)	$	48,035	$	79,593	$	(9,078)	$	70,822
Weighted average number of common
shares outstanding		59,719		59,719		59,719		58,161		58,161		58,161
Effect of dilutive securities:
Old Notes		5,823		-		5,823		5,823		-		5,823
New Notes		4		-		4		4		-		4
Stock options		801		-		801		306		-		306
Weighted average number of common
shares assuming dilution		66,347		59,719		66,347		64,294		58,161		64,294
Diluted net income (loss) per
common share	$	0.91	$	(0.22)	$	0.72	$	1.24	$	(0.16)	$	1.10

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DIVIDENDS DECLARED ON COMMON STOCK

6 Months Ended

Jun. 30, 2011

Notes To Consolidated Financial Statement Abstract

DIVIDENDS DECLARED ON COMMON STOCK

14.       DIVIDENDS DECLARED ON COMMON STOCK

On June8, 2011, the Company announced that its Board of Directors had declared a cash dividend of $0.08 per issued and outstanding share of the Company's Class A common stock,which was paid onJuly29, 2011, to stockholders of record at the close of business on July 1, 2011. The $5.1 million dividend was recorded as a reduction of accumulated earnings and is included in other current liabilities in the accompanying condensed consolidated balance sheets as of June 30, 2011. The Company has not adopted a dividend policy.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 150,201	$ 218,362
Short Term Investments	655,555	485,192
Accounts receivable, net	166,399	130,622
Inventories, net	30,829	35,282
Deferred tax assets, net	24,602	70,461
Other current assets	19,264	15,268
Assets held for sale from discontinued operations	10,248	13,127
Total current assets	1,057,098	968,314
Property and equipment, net	23,683	24,435
Net intangible assets	197,283	195,308
Goodwill	92,398	92,398
Deferred tax assets, net	95,516	36,898
Long-term investments	22,379	21,480
Other assets	2,991	2,991
Total Assets	1,491,348	1,341,824
Current liabilities
Accounts payable	45,393	41,015
Current portion contingent convertible senior notes	169,145	0
Reserve for sales returns	78,220	60,692
Accrued Consumer Rebates And Loyalty Programs	124,922	101,678
Managed Care And Medicaid Reserves	51,239	49,375
Income taxes payable	0	4,628
Other current liabilities	73,764	75,228
Liabilities held for sale from discontinued operations	7,172	7,276
Total current liabilities	549,855	339,892
Long-term liabilities
Contingent convertible senior notes	181	169,326
Other liabilities	38,982	5,084
Stockholders' Equity
Preferred stock	0	0
Additional paid-in capital	778,120	715,651
Accumulated other comprehensive (loss) income	(23,298)	(2,149)
Accumulated earnings	498,907	460,716
Less: Treasury stock	352,422	347,691
Total stockholders' equity	902,330	827,522
Total liabilities and stockholders' equity	1,491,348	1,341,824
Class A
Stockholders' Equity
Common stock	1,023	995
Class B
Stockholders' Equity
Common stock	$ 0	$ 0

