10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2012

OR

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

For the transition period from                  to                 

Commission file number: 001-14471

MEDICIS PHARMACEUTICAL CORPORATION

(Exact name of Registrant as specified in its charter)

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

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 [X]   No [  ]

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

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

Large accelerated filer [X]	Accelerated filer [  ]
Non-accelerated filer [  ] (do not check if a smaller reporting  company)	Smaller reporting company [  ]

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

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 May 3, 2012
Class A Common Stock $.014 Par Value	59,493,016 (a)
	(a) includes 2,023,742 shares of unvested restricted stock awards

MEDICIS PHARMACEUTICAL CORPORATION

Table of Contents

			Page
PART I.	FINANCIAL INFORMATION
	Item 1	Financial Statements
		Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011		1
		Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2012 and 2011		3
		Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2012 and 2011		4
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011		5
		Notes to the Condensed Consolidated Financial Statements		6
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
	Item 3	Quantitative and Qualitative Disclosures About Market Risk		48
	Item 4	Controls and Procedures		48
PART II.	OTHER INFORMATION
	Item 1	Legal Proceedings		50
	Item 1A	Risk Factors		53
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		53
	Item 6	Exhibits		54
SIGNATURES				55

Part I.  Financial Information

Item 1.  Financial Statements

MEDICIS PHARMACEUTICAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	March 31, 2012			December 31, 2011
Assets		(unaudited	)
Current assets:
Cash and cash equivalents	$	96,298		$	42,823
Short-term investments		245,984			245,497
Accounts receivable, net		199,506			193,009
Inventories, net		36,699			34,519
Deferred tax assets, net		13,781			12,720
Other current assets		24,803			22,586
Total current assets		617,071			551,154
Property and equipment, net		28,282			25,081
Intangible assets, net		486,848			502,492
Goodwill		202,703			202,627
Deferred tax assets, net		127,421			114,555
Long-term investments		20,243			40,270
Other assets		16,163			15,780
	$	1,498,731		$	1,451,959

See accompanying notes to condensed consolidated financial statements.

1

MEDICIS PHARMACEUTICAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS, Continued

(in thousands, except share amounts)

	March 31, 2012		December 31, 2011
Liabilities		(unaudited)
Current liabilities:
Accounts payable	$	94,438	$	54,094
Current portion of contingent convertible senior notes		169,145		169,145
Reserve for sales returns		63,562		60,024
Accrued consumer rebates and loyalty programs		116,171		139,948
Managed care and Medicaid reserves		97,035		72,801
Income taxes payable		4,626		-
Other current liabilities		71,705		78,785
Total current liabilities		616,682		574,797
Long-term liabilities:
Contingent convertible senior notes		181		181
Other liabilities		48,202		44,998
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: 75,371,125 and 74,740,324 at March 31, 2012 and December 31, 2011, respectively		1,030		1,028
Class B common stock, $0.014 par value; shares authorized: 1,000,000; issued and outstanding: none		-		-
Additional paid-in capital		804,906		796,979
Accumulated other comprehensive loss		(20,481)		(21,315)
Accumulated earnings		567,009		567,581
Less: Treasury stock, 17,933,925 and 17,745,039 shares at cost at March 31, 2012 and December 31, 2011, respectively		(518,798)		(512,290)
Total stockholders’ equity		833,666		831,983
	$	1,498,731	$	1,451,959

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
	March 31, 2012		March 31, 2011
Net product revenues	$	200,046	$	163,896
Net contract revenues		1,697		1,017
Net revenues		201,743		164,913
Cost of product revenues (1)		20,933		14,331
Gross profit		180,810		150,582
Operating expenses:
Selling, general and administrative (2)		103,437		84,630
Research and development (3)		51,830		14,273
Depreciation and amortization		18,081		7,324
Operating income		7,462		44,355
Interest and investment income		(612)		(1,274)
Interest expense		1,058		1,058
Other income, net		(3,000)		-
Income from continuing operations before income tax expense		10,016		44,571
Income tax expense		4,667		17,886
Net income from continuing operations		5,349		26,685
Loss from discontinued operations, net of income tax benefit		-		7,325
Net income	$	5,349	$	19,360
Basic net income per share - continuing operations	$	0.09	$	0.44
Basic net loss per share - discontinued operations	$	-	$	(0.12)
Basic net income per share	$	0.09	$	0.32
Diluted net income per share - continuing operations	$	0.09	$	0.41
Diluted net loss per share - discontinued operations	$	-	$	(0.12)
Diluted net income per share	$	0.09	$	0.30
Cash dividend declared per common share	$	0.10	$	0.08
Common shares used in calculating:
Basic net income per share		57,109		59,124
Diluted net income per share		58,519		65,381
(1) amounts exclude amortization of intangible assets related to acquired products	$	15,676	$	5,452
(2) amounts include share-based compensation expense	$	8,400	$	6,284
(3) amounts include share-based compensation expense	$	697	$	405

See accompanying notes to condensed consolidated financial statements.

3

MEDICIS PHARMACEUTICAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(in thousands)

	Three Months Ended
	March 31, 2012		March 31, 2011
Net income	$	5,349	$	19,360
Other comprehensive income, net of income taxes:
Amortization of prior service costs related to supplemental executive retirement plan		775		-
Establishment of prior service costs for new participants under supplemental executive retirement plan		(531)		-
Net unrealized gain on available-for-sale securities		403		52
Foreign currency translation adjustment		186		148
Total other comprehensive income, net of income taxes		833		200
Comprehensive income	$	6,182	$	19,560

See accompanying notes to condensed consolidated financial statements.

4

MEDICIS PHARMACEUTICAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Three Months Ended
	March 31, 2012		March 31, 2011
Operating Activities:
Net income	$	5,349	$	19,360
Loss from discontinued operations, net of income tax benefit		-		7,325
Net income from continuing operations		5,349		26,685
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities from continuing operations:
Depreciation and amortization		18,081		7,324
Amortization of prior service costs, supplemental executive retirement plan		1,210		-
Gain on sale of product rights		(3,000)		-
(Gain) loss on sale of available-for-sale investments and supplemental executive retirement plan investments, net		(70)		7
Share-based compensation expense		9,097		6,689
Deferred income tax (benefit) expense		(14,290)		(5,124)
Tax benefit from exercise of stock options and vesting of restricted stock awards		1,329		658
Excess tax benefits from share-based payment arrangements		(3,967)		(618)
Increase in provision for sales discounts and chargebacks		355		(509)
Accretion of premium on investments		371		1,121
Changes in operating assets and liabilities:
Accounts receivable		(6,852)		31,547
Inventories		(2,180)		878
Other current assets		(2,208)		(2,882)
Accounts payable		37,243		4,330
Reserve for sales returns		3,538		13,110
Accrued consumer rebates and loyalty programs		(23,776)		20,026
Managed care and Medicaid reserves		24,234		(219)
Income taxes payable		4,626		10,460
Other current liabilities		(15,101)		(12,847)
Other liabilities		874		(124)
Net cash provided by operating activities from continuing operations		34,863		100,512
Net cash used in operating activities from discontinued operations		-		(5,458)
Net cash provided by operating activities		34,863		95,054
Investing Activities:
Purchase of property and equipment		(2,442)		(1,449)
Payments for purchase of product rights		(171)		(12,702)
Proceeds from sale of product rights		6,000		-
Purchase of investments for supplemental executive retirement plan		(388)		-
Purchase of available-for-sale investments		(66,627)		(109,176)
Sale of available-for-sale investments		53,904		11,794
Maturity of available-for-sale investments		32,589		102,090
Net cash provided by (used in) investing activities from continuing operations		22,865		(9,443)
Net cash provided by (used in) investing activities		22,865		(9,443)
Financing Activities:
Payment of dividends		(4,683)		(3,622)
Withholding of common shares for tax obligations on vested restricted stock awards		(6,508)		(3,822)
Excess tax benefits from share-based payment arrangements		3,967		618
Proceeds from the exercise of stock options		2,785		9,515
Net cash (used in) provided by financing activities		(4,439)		2,689
Effect of exchange rate on cash and cash equivalents		186		147
Net increase in cash and cash equivalents		53,475		88,447
Cash and cash equivalents at beginning of period		42,823		218,362
Cash and cash equivalents at end of period	$	96,298	$	306,809

See accompanying notes to condensed consolidated financial statements.

5

MEDICIS PHARMACEUTICAL CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2012

(unaudited)

1. NATURE OF BUSINESS

Medicis Pharmaceutical Corporation (“Medicis” or the “Company”) is a leading specialty pharmaceutical company focusing primarily on helping patients attain a healthy and youthful appearance and self-image through the development and marketing in the United States (“U.S.”) and Canada of products for the treatment of dermatological and aesthetic conditions.

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, actinic keratosis, bronchospasms, external genital and perianal warts/condyloma acuminate, seborrheic dermatitis and cosmesis (improvement in the texture and appearance of skin). Medicis currently offers 28 branded products. Its primary brands are DYSPORT^®, PERLANE^®, RESTYLANE^®, SOLODYN^®, VANOS^®, ZIANA^® and ZYCLARA^®.

The condensed 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 condensed 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, 2011. 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, 2011.

2. DISCONTINUED OPERATIONS

On February 25, 2011, the Company announced that as a result of the Company’s strategic planning process and the existing regulatory and commercial capital equipment environment, the Company would explore strategic alternatives for its LipoSonix business including, but not limited to, the sale of the stand-alone business. As a result of this decision, the Company classified the LipoSonix business as a discontinued operation for financial statement reporting purposes. On November 1, 2011, the Company sold LipoSonix to Solta Medical, Inc.

6

The following is a summary of loss from discontinued operations, net of income tax benefit, for the three months ended March 31, 2011 (in thousands):

	Three Months Ended
	March 31, 2011
Net revenues	$	156
Cost of revenues		2,375
Gross profit		(2,219)
Operating expenses:
Selling, general and administrative		5,863
Research and development		3,346
Loss from discontinued operations before income tax benefit		(11,428)
Income tax benefit		(4,103)
Loss from discontinued operations, net of income tax benefit	$	(7,325)

The Company included 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 were allocated to the LipoSonix discontinued operations. Included in cost of revenues for the three months ended March 31, 2011 was a $1.9 million charge related to an increase in the valuation reserve for LipoSonix inventory that was not expected to be sold.

The following is a summary of net cash used in operating activities from discontinued operations for the three months ended March 31, 2011 (in thousands):

	Three Months Ended
	March 31, 2011
Loss from discontinued operations, net of income tax benefit	$	(7,325	)
Share-based compensation expense		728
Decrease in assets held for sale from discontinued operations		3,073
Decrease in liabilities held for sale from discontinued operations		(1,934	)
Net cash used in operating activities from discontinued operations	$	(5,458	)

3. SHARE-BASED COMPENSATION

At March 31, 2012, 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.

7

The total value of the stock option awards is expensed ratably over the service period of the employees receiving the awards. As of March 31, 2012, total unrecognized compensation cost related to stock option awards, to be recognized as expense subsequent to March 31, 2012, was approximately $1.1 million and the related weighted average period over which it is expected to be recognized is approximately 3.4 years.

A summary of stock option activity within the Company’s stock-based compensation plans and changes for the three months ended March 31, 2012, is as follows:

	Number     of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic     Value
Balance at December 31, 2011		4,101,505	$	31.31
Granted		34,617	$	34.94
Exercised		(105,250)	$	26.47
Terminated/expired		(6,000)	$	38.45
Balance at March 31, 2012		4,024,872	$	31.45		2.3	$	26,122,252

The intrinsic value of options exercised during the three months ended March 31, 2012 was approximately $1.0 million. Options exercisable under the Company’s share-based compensation plans at March 31, 2012 were 3,857,472, with a weighted average exercise price of $31.57, a weighted average remaining contractual term of 2.1 years, and an aggregate intrinsic value of approximately $24.6 million.

A summary of outstanding and exercisable stock options that are fully vested and are expected to vest, based on historical forfeiture rates, as of March 31, 2012, is as follows:

	Number     of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic     Value
Outstanding, net of expected forfeitures		3,759,158	$	31.69		2.2	$	23,511,900
Exercisable, net of expected forfeitures		3,634,703	$	31.74		2.1	$	22,609,550

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:

	Three Months Ended
	March 31, 2012	March 31, 2011
Expected dividend yield	1.14%	0.77%
Expected stock price volatility	0.32	0.33
Risk-free interest rate	1.13%	2.81%
Expected life of options	6.0 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.

8

The weighted average fair value of stock options granted during the three months ended March 31, 2012 and 2011, was $9.94 and $11.45, 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 March 31, 2012, the total amount of unrecognized compensation cost related to nonvested restricted stock awards, to be recognized as expense subsequent to March 31, 2012, was approximately $51.0 million, and the related weighted average period over which it is expected to be recognized is approximately 3.7 years.

A summary of restricted stock activity within the Company’s share-based compensation plans and changes for the three months ended March 31, 2012, is as follows:

Nonvested Shares	Shares		Weighted Average Grant-Date     Fair  Value
Nonvested at December 31, 2011		1,919,462	$	22.61
Granted		686,502	$	34.94
Vested		(525,551)	$	20.06
Forfeited		(12,200)	$	28.20
Nonvested at March 31, 2012		2,068,213	$	27.31

The total fair value of restricted shares vested during the three months ended March 31, 2012 and 2011 was approximately $10.5 million and $7.1 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 during each reporting period based on the new fair value. As of March 31, 2012, the total measured amount of unrecognized compensation cost related to outstanding SARs, to be recognized as expense subsequent to March 31, 2012, based on the remeasurement at March 31, 2012, was approximately $24.4 million, and the related weighted average period over which it is expected to be recognized is approximately 2.5 years.

9

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:

	Remeasurement as of March 31, 2012	SARs Granted During the Three Months Ended March 31, 2011
Expected dividend yield	1.06%	0.87%
Expected stock price volatility	0.31	0.32
Risk-free interest rate	0.51% to 1.04%	3.12%
Expected life of SARs	2.9 to 4.9 Years	7.0 Years

No SARs were granted during the three months ended March 31, 2012. The weighted average fair value of SARs granted during the three months ended March 31, 2011, as of the grant date, was $9.90. The weighted average fair value of all SARs outstanding as of the remeasurement date of March 31, 2012 was $20.21.

A summary of SARs activity for the three months ended March 31, 2012 is as follows:

	Number     of SARs		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic     Value
Balance at December 31, 2011		2,323,060	$	17.52
Granted		-	$	-
Exercised		(102,751)	$	14.68
Terminated/expired		(51,451)	$	17.87
Balance at March 31, 2012		2,168,858	$	17.65		4.5	$	43,256,447

The intrinsic value of SARs exercised during the three months ended March 31, 2012 was approximately $2.1 million.

As of March 31, 2012, 364,451 SARs were exercisable, with a weighted average exercise price of $15.52, a weighted average remaining contractual term of 4.3 years, and an aggregate intrinsic value of approximately $8.0 million.

Total share-based compensation expense related to continuing operations recognized during the three months ended March 31, 2012 and 2011 was as follows (in thousands):

	Three Months Ended
	March 31, 2012		March 31, 2011
Stock options	$	195	$	250
Restricted stock awards		3,619		2,602
Stock appreciation rights		5,283		3,837
Total share-based compensation expense	$	9,097	$	6,689

4. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

On June 24, 2011, the Company’s Compensation Committee adopted the Medicis Pharmaceutical Corporation Supplemental Executive Retirement Plan, as amended on October 3, 2011 (the “SERP”), a non-qualified, noncontributory, defined benefit pension plan that provides supplemental retirement income for a select

10

group of officers, including the Company’s named executive officers. The SERP became effective as of June 1, 2011. Retirement benefits are calculated based on a percentage of a SERP participant’s average earnings, which ranges from 1.25% to 10% of the participant’s 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. The percentage of average earnings is multiplied by the participant’s years of service up to a specified cap on service ranging from five to twenty years. In no event will an executive officer’s retirement benefit exceed 50% of his or her average earnings, and for those participants who are not executive officers, their retirement benefits will not exceed 25% of average earnings. The SERP retirement benefit is intended to be paid to participants who reach the “normal retirement date,” which is age 65, or age 59  ¹/2 with twenty years of service, subject to certain exceptions.

A SERP participant vests in 1/6th of his or her retirement benefit per plan year, (which runs from June 1 to May 31), 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.

Participants in the SERP received credit for prior service with the Company. The prior service accrued benefit of approximately $33.8 million was recorded during the three months ended June 30, 2011 as other comprehensive income within stockholders’ equity, and is amortized as compensation expense over the remaining service years of each participant. The Company also established a deferred tax asset of approximately $12.0 million, the benefit of which was also recorded in other comprehensive income. During the three months ended March 31, 2012, an additional participant was added to the plan, and a prior service accrued benefit of approximately $0.8 million was recorded as other comprehensive income within stockholders’ equity, and is being amortized over the remaining service years of the participant. Total amortization of prior service costs recognized as compensation expense during the three months ended March 31, 2012, was approximately $1.2 million.

Compensation expense recognized during the three months ended March 31, 2012 related to current service costs was approximately $0.2 million. Interest cost accrued related to prior and current service costs during the three months ended March 31, 2012 was approximately $0.4 million. The total present value of accrued benefits for the SERP as of March 31, 2012 was approximately $36.5 million, which is included in other long-term liabilities in the Company’s condensed consolidated balance sheets as of March 31, 2012.

The Company maintains a rabbi trust to fund the SERP benefit. During the three months ended September 30, 2011, the Company purchased life insurance policy investments of approximately $9.8 million to fund the SERP. The life insurance policies cover the SERP participants. The Company intends to make similar annual purchases during each of the next four years. During the three months ended March 31, 2012, the Company made an additional life insurance policy investment purchase of approximately $0.4 million related to the new participant added to the SERP during the three months ended March 31, 2012. No material net gains on the investments were recognized during the three months ended March 31, 2012. The Company’s expected return on the plan assets is 4%. The total investment related to the SERP of $10.3 million is included in other assets in the Company’s condensed consolidated balance sheets as of March 31, 2012, and is the cash surrender value of the life insurance policies, representing the fair value of the plan assets.

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. Except for impairments related to the illiquidity of the Company’s auction rate floating securities, other-than-temporary impairments are charged to earnings and a new cost basis for the

11

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 March 31, 2012, the Company has recorded the estimated fair value of available-for-sale securities in short-term and long-term investments of approximately $246.0 million and $20.2 million, respectively.