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SHARE BASED COMPENSATION (DETAILS) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Compensation Cost Recognition Period				2.6
Share Based Compensation Expense		$ 9,320,000	$ 2,114,000	$ 16,009,000	$ 5,057,000
Share Based Compensation Employee Stock Purchase Plan Activity Abstract
Stock Options Outstanding Weighted Average Exercise Price Beginning of Period				$ 30.01
Stock Options Granted Weighted Average Exercise Price	$ 34.30	$ 34.30		$ 34.30
Stock Options Exercised Weighted Average Exercise Price	$ 27.64	$ 27.64		$ 27.64
Stock Options Cancelled Weighted Average Exercise Price	$ 36.82	$ 36.82		$ 36.82
Stock Options Outstanding Weighted Average Exercise Price End of Period	$ 31.01	$ 31.01		$ 31.01
Stock Options Outstanding Number Beginning Balance				6,491,353
Stock Options Granted Shares				79,933
Stock Options Exercised Shares				(1,984,481)
Stock Options Cancelled Shares				(80,705)
Stock Options Outstanding Number Ending Balance	4,506,100	4,506,100		4,506,100
Stock Options Outstanding Remaining Contractual Term	2.7	2.7		2.7
Stock Options Outstanding Aggregate Intrinsic Value	32,807,450	32,807,450		32,807,450
Employee Stock Option [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Plan Description				Stock option awards are granted at the fair market value on the date of grant. The option awards vest over a period determined at the time the options are granted, ranging from one to five years, and generally have a maximum term of ten years. Certain options provide for accelerated vesting if there is a change in control (as defined in the plans). When options are exercised, new shares of the Company’s Class A common stock are issued.
Compensation Cost Not Yet Recognized	1,500,000	1,500,000		1,500,000
Share Based Compensation Expense		234,000	385,000	484,000	838,000
Share Based Compensation Employee Stock Purchase Plan Activity Abstract
Total Intrinsic Value Of Options Excercised				16,015,062
Options Excercisable Shares	4,352,288	4,352,288		4,352,288
Options Excercisable Weighted Average Exercise Price	$ 31.18	$ 31.18		$ 31.18
Options Exercisable Weighted Average Remaining Contractual Term				2.6
Options Excercisable Aggregate Intrinsic Value	30,957,994	30,957,994		30,957,994
Options Outstanding Vested And Expected To Vest Shares	4,238,744	4,238,744		4,238,744
Options Outstanding Vested And Expected To Vest Weighted Average Exercise Price	$ 31.19	$ 31.19		$ 31.19
Options Outstanding Vested And expected To Vest Aggregate Intrinsic Value	30,085,482	30,085,482		30,085,482
Options Outstanding Vested And Expected To Vest Weighted Average Remaining Contractual Term				2.7
Options Exercisable Vested And Expected To Vest Shares	4,124,910	4,124,910		4,124,910
Options Exercisable Vested And Expected To Vest Weighted Average Exercise Price	$ 31.27	$ 31.27		$ 31.27
Options Exercisable Vested And Expected To Vest Weighted Average Remaining Contractual Term				2.6
Options Exercisable Vested And Expected To Vest Aggregate Intrinsic Value	28,950,668	28,950,668		28,950,668
Share Based Payment Award Fair Value Assumptions And Methodology Abstract
Fair Value Assumptions Expected Volatility Rate				0.33%	0.33%
Fair Value Assumptions Expected Life				7.0	7.0
Fair Value Assumptions Risk Free Interest Rate Minimum				2.47%	2.82%
Fair Value Assumptions Risk Free Interest Rate Maximum				2.81%	3.04%
Fair Value Assumptions Risk Expected Dividend Yield Minimum				0.77%	1.02%
Fair Value Assumptions Risk Expected Dividend Yield Maximum				0.88%	1.06%
Grant Date Fair Value Of Options				$ 12.25	$ 8.28
Restricted Stock Units RSU [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Compensation Cost Not Yet Recognized	40,700,000	40,700,000		40,700,000
Compensation Cost Recognition Period				3.4
Compensation Cost Not Yet Recognized Discontinued Operations				2,600,000
Share Based Compensation Expense		3,197,000	1,291,000	5,799,000	3,176,000
Share Based Compensation Equity Instruments Other Than Options Plan Activity Abstract
Restricted Stock Nonvested Number Beginning Balance				1,794,445
Restricted Stock Granted Shares				757,310
Units Vested				(445,912)
Forfeited Units				(25,373)
Restricted Stock Nonvested Number Ending Balance	2,080,470	2,080,470		2,080,470
Restricted Stock Nonvested Weighted Average Grant Date Fair Value Beginning of Period				$ 17.94
Restricted Stock Granted Weighted Average Grant Date Fair Value				$ 31.47
Awards Vested Weighted Average Grant Date Fair Value				$ 19.11
Units Cancelled Weighted Average Grant Date Fair Value	$ 23.96	$ 23.96		$ 23.96
Restricted Stock Nonvested Weighted Average Grant Date Fair Value End of Period	$ 22.54	$ 22.54		$ 22.54
Fair Value Of Awards Vested				8,500,000	6,600,000
Stock Appreciation Rights SARS [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Compensation Cost Not Yet Recognized	42,100,000	42,100,000		42,100,000
Compensation Cost Recognition Period				3.2
Compensation Cost Not Yet Recognized Discontinued Operations				5,300,000
Share Based Compensation Expense		5,889,000	438,000	9,726,000	1,043,000
Share Based Payment Award Fair Value Assumptions And Methodology Abstract
Fair Value Assumptions Expected Volatility Rate	0.31%			0.32%
Fair Value Assumptions Expected Volatility Rate Minimum	1.76%				0.32%
Fair Value Assumptions Expected Volatility Rate Maximum	2.50%				0.33%
Fair Value Assumptions Expected Life				7.0	7.0
Fair Value Assumptions Expected Life Minimum	4.7
Fair Value Assumptions Expected Life Maximum	6.6
Fair Value Assumptions Risk Free Interest Rate				3.12%
Fair Value Assumptions Risk Free Interest Rate Minimum					3.04%
Fair Value Assumptions Risk Free Interest Rate Maximum					3.07%
Fair Value Assumptions Risk Expected Dividend Yield	0.84%			0.87%
Fair Value Assumptions Risk Expected Dividend Yield Minimum					0.95%
Fair Value Assumptions Risk Expected Dividend Yield Maximum					1.06%
Share Based Compensation Equity Instruments Other Than Options Plan Activity Abstract
Grant Date Fair Value of Stock Appreciation Rights				$ 9.90	$ 8.14
Remeasurement Date Fair Value Of Stock Appreciation Rights				$ 22.40
Share Based Compensation Stock Appreciation Rights Plan Activity Abstract
Stock Appreciation Rights Outstanding Weighted Average Exercise Price Beginning of Period						$ 16.99
Stock Appreciation Rights Granted Weighted Average Exercise Price	$ 27.56	$ 27.56		$ 27.56
Stock Appreciation Rights Exercised Weighted Average Exercise Price	$ 15.48	$ 15.48		$ 15.48
Stock Appreciation Rights Cancelled Weighted Average Exercise Price	$ 15.99	$ 15.99		$ 15.99
Stock Appreciation Rights Outstanding Weighted Average Exercise Price End of Period	$ 17.46	$ 17.46		$ 17.46
Stock Appreciation Rights Outstanding Number Beginning Balance						3,030,142
Stock Appreciation Rights Granted Number	64,135	64,135		64,135
Stock Appreciation Rights Exercised Number	(272,120)	(272,120)		(272,120)
Stock Appreciation Rights Cancelled Number	(166,185)	(166,185)		(166,185)
Stock Appreciation Rights Outstanding Number Ending Balance	2,655,972	2,655,972		2,655,972
Stock Appreciation Rights Outstanding Weighted Average Remaining Contractual Term				5.2
Stock Appreciation Rights Outstanding Aggregate Intrinsic Value	54,994,411	54,994,411		54,994,411
Total Intrinsic Value Of Stock Appreciation Rights Excercised				4,937,860
Stock Appreciation Rights Exercisable Number	88,455	88,455		88,455
Stock Appreciation Rights Exercisable Weighted Average Exercise Price	$ 14.69	$ 14.69		$ 14.69
Stock Appreciation Rights Exercisable Weighted Average Remaining Contractual Term				4.7
Stock Appreciation Rights Exercisable Aggregate Intrinsic Value	$ 1,911,063	$ 1,911,063		$ 1,911,063