Available-for-sale securities consist of the following at March 31, 2012 (in thousands):

	March 31, 2012
	Cost		Gross Unrealized     Gains		Gross Unrealized Losses		Other-Than- Temporary Impairment     Losses		Fair     Value
Corporate notes and bonds	$	132,516	$	299		$    (89)	$	-	$	132,726
Federal agency notes and bonds		111,391		220		(23)		-		111,588
Auction rate floating securities		17,350		-		(4,596)		-		12,754
Asset-backed securities		9,147		12		-		-		9,159
Total securities	$	270,404	$	531		$    (4,708)	$	-	$	266,227

	December 31, 2011
	Cost		Gross Unrealized     Gains		Gross Unrealized Losses		Other-Than- Temporary Impairment Losses		Fair     Value
Corporate notes and bonds	$	138,554	$	161		$    (549)	$	-	$	138,166
Federal agency notes and bonds		125,092		221		(24)		-		125,289
Auction rate floating securities		17,400		-		(4,607)		-		12,793
Asset-backed securities		9,527		-		(8)		-		9,519
Total securities	$	290,573	$	382		$    (5,188)	$	-	$	285,767

During the three months ended March 31, 2012, gross realized gains on sales of available-for-sale securities totaled approximately $0.1 million. During the three months ended March 31, 2012, there were no significant gross realized losses on sales of available-for-sale securities. During the three months ended March 31, 2011, there were no significant gross realized gains or 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 three months ended March 31, 2012, on available-for-sale securities included in stockholders’ equity totaled approximately $0.4 million. The amortized cost and estimated fair value of the available-for-sale securities at March 31, 2012, by maturity, are shown below (in thousands):

	March 31, 2012
	Cost		Estimated         Fair Value
Available-for-sale
Due in one year or less		$     106,675		$     106,868
Due after one year through five years		146,379		146,605
Due after 10 years		17,350		12,754
		$     270,404		$     266,227

12

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 March 31, 2012, approximately $20.2 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 March 31, 2012, the Company’s investments included auction rate floating securities with a fair value of $12.8 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 three months of 2012 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.

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 March 31, 2012 (in thousands):

	Less Than 12 Months				Greater Than 12 Months
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Corporate notes and bonds	$	39,286	$	(89)	$	-	$	-
Federal agency notes and bonds		36,435		(23)		-		-
Auction rate floating securities		-		-		12,754		(4,596)
Asset-backed securities		-		-		-		-
Total securities	$	75,721	$	(112)	$	12,754	$	(4,596)

As of March 31, 2012, 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 March 31, 2012, 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 March 31, 2012. 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.

13

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 March 31, 2012, were as follows (in thousands):

			Fair Value Measurement at Reporting Date Using
	Mar. 31, 2012		Quoted Prices in Active Markets     (Level 1)		Significant Other Observable Inputs     (Level 2)		Significant Unobservable Inputs     (Level 3)
Corporate notes and bonds	$	132,726	$	-	$	132,726	$	-
Federal agency notes and bonds		111,588		-		111,588		-
Auction rate floating securities		12,754		-		-		12,754
Asset-backed securities		9,159		-		9,159		-
Total assets measured at fair value	$	266,227	$	-	$	253,473	$	12,754

			Fair Value Measurement at Reporting Date Using
	Dec. 31, 2011		Quoted Prices in Active Markets     (Level 1)		Significant Other Observable Inputs     (Level 2)		Significant Unobservable Inputs     (Level 3)
Corporate notes and bonds	$	138,166	$	-	$	138,166	$	-
Federal agency notes and bonds		125,289		-		125,289		-
Auction rate floating securities		12,793		-		-		12,793
Asset-backed securities		9,519		-		9,519		-
Total assets measured at fair value	$	285,767	$	-	$	272,974	$	12,793

14

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 months ended March 31, 2012 (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Auction Rate Floating Securities
Balance at December 31, 2011	$	12,793
Transfers to (from) Level 3		-
Total gains (losses) included in other (income) expense, net		-
Total gains included in other comprehensive income		11
Purchases		-
Settlements		(50)
Balance at March 31, 2012	$	12,754

The following is a description of the valuation techniques used for the assets measured at fair value classified within Level 2 or Level 3 of the fair value hierarchy:

Available-for-sale securities classified within Level 2 of the fair value hierarchy are valued utilizing reports from third-party asset managers that hold the Company’s investments, showing closing prices on the last business day of the period presented. These asset managers utilize an independent pricing source to obtain quotes for most fixed income securities, and utilize internal procedures to validate the prices obtained. In addition, the Company uses an independent third-party to perform price testing, comparing a sample of quoted prices listed in the asset managers’ reports to quotes listed through a public quotation service.

Available-for-sale securities classified within Level 3 of the fair value hierarchy (auction rate floating securities) are valued utilizing a discounted cash flow model. Key variables that are included in the Company’s calculation of the fair value of its auction rate floating securities utilizing a discounted cash flow model are weighted average cost of capital (“WACC”), liquidity horizon and estimated coupon rate. The liquidity horizon is an estimation of how long the liquidity issue of the auction rate floating securities will continue to exist. As part of its calculation of the fair value of its auction rate floating securities as of March 31, 2012, the Company used a WACC of 5.0%, a liquidity horizon of nine years, and an estimated coupon rate of a 12-month historical average for the indexes. The 12-month historical averages for 1-Month LIBOR and 90-Day T-Bills were 0.23% and 0.03%, respectively. As part of its assessment of these variables used in calculating the fair value of its auction rate floating securities, the Company performs a sensitivity analysis to understand the potential impact of using different amounts for these variables. As of March 31, 2012 and December 31, 2011, the sensitivity analysis did not produce calculated fair values that were significantly different from those calculated using the variables described above.

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 and the related stage of the research and development project.

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

15

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.

Research and development expense for the three months ended March 31, 2012 and 2011 are as follows (in thousands):

	Three Months Ended
	March 31,         2012		March 31,         2011
Ongoing research and development costs	$	12,127	$	6,868
Payments related to strategic collaborations		39,006		7,000
Share-based compensation expense		697		405
Total research and development	$	51,830	$	14,273

8. STRATEGIC COLLABORATIONS

Development and License Agreement with a specialty pharmaceutical company

On March 30, 2012, the Company entered into a Development and License Agreement with a specialty pharmaceutical company pursuant to which the Company obtained exclusive worldwide rights for the development and commercialization of an investigational drug targeted at certain topical skin applications. Under the terms of the agreement, the Company agreed to pay an up-front payment of $25.0 million in connection with the execution of the agreement, and will pay up to an additional $80.0 million upon the achievement of certain research, development and regulatory milestones and up to an additional $120.0 million upon the achievement of certain commercial milestones, as well as royalties on future sales. The initial $25.0 million up-front payment, paid in April 2012, was recognized as research and development expense during the three months ended March 31, 2012 and is included in accounts payable in the accompanying condensed consolidated balance sheets as of March 31, 2012.

License Agreement with 3M

On February 24, 2012, the Company entered into a License Agreement with 3M Company and 3M Innovative Properties Company (collectively, “3M”) for worldwide rights to a number of leading molecules in 3M’s platform of immune response modifiers, for all topical dermatology indications and options for all human uses associated with the licensed molecules, excluding vaccine adjuvant. Under the terms of the agreement, the Company made an up-front payment of $7.5 million to 3M in connection with the execution of the agreement, and will pay up to an additional $25.6 million of contingent license and option fees. The Company may also pay up to an additional $25.0 million upon the achievement of certain research, development and regulatory milestones, as well as royalties on future sales. The initial $7.5 million payment was recognized as research and development expense during the three months ended March 31, 2012.

Joint Development Agreement with Lupin

On July 21, 2011, the Company entered into a Joint Development Agreement (the “Original Agreement”) with Lupin Limited, on behalf of itself and its affiliates (hereinafter collectively referred to as “Lupin”), whereby the Company and Lupin will collaborate to develop multiple novel proprietary therapeutic products. Pursuant to the Original Agreement, subject to the terms and conditions contained therein, the Company made an up-front $20.0 million payment to Lupin and was to make additional payments to Lupin upon the achievement of certain research, development, regulatory and other milestones, as well as royalty payments on sales of the products covered under the Original Agreement. In addition, the Company was to receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Original Agreement.

16

On March 30, 2012, the Company entered into an Amended and Restated Joint Development Agreement, with Lupin (the “Amended and Restated Joint Development Agreement”), which modified the list of products being developed. The Company made a $2.5 million payment to Lupin in April 2012 in connection with the execution of the Amended and Restated Joint Development Agreement, and will make additional payments to Lupin of up to $35.5 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 Amended and Restated Joint Development Agreement, which supersedes the additional payments the Company would have made under the Original Agreement. In addition, the Company will receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Amended and Restated Joint Development Agreement.

The $20.0 million up-front payment related to the Original Agreement was recognized as research and development expense during the three months ended September 30, 2011. The $2.5 million payment related to the Amended and Restated Joint Development Agreement was recognized as research and development expense during the three months ended March 31, 2012 and is included in accounts payable in the accompanying condensed consolidated balance sheets as of March 31, 2012.

Amended and Restated Collaboration Agreement and Asset Purchase Agreement with Hyperion

On March 22, 2012, Ucyclyd Pharma, Inc. (“Ucyclyd “), a wholly-owned subsidiary of the Company, and Hyperion Therapeutics, Inc. (“Hyperion”) entered into an Amended and Restated Collaboration Agreement (the “Amended Collaboration Agreement”), which amended and restated their existing Collaboration Agreement, dated August 23, 2007, as previously amended on or about November 24, 2008, June 29, 2009 and October 12, 2009 (the “Prior Collaboration Agreement”).

Pursuant to the terms of the Prior Collaboration Agreement, Ucyclyd granted rights to Hyperion, exercisable in the future, to purchase certain worldwide rights to Ucyclyd’s existing on-market products AMMONUL^® and BUPHENYL^® under certain conditions, as well as to develop and commercialize Ravicti™, a compound referred to as HPN-100 (and also previously referred to as GT4P in the Prior Collaboration Agreement), for the treatment of urea cycle disorder, hepatic encephalopathies and other indications. The parties agreed to supersede the Prior Collaboration Agreement with the Amended Collaboration Agreement, under which Hyperion will continue to have the right, exercisable no earlier than January 1, 2013, to purchase certain worldwide rights to AMMONUL^® and BUPHENYL^®, subject to Ucyclyd’s right to elect to retain such rights to AMMONUL^®, and an Asset Purchase Agreement of even date (the “APA”), under which Hyperion agreed to purchase Ucyclyd’s rights to Ravicti™ on the terms set forth therein. The parties completed the sale of Ravicti™ under the APA on March 22, 2012, for which Hyperion paid Ucyclyd $6.0 million. If Ravicti™ is not approved by the FDA by January 1, 2013, Ucyclyd will pay Hyperion $0.5 million per month until June 30, 2013, or until Ravicti™ is approved, whichever comes first, subject to a maximum of $3.0 million in aggregate payments. Pursuant to the APA, Hyperion will pay Ucyclyd certain royalties and regulatory and sales milestones relating to Ravicti™ and, pursuant to the terms of the Amended Collaboration Agreement, following exercise of its purchase rights, Hyperion will pay Ucyclyd certain royalties and regulatory and sales milestones relating to AMMONUL^® (but only if Ucyclyd does not elect to retain rights to AMMUNOL^®) and BUPHENYL^®. Ucyclyd will continue to be entitled to all revenue from the sales of AMMONUL^® and BUPHENYL^® until the exercise of the purchase rights by Hyperion. If Hyperion elects to purchase AMMONUL^® and BUPHENYL^®, but Ucyclyd elects to retain AMMONUL^®, then AMMONUL^® will remain an asset of Ucyclyd and Ucyclyd will continue to be entitled to all revenue from the sales of AMMONUL^®. A net gain of $3.0 million on the sale of Ravicti™ to Hyperion was recognized in other income during the three months ended March 31, 2012. This consisted of the $6.0 million payment Ucyclyd received from Hyperion, partially offset by the $3.0 million in total potential contingent payments that Ucyclyd could pay to Hyperion during the first six months of 2013, based upon the timing of the approval of Ravicti™ by the FDA. The $3.0 million contingent liability is included in the Company’s condensed consolidated balance sheets as of March 31, 2012, with $1.5 million included in other current liabilities and $1.5 million included in other liabilities.

Research and Development Agreement with 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.

17

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, contract revenue, and beginning on December 2, 2011, upon the Company’s acquisition of the assets of Graceway Pharmaceuticals, LLC (“Graceway”), products in the respiratory and women’s health specialties. 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^®, VANOS^® and ZYCLARA^®. ZYCLARA^® was acquired by the Company as part of the acquisition of the assets of Graceway on December 2, 2011. The non-dermatological product lines include AMMONUL^® and BUPHENYL^®. The non-dermatological field also includes contract revenues associated with licensing agreements and authorized generic agreements.

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. ZIANA^® and SOLODYN^® are also promoted to pediatricians whose prescribing habits closely resemble those of dermatologists. 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
	March 31,     2012			March 31,     2011
Acne and acne-related dermatological products	$	108,501		$	103,462
Non-acne dermatological products		73,998			52,221
Non-dermatological products		19,244			9,230
Total net revenues	$	201,743		$	164,913
	Three Months Ended
	March 31,     2012			March 31,     2011
Acne and acne-related dermatological products		54	%		63	%
Non-acne dermatological products		37			32
Non-dermatological products		9			5
Total net revenues		100	%		100	%

During the three months ended March 31, 2012, approximately 4.9% of the Company’s net revenues were generated in Canada. No country or region outside of the U.S. generated more than 5%, individually or in the aggregate, of the Company’s net revenues during the three months ended March 31, 2012. During the three months ended March 31, 2011, less than 5% of the Company’s net revenues were generated outside of the U.S.

18

10. INVENTORIES

The Company 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 March 31, 2012 and December 31, 2011, there were no costs capitalized into inventory for products that had not yet received regulatory approval.

Inventories are as follows (in thousands):

	March 31, 2012			December 31, 2011
Raw materials	$	11,168		$	9,100
Work-in-process		3,029			5,495
Finished goods		30,125			29,250
Valuation reserve		(7,623	)		(9,326	)
Total inventories	$	36,699		$	34,519

11. OTHER CURRENT LIABILITIES

Other current liabilities are as follows (in thousands):

	March 31, 2012		December 31, 2011
Accrued incentives, including SARs liability	$	31,406	$	41,516
Deferred revenue		13,630		13,703
Other accrued expenses		26,669		23,566
	$	71,705	$	78,785

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

	March 31, 2012		December 31, 2011
Deferred revenue - aesthetics products, net of cost of revenue	$	7,285	$	13,349
Deferred revenue - sales into distribution channel in excess of eight weeks of projected demand		6,204		212
Other deferred revenue		141		142
	$	13,630	$	13,703

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. 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.

19

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. No contingent interest related to the Old Notes was payable at March 31, 2012 or December 31, 2011. 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 March 31, 2012, $169.1 million of the Old Notes and $65.1 million of deferred tax liabilities were classified as current liabilities in the Company’s condensed consolidated balance sheets. The $65.1 million of deferred tax liabilities were included within current deferred tax assets, net.

On May 3, 2012, the Company filed with the Securities and Exchange Commission (the “SEC”) a Tender Offer Statement on Schedule TO and a notice (the “Company Notice”) to the holders of the Old Notes related to the option of the holders to require the Company to repurchase all or a portion of their Old Notes on June 4, 2012. In addition, such Company Notice was made available through The Depository Trust Company and Deutsche Bank Trust Company Americas, the paying agent.

The Company Notice specifies the terms, conditions and procedures for surrendering and withdrawing the Old Notes for purchase. Specifically, the Company Notice provides that the opportunity to surrender the Old Notes for purchase will commence on May 3, 2012, and will terminate at 5:00 p.m., Eastern Time, on Friday, June 1, 2012, and also that the holders of the Old Notes may withdraw any Old Notes previously surrendered for purchase at any time prior to 5:00 p.m., Eastern Time, on June 1, 2012.

The Company Notice also states that validly surrendered and not withdrawn Old Notes will be purchased by the Company for $1,000 in cash per $1,000 principal amount at maturity of the Old Notes (the “Purchase Price”) and that accrued and unpaid interest on the Old Notes to, but not including, June 4, 2012 (an interest payment date under the terms of the Old Notes), will be paid to the holder of record at the close of business on May 19, 2012, prior to the payment of the Purchase Price as provided by the indenture. Accordingly, the Company expects that there will be no accrued and unpaid interest due as part of the Purchase Price. Additionally, the Company Notice states that holders that do not surrender their Old Notes for purchase will maintain the right to convert their Old Notes into shares of the Company’s Class A common stock, as further described below.

The Company Notice also makes clear that none of the Company, its board of directors or employees have made or are making any representation or recommendation as to whether or not any holder should surrender any of the Old Notes.

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 to purchase the Old Notes. The Company would also be required to pay the accumulated deferred tax liability related to the Old Notes.

20

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 March 31, 2012 or December 31, 2011. The New Notes will 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 March 31, 2012 and December 31, 2011.

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 New 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;

21

• 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, through June 11, 2008, above $0.025 per share would result in at least a one percent (1%) increase in the conversion price. This threshold was not reached and no adjustment to the conversion price has been made.

During the quarters ended December 31, 2011 and March 31, 2012, 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 quarters ended December 31, 2011 and March 31, 2012. During the quarter ended March 31, 2012, no holders of Old Notes converted their Old Notes into shares of the Company’s Class A common stock. The holders of Old Notes have this conversion right only until June 30, 2012. 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 March 31, 2012, the New Notes did not meet the criteria for the right of conversion.

The fair value of the Company’s contingent convertible senior notes, based on market quotations, is approximately $220.5 million and $202.5 million at March 31, 2012 and December 31, 2011, respectively. The fair value of the contingent convertible senior notes held as of March 31, 2012 and December 31, 2011 were valued using Level 2 pricing inputs based on quoted prices for similar instruments in markets that are not active, and through model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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 the reserve for uncertain tax positions, 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.

On November 1, 2011, the Company closed its sale of all issued and outstanding shares of common stock of LipoSonix to Solta. The transaction resulted in a $30.5 million capital loss for income tax purposes, of which $26.2 million can be carried back and used to offset capital gains generated in prior tax years. Accordingly, an income tax benefit of $9.4 million was recognized and is included in the gain from discontinued operations for the year ended December 31, 2011. A deferred tax asset was recorded on the portion of the capital loss ($4.3 million) that could not be carried back to prior years. As a capital loss can only be utilized to offset capital gains, the Company has recorded a valuation allowance of $1.5 million against the deferred tax asset 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.

22

The sales price used to calculate the above capital loss consisted of $15.5 million of cash received at closing, $20.0 million of cash received on November 18, 2011 and $29.3 million of value from future additional contingent cash and milestone payments. A deferred tax asset was recorded on the $29.3 million as it was not recognized as additional selling price for financial reporting purposes. The Company has recorded a valuation allowance of $10.5 million against this deferred tax asset in order to reduce the carrying value of this deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

At March 31, 2012, 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 March 31, 2012, 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 March 31, 2012, 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 March 31, 2012, 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 March 31, 2012 and March 31, 2011, the Company made net tax payments of $11.3 million and $6.0 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 2007. The state of California is currently conducting an 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 March 31, 2012 and December 31, 2011, the Company had unrecognized tax benefits of $9.3 million and $8.6 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 $6.0 million and $5.6 million as of March 31, 2012 and December 31, 2011, respectively. The Company estimates that it is reasonably possible that the amount of unrecognized tax benefits will decrease by $0.3 million in the next twelve months due to audit settlements.