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EARNINGS PER SHARE (DETAILS) (USD $) In Thousands, except Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Earnings Per Share Basic Two Class Method Abstract
Net income (loss)	$ 28,783	$ 36,500	$ 48,143	$ 71,868
Undistributed Earnings Allocated To Participating Securities	916	1,206	1,469	2,368
Net Income Loss Available To Common Stockholders Basic	27,867	35,294	46,674	69,500
Weighted average number of shares outstanding basic	60,308,000	58,271,000	59,719,000	58,161,000
Earnings Per Share Basic Undistributed	$ 0.46	$ 0.61	$ 0.78	$ 1.19
Earnings Per Share Diluted Two Class Method Abstract
Undistributed Earnings Allocated To Unvested Stockholders	(796)	(1,113)	(1,245)	(2,170)
Undistributed Earnings Reallocated To Unvested Stockholders	783	1,107	1,229	2,159
Interest On Old Notes Net Of Tax	711	666	1,376	1,332
Interest On New Notes Net Of Tax			1	1
Net Income Loss Available To Common Stockholders Diluted	28,565	35,954	48,035	70,822
Weighted Average Number Diluted Shares Outstanding Adjustment Abstract
Incremental Common Shares Attributable To Conversion Of Debt Securities Old Notes	5,823,000	5,823,000	5,823,000	5,823,000
Incremental Common Shares Attributable To Conversion Of Debt Securities New Notes	4,000	4,000	4,000	4,000
Incremental Common Shares Attributable To Share Based Payment Arrangements	1,005,000	297,000	801,000	306,000
Weighted Average Number Of Diluted Shares Outstanding	67,140,000	64,395,000	66,347,000	64,294,000
Earnings per share diluted	$ 0.43	$ 0.56	$ 0.72	$ 1.10
Segment Continuing Operations [Member]
Earnings Per Share Basic Two Class Method Abstract
Income Loss From Continuing Operations	34,512	40,928	61,197	80,946
Undistributed Earnings Allocated To Participating Securities	1,113	1,355	1,905	2,673
Net Income Loss Available To Common Stockholders Basic	33,399	39,573	59,292	78,273
Weighted average number of shares outstanding basic	60,308,000	58,271,000	59,719,000	58,161,000
Earnings Per Share Basic Undistributed	$ 0.55	$ 0.68	$ 0.99	$ 1.35
Earnings Per Share Diluted Two Class Method Abstract
Undistributed Earnings Allocated To Unvested Stockholders	(987)	(1,263)	(1,668)	(2,474)
Undistributed Earnings Reallocated To Unvested Stockholders	971	1,256	1,647	2,461
Interest On Old Notes Net Of Tax	711	666	1,376	1,332
Interest On New Notes Net Of Tax			1	1
Net Income Loss Available To Common Stockholders Diluted	34,094	40,232	60,648	79,593
Weighted Average Number Diluted Shares Outstanding Adjustment Abstract
Incremental Common Shares Attributable To Conversion Of Debt Securities Old Notes	5,823,000	5,823,000	5,823,000	5,823,000
Incremental Common Shares Attributable To Conversion Of Debt Securities New Notes	4,000	4,000	4,000	4,000
Incremental Common Shares Attributable To Share Based Payment Arrangements	1,005,000	297,000	801,000	306,000
Weighted Average Number Of Diluted Shares Outstanding	67,140,000	64,395,000	66,347,000	64,294,000
Earnings per share diluted	$ 0.51	$ 0.62	$ 0.91	$ 1.24
Segment Discontinued Operations [Member]
Earnings Per Share Basic Two Class Method Abstract
Income Loss From Discontinued Operations	(5,729)	(4,428)	(13,054)	(9,078)
Undistributed Earnings Allocated To Participating Securities	0	0	0	0
Net Income Loss Available To Common Stockholders Basic	(5,729)	(4,428)	(13,054)	(9,078)
Weighted average number of shares outstanding basic	60,308,000	58,271,000	59,719,000	58,161,000
Earnings Per Share Basic Undistributed	$ (0.09)	$ (0.08)	$ (0.22)	$ (0.16)
Earnings Per Share Diluted Two Class Method Abstract
Undistributed Earnings Allocated To Unvested Stockholders	0	0	0	0
Undistributed Earnings Reallocated To Unvested Stockholders	0	0	0	0
Interest On Old Notes Net Of Tax	0	0	0	0
Interest On New Notes Net Of Tax			0	0
Net Income Loss Available To Common Stockholders Diluted	$ (5,729)	$ (4,428)	$ (13,054)	$ (9,078)
Weighted Average Number Diluted Shares Outstanding Adjustment Abstract
Incremental Common Shares Attributable To Conversion Of Debt Securities Old Notes	0	0	0	0
Incremental Common Shares Attributable To Conversion Of Debt Securities New Notes	0	0	0	0
Incremental Common Shares Attributable To Share Based Payment Arrangements	0	0	0	0
Weighted Average Number Of Diluted Shares Outstanding	60,308,000	58,271,000	59,719,000	58,161,000
Earnings per share diluted	$ (0.09)	$ (0.08)	$ (0.22)	$ (0.16)
Stock Options [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount	1,797,876	8,027,204	3,291,806	8,559,315