The Company recognizes accrued interest and penalties, if applicable, related to unrecognized tax benefits in income tax expense. The Company had approximately $0.3 million for the payment of interest and penalties accrued (net of tax benefit) at March 31, 2012 and December 31, 2011.

14. DIVIDENDS DECLARED ON COMMON STOCK

On February 27, 2012, the Company announced that its Board of Directors had declared a cash dividend of $0.10 per issued and outstanding share of the Company’s Class A common stock, which was paid on April 30, 2012, to stockholders of record at the close of business on April 2, 2012. The $6.0 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 March 31, 2012. The Company has not adopted a dividend policy.

23

15. STOCK REPURCHASE

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 SEC’s Rule 10b-18 if applicable, and may be made in the open market or in privately negotiated transactions, including the entry into derivatives transactions.

The number of shares to be repurchased and the timing of repurchases will depend on a variety of factors, including, but not limited to, stock price, economic and market conditions and corporate and regulatory requirements. It is intended that any repurchases will be funded by existing general corporate funds. 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.

As part of its stock repurchase program, the Company may from time to time enter into structured share repurchase agreements with financial institutions. These agreements generally require the Company to make one or more cash payments in exchange for the right to receive shares of its common stock and/or cash at the expiration of the agreement and/or at various times during the term of the agreement, generally based on the market price of the Company’s common stock during the relevant valuation period or periods, but the Company may enter into structured share repurchase agreements with different features.

No shares were repurchased during the three months ended March 31, 2012. Total shares repurchased from the inception of the plan through March 31, 2012 in the open market and through structured share repurchase arrangements was 4,438,233 shares at a weighted average cost of $33.82 per share.

As of March 31, 2012, the remaining authorized amount under the plan is approximately $49.9 million.

24

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
	March 31, 2012						March 31, 2011
	Continuing Operations		Discontinued Operations		Net Income		Continuing Operations		Discontinued Operations		Net Income
BASIC
Net income (loss)	$	5,349	$	-	$	5,349	$	26,685	$	(7,325)	$	19,360
Less: income (loss) allocated to participating securities		-		-		-		799		-		562
Net income (loss) available to common stockholders		5,349		-		5,349		25,886		(7,325)		18,798
Weighted average number of common shares outstanding		57,109		-		57,109		59,124		59,124		59,124
Basic net income (loss) per common share	$	0.09	$	-	$	0.09	$	0.44	$	(0.12)	$	0.32
DILUTED
Net income (loss)	$	5,349	$	-	$	5,349	$	26,685	$	(7,325)	$	19,360
Less: income (loss) allocated to participating securities		-		-		-		799		-		562
Net income (loss) available to common stockholders		5,349		-		5,349		25,886		(7,325)		18,798
Less:
Undistributed earnings allocated to unvested stockholders		-		-		-		(687)		-		(457)
Add:
Undistributed earnings re-allocated to unvested stockholders		-		-		-		683		-		454
Add:
Tax-effected interest expense related to Old Notes		-		-		-		666		-		666
Net income (loss) assuming dilution	$	5,349	$	-	$	5,349	$	26,548	$	(7,325)	$	19,461
Weighted average number of common shares outstanding		57,109		-		57,109		59,124		59,124		59,124
Effect of dilutive securities:
Old Notes		-		-		-		5,823		-		5,823
New Notes		-		-		-		4		-		4
Stock options		1,410		-		1,410		430		-		430
Weighted average number of common shares assuming dilution		58,519		-		58,519		65,381		59,124		65,381
Diluted net income (loss) per common share	$	0.09	$	-	$	0.09	$	0.41	$	(0.12)	$	0.30

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.

25

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 March 31, 2012 excludes 2,363,691 shares of stock that represented outstanding stock options whose impact would be anti-dilutive. The diluted net income per common share computation for the three months ended March 31, 2012 also excludes 5,822,551 and 4,685 shares of common stock, issuable upon conversion of the Old Notes and New Notes, respectively, whose impact would be anti-dilutive. The two-class method for computing diluted net income per common share for the three months ended March 31, 2012 is also not presented, as its impact would be anti-dilutive.

The diluted net income per common share computation for the three months ended March 31, 2011 excludes 5,032,879 shares of stock that represented outstanding stock options whose impact would be anti-dilutive.

Due to the net loss from discontinued operations during the three months ended March 31, 2011, 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,

26

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 with the plaintiffs’ representatives to memorialize an agreement in principle to settle the pending action. On September 21, 2011, the parties filed with the Court a motion for preliminary approval of a Settlement Stipulation (the “Class Action Stipulation”) setting forth the terms of the settlement. The Court granted the motion for preliminary approval on November 2, 2011, ordered that notice be given to class participants and set a hearing for final approval for February 23, 2012. At the hearing on February 23, 2012, the Court stated that it was granting final approval of the Class Action Stipulation. A written order by the Court was entered on February 28, 2012 dismissing the action with prejudice. Under the terms of the Class Action Stipulation, the Company’s portion of the settlement will be paid entirely by insurance. The Company’s outside auditors will contribute to the settlement. The Company itself is not required to make any payments to fund the settlement, and the Class Action Stipulation contains no admission of liability by the Company or the named individuals in the action, the allegations of which are expressly denied therein.

Hyperion Arbitration

On June 23, 2011, Hyperion Therapeutics, Inc. (“Hyperion”) filed a demand for arbitration before the American Arbitration Association for a determination 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 on or about November 24, 2008, June 29, 2009 and October 12, 2009 (as amended, the “Prior Collaboration Agreement”). Pursuant to the terms of the Prior Collaboration Agreement, Ucyclyd granted rights to Hyperion, exercisable in the future, to purchase certain worldwide rights to Ucyclyd’s existing on-market products, AMMONUL^® and BUPHENYL^® under certain conditions, as well as to develop and commercialize Ravicti^TM, a compound referred to as HPN-100 (and as previously referred to as GT4P in the Prior Collaboration Agreement) for the treatment of urea cycle disorder, hepatic encephalopathies and other indications. In its demand for arbitration, Hyperion requested a judgment regarding the rights of the parties in connection with the development activities relating to Ravicti^TM, including relating to the submission of a NDA to the FDA for Ravicti^TM for the treatment of urea cycle disorder. Ucyclyd responded to the demand for arbitration on July 28, 2011 denying the allegations and bringing counterclaims against Hyperion. Following additional responses and counterclaims made by the parties, and negotiations between them, on March 22, 2012, Ucyclyd and Hyperion entered into an Amended and Restated Collaboration Agreement (the “Amended Collaboration Agreement”), which amended and restated the Prior Collaboration Agreement with the Amended Collaboration Agreement, under which Hyperion will continue to have the right, exercisable no earlier than January 1, 2013, to purchase certain worldwide rights to AMMONUL^® and BUPHENYL^®, subject to Ucyclyd’s right to elect to retain such rights to AMMONUL^®, and an Asset Purchase Agreement of even date (the “APA”), under which Hyperion agreed to purchase Ucyclyd’s rights to Ravicti^TM on the terms set forth therein. No payments were required by the parties under the Amended Collaboration Agreement upon signing of the same. The parties completed the sale of Ravicti^TM under the APA on March 22, 2012. Pursuant to the APA, Hyperion will pay Ucyclyd certain royalties and regulatory and sales milestones relating to Ravicti^TM and, pursuant to the terms of the Amended Collaboration Agreement, following exercise of its purchase rights, Hyperion will pay Ucyclyd certain royalties and regulatory and sales milestones relating to AMMUNOL^® (but only if Ucyclyd does not elect to retain rights to AMMUNOL^®) and BUPHENYL^®. Ucyclyd will continue to be entitled to all revenue from the sale of AMMONUL^® and BUPHENYL^® until the exercise of the purchase rights by Hyperion. If Hyperion elects to purchase AMMONUL^® and BUPHENYL^®, but Ucyclyd elects to retain AMMONUL^®, then AMMONUL^® will remain an asset of Ucyclyd and Ucyclyd will continue to be entitled to all revenue from the sales of AMMONUL^®.

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.

27

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 adopted ASU No. 2011-04 as of January 1, 2012 and the revised guidance, which relates to disclosure, did not impact 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. The Company adopted ASU No. 2011-05 as of January 1, 2012, and the adoption of this amendment only impacted the presentation of comprehensive income within the Company’s condensed consolidated financial statements. Comprehensive income is now presented in the condensed consolidated statements of comprehensive income that are now included as part of the Company’s condensed consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The updated guidance permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value before applying the two-step goodwill impairment model that is currently in place. If it is determined through the qualitative assessment that a reporting unit’s fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing companies to go directly to the quantitative assessment. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed in annual reporting periods beginning after December 15, 2011, with early adoption permitted. The Company adopted ASU 2011-08 as of January 1, 2012, and the revised guidance did not impact its results of operations and financial condition.

19. SUBSEQUENT EVENTS

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

Corporate Integrity Agreement

As previously disclosed, on April 25, 2007, we entered into a Settlement Agreement with the Justice Department, the Office of Inspector General of the Department of Health and Human Services (“OIG”) and the TRICARE Management Activity and private complainants to settle all outstanding federal and state civil suits against us in connection with claims related to our alleged off-label marketing and promotion of LOPROX^® and LOPROX^® TS products to pediatricians during periods prior to our May 2004 disposition of our pediatric sales division. As part of the settlement, we entered into a five-year Corporate Integrity Agreement (the “CIA”) with the OIG which expired on April 24, 2012. Although the term of the CIA has expired, the Company intends to continue the existence of its comprehensive compliance program which provides for policies and procedures aimed at promoting compliance with federal health care programs and FDA requirements.

28

Civil Investigative Demand from the U.S. Federal Trade Commission

As previously disclosed in the Company’s SEC filings, the Company entered into various settlement and other agreements with makers of generic SOLODYN^® products following patent infringement claims and litigation. On May 2, 2012, the Company received a civil investigative demand from the U.S. Federal Trade Commission (the “FTC”) requiring that it provide to the FTC information and documents relating to such agreements, each of which was previously filed with the FTC and the Antitrust Division of the Department of Justice in accordancLODYNe with the requirements of the Medicare Modernization Act of 2003, and other efforts principally relating to SOLODYN^®. The Company intends to cooperate with this investigative process. If, at the conclusion of this process, the FTC believes that any of the agreements or efforts violates antitrust laws, it could challenge the Company through a civil administrative or judicial proceeding. It is not possible to predict the outcome of this process or any subsequent proceedings, which could result in the imposition of monetary and/or injunctive relief, including the invalidation of agreements. However, the Company believes that the subject agreements and efforts do not exceed the term or scope of its patents and are otherwise consistent with antitrust laws and applicable precedents. If the FTC ultimately challenges the agreements, the Company would expect to vigorously defend itself in any such action, which the Company would anticipate to be a multi-year, protracted process. However, no assurance can be given as to the timing or outcome of such process.

29

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. and Canada of products for the treatment of dermatological and aesthetic conditions. We offer a broad range of products addressing various conditions or aesthetics improvements, including facial wrinkles, glabellar lines, acne, fungal infections, hyperpigmentation, photoaging, psoriasis, actinic keratosis, bronchospasms, external genital and perianal warts/condyloma acuminate, seborrheic dermatitis and cosmesis (improvement in the texture and appearance of skin).

During the fourth quarter of 2011, we acquired substantially all of the assets of Graceway Pharmaceuticals, LLC (“Graceway”) for approximately $455.9 million in cash, after our successful bid at a bankruptcy auction. Graceway’s commercial pharmaceutical product portfolio includes on-market prescription products and important development projects primarily in dermatology and women’s health specialties.

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 in the respiratory and women’s health specialties and products for the treatment of urea cycle disorder. Our non-dermatological field also includes contract revenues associated with licensing agreements and authorized generic agreements. Our acne and acne-related dermatological product lines include SOLODYN^® and ZIANA^®. Our non-acne dermatological product lines include DYSPORT^®, LOPROX^®, PERLANE^®, RESTYLANE^®, VANOS^® and ZYCLARA^®. Our non-dermatological product lines include AMMONUL^® and BUPHENYL^®.

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^®, ZIANA^® and ZYCLARA^®. We believe that sales of our primary products will constitute a significant portion of our revenue for 2012.

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 and utilizing 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 physicians in the U.S. and Canada. We rely on third parties to manufacture our products.

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.

30

We sell our products primarily to major wholesalers and retail pharmacy chains. Approximately 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 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 that licensed health care providers’ dispensing instructions are fulfilled with our branded products and are not improperly 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 retail chain 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. During the fourth quarter of 2011, we acquired substantially all of the assets of Graceway for approximately $455.9 million in cash, after our successful bid at a bankruptcy auction. Graceway’s commercial pharmaceutical product portfolio includes on-market prescription products and development projects primarily in dermatology and women’s health specialties. Also during the fourth quarter of 2011, we closed the sale of our LipoSonix business to Solta Medical, Inc. for aggregate cash consideration of approximately $35.5 million and continuing milestone payments based upon the commercial success of the LipoSonix products.

31

Recent Developments

As described in more detail below, the following significant events and transactions occurred during the three months ended March 31, 2012 (in chronological order) and affected our results of operations, our cash flows and our financial condition:

- License agreement with 3M;

- Increase of our quarterly dividend from $0.08 per share to $0.10 per share;

- Amended and restated collaboration agreement and asset purchase agreement with Hyperion;

- Development and license agreement with a specialty pharmaceutical company; and

- Amended and restated joint development agreement with Lupin.

License agreement with 3M

On February 24, 2012, we entered into a License Agreement with 3M Company and 3M Innovative Properties Company (collectively, “3M”) for worldwide rights to a number of leading molecules in 3M’s platform of immune response modifiers, for all topical dermatology indications and options for all human uses associated with the licensed molecules, excluding vaccine adjuvant. Under the terms of the agreement, we made an up-front payment of $7.5 million to 3M in connection with the execution of the agreement, and will pay up to an additional $25.6 million of contingent license and option fees. We may also pay up to an additional $25.0 million upon the achievement of certain research, development and regulatory milestones, as well as royalties on future sales. The initial $7.5 million payment was recognized as research and development expense during the three months ended March 31, 2012.

Increase of our quarterly dividend from $0.08 per share to $0.10 per share

On February 27, 2012, we announced that our Board of Directors had declared a cash dividend of $0.10 per issued and outstanding share of our Class A common stock, which was paid on April 30, 2012, to stockholders of record at the close of business on April 2, 2012. This represented a 25% increase compared to our previous $0.08 dividend.

Amended and restated collaboration agreement and asset purchase agreement with Hyperion

On March 22, 2012, Ucyclyd Pharma, Inc. (“Ucyclyd”), our wholly-owned subsidiary, and Hyperion Therapeutics, Inc. (“Hyperion”) entered into an Amended and Restated Collaboration Agreement (the “Amended Collaboration Agreement”), which amended and restated our existing Collaboration Agreement, dated August 23, 2007, as previously amended on or about November 24, 2008, June 29, 2009 and October 12, 2009 (the “Prior Collaboration Agreement”).

Pursuant to the terms of the Prior Collaboration Agreement, Ucyclyd granted rights to Hyperion, exercisable in the future, to purchase certain worldwide rights to Ucyclyd’s existing on-market products AMMONUL^® and BUPHENYL^® under certain conditions, as well as to develop and commercialize Ravicti™, a compound referred to as HPN-100 (and also previously referred to as GT4P in the Prior Collaboration Agreement), for the treatment of urea cycle disorder, hepatic encephalopathies and other indications. The parties agreed to supersede the Prior Collaboration Agreement with the Amended Collaboration Agreement, under which Hyperion will continue to have the right, exercisable no earlier than January 1, 2013, to purchase certain worldwide rights to AMMONUL^® and BUPHENYL^®, subject to Ucyclyd’s right to elect to retain such rights to AMMONUL^®, and an Asset Purchase Agreement of even date with the Amended Collaboration Agreement (the “APA”), under which Hyperion agreed to purchase Ucyclyd’s rights to Ravicti™ on the terms set forth therein. The parties completed the sale of Ravicti™ under the APA on March 22, 2012, for which Hyperion paid Ucyclyd $6.0 million. If Ravicti™ is not approved by the FDA by January 1, 2013, Ucyclyd will pay Hyperion $0.5 million per month until June 30, 2013, or until Ravicti™ is approved, whichever comes first, subject to a maximum of $3.0 million in aggregate payments. Pursuant to the APA, Hyperion will pay Ucyclyd certain royalties and regulatory and sales milestones relating to Ravicti™ and, pursuant to the terms of the Amended Collaboration Agreement, following exercise of its purchase rights, Hyperion will pay Ucyclyd certain royalties and regulatory and sales milestones relating to AMMONUL^® and BUPHENYL^®. Ucyclyd will continue to be entitled to all revenue from the sales of AMMONUL^® and BUPHENYL^® until the exercise of the purchase rights by Hyperion. If Hyperion elects to purchase AMMONUL^® and BUPHENYL^®, but Ucyclyd elects to retain AMMONUL^®, then AMMONUL^® will remain an asset of Ucyclyd and Ucyclyd will continue to be entitled to all revenue from the sales of AMMONUL^®.

32

A net gain of $3.0 million on the sale of Ravicti™ to Hyperion was recognized in other income during the three months ended March 31, 2012. This consisted of the $6.0 million payment Ucyclyd received from Hyperion, partially offset by the $3.0 million in potential contingent payments that Ucyclyd could pay to Hyperion during the first six months of 2013, based upon the timing of the approval of Ravicti™ by the FDA.

Development and license agreement with a specialty pharmaceutical company

On March 30, 2012, we entered into a Development and License Agreement with a specialty pharmaceutical company pursuant to which we obtained exclusive worldwide rights for the development and commercialization of an investigational drug targeted at certain topical skin applications. Under the terms of the agreement, we agreed to pay an up-front payment of $25.0 million in connection with the execution of the agreement, and will pay up to an additional $80.0 million upon the achievement of certain research, development and regulatory milestones and up to an additional $120.0 million upon the achievement of certain commercial milestones, as well as royalties on future sales. The initial $25.0 million up-front payment, paid in April 2012, was recognized as research and development expense during the three months ended March 31, 2012.

Amended and restated joint development agreement with Lupin

On July 21, 2011, we entered into a Joint Development Agreement (the “Original Agreement”) with Lupin Limited, on behalf of itself and its affiliates (hereinafter collectively referred to as “Lupin”), whereby we and Lupin will collaborate to develop multiple novel proprietary therapeutic products. Pursuant to the Original Agreement, subject to the terms and conditions contained therein, we made an up-front $20.0 million payment to Lupin and were to make additional payments to Lupin upon the achievement of certain research, development, regulatory and other milestones, as well as royalty payments on sales of the products covered under the Original Agreement. In addition, we were to receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Original Agreement.