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CONVERTIBLE NOTES (DETAILS) (USD $)	6 Months Ended
	Jun. 30, 2011
Convertible Senior Notes Due 2032 Member
Debt Instrument [Line Items]
Debt Instrument Principal Amount	$ 169,100,000
Stated Interest Rate	2.50%
Stated Contingent Interest Rate	0.50%
Contingent Interest Payable	100,000
Contingent Interest Rate Terms	The Company also agreed to pay contingent interest at a rate equal to 0.5% per annum during any six-month period, with the initial six-month period commencing June 4, 2007, if the average trading price of the Old Notes reaches certain thresholds.
Debt Instrument Convertible Terms Of Conversion Feature	The Old Notes are convertible, at the holders’ option, prior to the maturity date into shares of the Company’s Class A common stock in the following circumstances: during any quarter commencing after June 30, 2002, if the closing price of the Company’s Class A common stock over a specified number of trading days during the previous quarter, including the last trading day of such quarter, is more than 110% of the conversion price of the Old Notes, or $31.96. The Old Notes are initially convertible at a conversion price of $29.05 per share, which is equal to a conversion rate of approximately 34.4234 shares per $1,000 principal amount of Old Notes, subject to adjustment; if the Company has called the Old Notes for redemption; during the five trading day period immediately following any nine consecutive day trading period in which the trading price of the Old Notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of the Company’s Class A common stock on that day multiplied by the number of shares of the Company’s Class A common stock issuable upon conversion of $1,000 principal amount of the Old Notes; or upon the occurrence of specified corporate transactions.
Debt Instrument Fee Amount	12,600,000
Deferred Tax Liability Convertible Debt	57,900,000
Convertible Senior Notes Due 2033 Member
Debt Instrument [Line Items]
Debt Instrument Principal Amount	181,000
Stated Interest Rate	1.50%
Stated Contingent Interest Rate	0.50%
Contingent Interest Rate Terms	The Company will also pay contingent interest at a rate of 0.5% per annum during any six-month period, with the initial six-month period commencing June 4, 2008, if the average trading price of the New Notes reaches certain thresholds.
Debt Instrument Convertible Terms Of Conversion Feature	The remaining New Notes are convertible, at the holders’ option, prior to the maturity date into shares of the Company’s Class A common stock in the following circumstances: during any quarter commencing after September 30, 2003, if the closing price of the Company’s Class A common stock over a specified number of trading days during the previous quarter, including the last trading day of such quarter, is more than 120% of the conversion price of the New Notes, or $46.51. The Notes are initially convertible at a conversion price of $38.76 per share, which is equal to a conversion rate of approximately 25.7998 shares per $1,000 principal amount of New Notes, subject to adjustment; if the Company has called the New Notes for redemption; during the five trading day period immediately following any nine consecutive day trading period in which the trading price of the New Notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of the Company’s Class A common stock on that day multiplied by the number of shares of the Company’s Class A common stock issuable upon conversion of $1,000 principal amount of the New Notes; or upon the occurrence of specified corporate transactions.
Debt Instrument Fee Amount	$ 5,100,000