On March 30, 2012, we entered into an Amended and Restated Joint Development Agreement with Lupin (the “Amended and Restated Joint Development Agreement”), which modified the list of products being developed. We made a $2.5 million payment to Lupin in April 2012 in connection with the execution of the Amended and Restated Joint Development Agreement, and will make additional payments to Lupin of up to $35.5 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 Amended and Restated Joint Development Agreement, which supersedes the additional payments we would have made under the Original Agreement. In addition, we will receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Amended and Restated Joint Development Agreement.

The $20.0 million up-front payment related to the Original Agreement was recognized as research and development expense during the three months ended September 30, 2011. The $2.5 million payment related to the Amended and Restated Joint Development Agreement was recognized as research and development expense during the three months ended March 31, 2012.

33

Results of Operations

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

	Three Months Ended
	March 31, 2012			March 31, 2011
	(a)			(b)
Net revenues		100.0	%		100.0	%
Gross profit (c)		89.6			91.3
Operating expenses		85.9			64.4
Operating income		3.7			26.9
Other income, net		1.5			-
Interest and investment (expense) income, net		(0.2)			0.1
Income from continuing operations before income tax expense		5.0			27.0
Income tax expense		(2.3)			(10.8)
Net income from continuing operations		2.7			16.2
Loss from discontinued operations, net of income tax benefit		-			(4.4)
Net income		2.7	%		11.8	%

(a) Included in operating expenses is $25.0 million (12.4% of net revenues) related to a development and license agreement with a specialty pharmaceutical company, $7.5 million (3.7% of net revenues) paid to 3M related to a license agreement, $4.0 million (2.0% of net revenues) paid to a Medicis partner related to a product development agreement, $2.5 million (1.2% of net revenues) related to a product development agreement with Lupin and $9.1 million (4.5% of net revenues) of compensation expense related to stock options, restricted stock and stock appreciation rights.

(b) Included in operating expenses is $7.0 million (4.2% of net revenues) paid to Anacor related to a product development agreement and $6.7 million (4.1% of net revenues) of compensation expense related to stock options, restricted stock and stock appreciation rights.

(c) Gross profit does not include amortization of the related intangibles as such expense is included in operating expenses.

34

Three Months Ended March 31, 2012 Compared to the Three Months Ended March 31, 2011

Net Revenues

The following tables set forth our net revenues for the three months ended March 31, 2012 (the “first quarter of 2012”) and March 31, 2011 (the “first quarter of 2011”), along with the percentage of net revenues and percentage point change for each of our product categories (dollar amounts in millions):

	First Quarter 2012			First Quarter 2011			$ Change			% Change
Net product revenues	$	200.0		$	163.9		$	36.1			22.0	%
Net contract revenues		1.7			1.0			0.7			70.0	%
Total net revenues	$	201.7		$	164.9		$	36.8			22.3	%
	First Quarter 2012			First Quarter 2011			$ Change			% Change
Acne and acne-related dermatological products	$	108.5		$	103.5		$	5.0			4.8	%
Non-acne dermatological products		74.0			52.2			21.8			41.8	%
Non-dermatological products (including contract revenues)		19.2			9.2			10.0			108.7	%
Total net revenues	$	201.7		$	164.9		$	36.8			22.3	%
	First Quarter 2012			First Quarter 2011			Change
Acne and acne-related dermatological products		53.8	%		62.7	%		(8.9)	%
Non-acne dermatological products		36.7	%		31.7	%		5.0	%
Non-dermatological products (including contract revenues)		9.5	%		5.6	%		3.9	%
Total net revenues		100.0	%		100.0	%		-

Net revenues associated with our acne and acne-related dermatological products increased by $5.0 million, or 4.8%, during the first quarter of 2012 as compared to the first quarter of 2011, primarily due to an increase in net revenues of ZIANA^®. The increase in net revenues of ZIANA^® was in part due to a $3.9 million reserve recorded during the first quarter of 2011 related to a targeted recall of product from one lot, as a result of a notice we received during April 2011 from our contract manufacturer regarding one lot of ZIANA^® that went out of specifications. Net revenues of SOLODYN^® during the first quarter of 2012 as compared to the first quarter of 2011 were positively impacted by increased demand and a reduction in consumer rebates due to the launch of our alternate fulfillment initiatives during the first quarter of 2012, partially offset by the impact of new managed care contracts that were entered into during December 2011. See “Critical Accounting Policies and Estimates – Items Deducted from Gross Revenue” for a discussion of our managed care rebates.

Net revenues associated with our non-acne dermatological products increased by $21.8 million, or 41.8%, during the first quarter of 2012 as compared to the first quarter of 2011 primarily due to sales of ZYCLARA^®, including the initial sales of ZYCLARA^® 3.75% strength in a pump container system during the first quarter of 2012. ZYCLARA^® was acquired during December 2011 as part of our acquisition of the assets of Graceway. Our net revenues of our non-acne dermatological products also increased because of increases in net revenues of RESTYLANE^®, PERLANE^® and VANOS^®.

35

Net revenues associated with our non-dermatological products increased by $10.0 million, or 108.7%, during the first quarter of 2012 as compared to the first quarter of 2011 primarily due to sales of various products that were acquired as part of the acquisition of the assets of Graceway during December 2011.

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 first quarter of 2012 and 2011 was approximately $15.7 million and $5.5 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 first quarter of 2012 and 2011, along with the percentage of net revenues represented by such gross profit (dollar amounts in millions):

	First Quarter 2012			First Quarter 2011			$ Change		% Change
Gross profit	$	180.8		$	150.6		$	30.2		20.1	%
% of net revenues		89.6	%		91.3	%

The increase in gross profit during the first quarter of 2012 as compared to the first quarter of 2011 is primarily due to the $36.8 million increase in net revenues.

Selling, General and Administrative Expenses

The following table sets forth our selling, general and administrative expenses for the first quarter of 2012 and 2011, along with the percentage of net revenues represented by selling, general and administrative expenses (dollar amounts in millions):

	First Quarter 2012			First Quarter 2011			$ Change		% Change
Selling, general and administrative	$	103.4		$	84.6		$	18.8		22.2	%
% of net revenues		51.3	%		51.3	%
Share-based compensation expense included in selling, general and administrative	$	8.4		$	6.3		$	2.1		33.3	%

Selling, general and administrative expenses increased $18.8 million, or 22.2%, during the first quarter of 2012 as compared to the first quarter of 2011, but remained consistent as a percentage of net revenues at 51.3% during both the first quarter of 2011 and the first quarter of 2012. Included in this increase was an $8.1 million increase in personnel expenses, an $8.8 million increase in professional fees and costs, and an increase of $1.9 million of other selling, general and administrative costs. The increase in personnel costs was primarily due to an increase in headcount (excluding research and development personnel) from 561 as of March 31, 2011 to 721 as of March 31, 2012.

36

Research and Development Expenses

The following table sets forth our research and development expenses for the first quarter of 2012 and 2011 (dollar amounts in millions):

	First Quarter 2012		First Quarter 2011		$ Change		% Change
Research and development	$	51.8	$	14.3	$	37.5		262.2	%
Charges included in research and development	$	39.0	$	7.0	$	32.0		457.1	%
Share-based compensation expense included in research and development	$	0.7	$	0.4	$	0.3		75.0	%

Included in research and development expenses for the first quarter of 2012 was $25.0 million related to a development and license agreement with a specialty pharmaceutical company, a $7.5 million payment to 3M related to a license agreement, $4.0 million paid to a Medicis partner related to a product development agreement and $2.5 million related to a product development agreement with Lupin. Included in research and development expense for the first quarter of 2011 was $7.0 million paid to Anacor 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 first quarter of 2012 increased $10.8 million, or 146.9%, to $18.1 million during the first quarter of 2012, as compared to $7.3 million during the first quarter of 2011, primarily as a result of $335.8 million of intangible assets acquired during December 2011 as part of the acquisition of the assets of Graceway. Amortization expense is expected to be significantly higher during 2012, and in subsequent years, as compared to 2011, as 2011 only included one month of amortization expense related to these acquired intangible assets.

Interest and Investment Income

Interest and investment income during the first quarter of 2012 decreased $0.7 million, or 52.0%, to $0.6 million from $1.3 million during the first quarter of 2011, due to a decrease in the amount of funds available for investment during the first quarter of 2012. The decrease in the amount of funds available for investment was primarily impacted by the $455.9 million used to acquire the assets of Graceway during the fourth quarter of 2011 and the $150.1 million used to repurchase shares of our common stock during the second half of 2011.

Interest Expense

Interest expense during the first quarter of 2012 and first quarter of 2011 was $1.1 million. Our interest expense during the first quarter of 2012 and 2011 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. See Note 12 in our accompanying condensed consolidated financial statements for further discussion on the Old Notes and New Notes.

Other Income, net

Other income during the first quarter of 2012 included a $3.0 million gain on the sale of the product rights for Ravicti^TM to Hyperion.

Income Tax Expense

Our effective tax rate for continuing operations for the first quarter of 2012 was 46.6%, as compared to 40.1% for the first quarter of 2011. The increase in our effective tax rate was primarily due to an accrual related to an uncertain tax position.

37

Loss from Discontinued Operations, Net of Income Tax Benefit

Loss from discontinued operations, net of income tax benefit, was $7.3 million during the first quarter of 2011. See Note 2 in our accompanying condensed consolidated financial statements for further discussion.