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INCOME TAXES (DETAILS) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Mar. 31, 2011	Dec. 31, 2010
Tax Credit Carryforward [Line Items]
Income Taxes Paid Net	$ 32,000,000	$ 30,900,000	$ 38,000,000	$ 47,700,000
Income Tax Uncertainties Abstract
Income Tax Examination Liability Refund Adjustment From Settlement With Taxing Authority					500,000
Unrecognized Tax Benefits Beginning Balance			1,400,000
Unrecognized Tax Benefits Ending Balance	1,000,000		1,000,000
Unrecognized Tax Benefits That Would Impact Effective Tax Rate	600,000		600,000			900,000
Significant Change In Unrecognized Tax Benefits Is Reasonably Possible Amount Of Unrecorded Benefit	700,000		700,000
Unrecognized Tax Benefits Income Tax Penalties And Interest Accrued	500,000		500,000			500,000
Option To Acquire Revance Or License Product Under Development [Member]
Tax Credit Carryforward [Line Items]
Tax Credit Carryforward Amount	21,000,000		21,000,000
Tax Credit Carryforward Valuation Allowance	7,600,000		7,600,000
Tax Credit Carryforward Deferred Tax Asset	0		0
Option To Acquire Privately Held US Biotechnology Company [Member]
Tax Credit Carryforward [Line Items]
Tax Credit Carryforward Amount	21,900,000		21,900,000
Tax Credit Carryforward Valuation Allowance	7,900,000		7,900,000
Tax Credit Carryforward Deferred Tax Asset	$ 0		$ 0

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SERP (DETAILS) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2011	Jun. 30, 2010
Defined Benefit Pension Plans And Defined Benefit Postretirement Plans Disclosure Abstract
Defined Benefit Plans General Information		On June 24, 2011, the Company’s Compensation Committee adopted the Medicis Pharmaceutical Supplemental Executive Retirement Plan (the “SERP”), a non-qualified, noncontributory, defined benefit pension plan that provides supplemental retirement income for a select group of officers, including the Company’s named executive officers. The SERP is effective as of June 1, 2011. Retirement benefits are based on a SERP participant’s years of service and average earnings (base salary plus cash bonus or incentive payments) during any three calendar years of service (regardless of whether the years are consecutive), beginning with the 2009 calendar year. A SERP participant vests in 1/6th of his or her retirement benefit per plan year, effective as of the first day of the plan year, and becomes fully vested in his or her accrued retirement benefit upon (1) the participant’s normal retirement date, provided that the participant has at least fifteen years of service with the Company and is employed by the Company on such date, (2) the participant’s separation from service due to a discharge without “cause” or resignation for “good reason” (as such terms are defined in the participant’s employment agreement, or in the absence of such employment agreement or definitions, in the Company’s Executive Retention Plan), or (3) a “change in control” of the Company. A SERP participant accrues his or her retirement benefit based on (x) the participant’s number of years of service with the Company (including prior years of service), divided by (y) the number of years designated for such participant’s tier (which ranges from five to twenty years).
Other Comprehensive Income Defined Benefit Plan Net Prior Service Cost Credit Arising During Period Before Tax		$ 33,800,000
Defined Benefit Plan Amortization Of Prior Service Cost Credit	400,000	400,000	0
Deferred Tax Assets Tax Deferred Expense Compensation And Benefits Postretirement Benefits	$ 12,000,000	$ 12,000,000