38

Liquidity and Capital Resources

Overview

The following table highlights selected cash flow components for the first quarter of 2012 and first quarter of 2011, and selected balance sheet components as of March 31, 2012 and December 31, 2011 (dollar amounts in millions):

	First Quarter 2012		First Quarter 2011		$ Change		% Change
Cash provided by (used in):
Operating activities	$	34.9	$	95.1	$	(60.2)		(63.3)	%
Investing activities		22.9		(9.4)		32.3		343.6	%
Financing activities		(4.4)		2.7		(7.1)		(263.0)	%

	Mar. 31, 2012		Dec. 31, 2011		$ Change		% Change
Cash, cash equivalents, and short-term investments	$	342.3	$	288.3	$	54.0		18.7	%
Working capital		0.4		(23.6)		24.0		101.7	%
Long-term investments		20.2		40.3		(20.1)		(49.9)	%
2.5% contingent convertible senior notes due 2032		169.1		169.1		-		-	%
1.5% contingent convertible senior notes due 2033		0.2		0.2		-		-	%

39

Working Capital

Working capital as of March 31, 2012 and December 31, 2011 consisted of the following (dollar amounts in millions):

	Mar. 31, 2012		Dec. 31, 2011		$ Change		% Change
Cash, cash equivalents, and short-term investments	$	342.3	$	288.3	$	54.0		18.7	%
Accounts receivable, net		199.5		193.0		6.5		3.4	%
Inventories, net		36.7		34.5		2.2		6.4	%
Deferred tax assets, net		13.8		12.7		1.1		8.7	%
Other current assets		24.8		22.6		2.2		9.7	%
Total current assets		617.1		551.1		66.0		12.0	%
Accounts payable		94.4		54.1		40.3		74.5	%
Current portion of contingent convertible senior notes		169.1		169.1		-		-	%
Reserve for sales returns		63.6		60.0		3.6		6.0	%
Accrued consumer rebate and loyalty programs		116.2		139.9		(23.7)		(16.9)	%
Managed care and Medicaid reserves		97.0		72.8		24.2		33.2	%
Income taxes payable		4.6		-		4.6		100.0	%
Other current liabilities		71.8		78.8		(7.0)		(8.9)	%
Total current liabilities		616.7		574.7		42.0		7.3	%
Working capital	$	0.4	$	(23.6)	$	24.0		101.7	%

We had cash, cash equivalents and short-term investments of $342.3 million and working capital of $0.4 million at March 31, 2012, as compared to $288.3 million and negative working capital of $23.6 million, respectively, at December 31, 2011. The increase in cash, cash equivalents and short-term investments and working capital was primarily due to the generation of $34.9 million of operating cash flow during the first quarter of 2012.

Accounts receivable, net, was $199.5 million and $193.0 million at March 31, 2012 and December 31, 2011, respectively. During both the first quarter of 2012 and the fourth quarter of 2011, at least half of our gross sales recognized during those quarters were made during the third month of the quarter. 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 March 2012 were $203.6 million, or 50.0% of the total gross sales for the first quarter of 2012, and gross sales during the month of December 2011 were $201.8 million, or 54.8% of total gross sales for the fourth quarter of 2011. 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 45 days as of March 31, 2012 as compared to 48 days as of December 31, 2011. The calculated days’ sales outstanding is impacted by the timing of orders placed within their inventory management agreement terms by customers during the first quarter of 2012 and the fourth quarter of 2011. Total purchases by customers, excluding the impact of the sales of Graceway products, for the first quarter of 2012 were consistent with previous quarters. Gross sales during the first quarter of 2012 and during the month of December 2011 included sales of Graceway products, which were acquired as part of our acquisition of the assets of Graceway in December 2011. 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 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

40

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 March 31, 2012.

Accounts payable increased $40.3 million, or 74.5%, to $94.4 million at March 31, 2012 from $54.1 million at December 31, 2011. This was primarily due to $27.5 million of up-front payments related to product development agreements that were included in accounts payable at March 31, 2012, which were paid during April 2012.

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, but may not be sufficient to fund potential future significant business development activities. 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 March 31, 2012, our short-term investments included $12.8 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 first quarter of 2012, we liquidated approximately $0.1 million of our auction rate floating securities at par.

Operating Activities

Net cash provided by operating activities during the first quarter of 2012 was approximately $34.9 million, compared to cash provided by operating activities of approximately $95.1 million during the first quarter of 2011. The following is a summary of the primary components of cash provided by operating activities during the first quarter of 2012 and first quarter of 2011 (in millions):

	First Quarter 2012		First Quarter 2011
Income taxes paid	$	(11.3)	$	(6.0)
Payment made to 3M related to development agreement		(7.5)		-
Payment made to Anacor related to development agreement		-		(7.0)
Payment made to a Medicis partner related to a development agreement		(4.0)		-
(Increase) decrease in accounts receivable		(6.9)		31.5
Increase in accounts payable		37.2		4.3
Increase in reserve for returns		3.5		13.1
(Decrease) increase in accrued consumer rebates and loyalty programs		(23.8)		20.0
Increase (decrease) in Managed care and Medicaid reserves		24.2		(0.2)
Decrease in other current liabilities		(15.1)		(12.8)
Cash used in operating activities from discontinued operations		-		(5.5)
Other cash provided by operating activities		38.6		57.7
Cash provided by operating activities	$	34.9	$	95.1

41

Investing Activities

Net cash provided by investing activities during the first quarter of 2012 was approximately $22.9 million, compared to net cash used in investing activities during the first quarter of 2011 of $9.4 million. The change was primarily due to the net purchases and sales of our short-term and long-term investments during the respective periods.

Financing Activities

Net cash used in financing activities during the first quarter of 2012 was $4.4 million, compared to net cash provided by financing activities of $2.7 million during the first quarter of 2011. Proceeds from the exercise of stock options were $2.8 million during the first quarter of 2012 compared to $9.5 million during the first quarter of 2011. Dividends paid during the first quarter of 2012 were $4.7 million and dividends paid during the first quarter of 2011 were $3.6 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, through June 11, 2008, above $0.025 per share would result in at least a one percent (1%) increase in the conversion price. This threshold was not 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 March 31, 2012, $169.1 million of the Old Notes and $65.1 million of deferred tax liabilities were classified as current liabilities in our condensed consolidated balance sheets. The $65.1 million of deferred tax liabilities were included within current deferred tax assets, net.

On May 3, 2012, we filed with the Securities and Exchange Commission (the “SEC”) a Tender Offer Statement on Schedule TO and a notice (the “Company Notice”) to the holders of the Old Notes related to the option of the holders to require us to repurchase all or a portion of their Old Notes on June 4, 2012. In addition, such Company Notice was made available through The Depository Trust Company and Deutsche Bank Trust Company Americas, the paying agent.

The Company Notice specifies the terms, conditions and procedures for surrendering and withdrawing the Old Notes for purchase. Specifically, the Company Notice provides that the opportunity to surrender the Old Notes for purchase will commence on May 3, 2012, and will terminate at 5:00 p.m., Eastern Time, on Friday, June 1, 2012, and also that the holders of the Old Notes may withdraw any Old Notes previously surrendered for purchase at any time prior to 5:00 p.m., Eastern Time, on June 1, 2012.

The Company Notice also states that validly surrendered and not withdrawn Old Notes will be purchased by us for $1,000 in cash per $1,000 principal amount at maturity of the Old Notes (the “Purchase Price”) and that accrued and unpaid interest on the Old Notes to, but not including, June 4, 2012 (an interest payment date under the terms of the Old Notes), will be paid to the holder of record at the close of business on May 19, 2012, prior to the payment of the Purchase Price as provided by the indenture. Accordingly, we expect that there will be no accrued and unpaid interest due as part of the Purchase Price. Additionally, the Company Notice states that holders that do not surrender their Old Notes for purchase will maintain the right to convert their Old Notes into shares of the Company’s Class A common stock, as further described below.

42

The Company Notice also makes clear that none of we, our board of directors or employees have made or are making any representation or recommendation as to whether or not any holder should surrender any of the Old Notes.

If all of the Old Notes are put back to us on June 4, 2012, we would be required to pay $169.1 million to purchase the Old Notes. We would also be required to pay the accumulated deferred tax liability related to the Old Notes.

During the quarters ended December 31, 2011 and March 31, 2012, the Old Notes met the criteria for the right of conversion into shares of our 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 quarters ended December 31, 2011 and March 31, 2012. During the quarter ended March 31, 2012, no holders of Old Notes converted their Old Notes into shares of our Class A common stock. The holders of Old Notes have this conversion right only until June 30, 2012. 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 March 31, 2012, the New Notes did not meet the criteria for the right of conversion.

Except for the New Notes, we had only $48.2 million of long-term liabilities at March 31, 2012, and, except for the Old Notes, we had $447.5 million of current liabilities at March 31, 2012. 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 $83.3 million on our common stock. In addition, on February 27, 2012, we announced that our Board of Directors had declared a cash dividend of $0.10 per issued and outstanding share of common stock, which was paid on April 30, 2012, to our stockholders of record at the close of business on April 2, 2012. This represents a 25% increase compared to our previous $0.08 dividend. 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.

Fair Value Measurements

We utilize unobservable (Level 3) inputs in determining the fair value of our auction rate floating security investments, which totaled $12.8 million at March 31, 2012. These securities were included in long-term investments at March 31, 2012.

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 March 31, 2012, 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.

43

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, 2011. There were no new significant accounting estimates in the first quarter of 2012, 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, 2011.

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.

44

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 March 31, 2012 and 2011 (in thousands):

	Reserve for Sales Returns			Deferred Revenue		Sales Discounts Reserve			Chargebacks Reserve			Managed Care & Medicaid Rebates Reserve			Consumer Rebate and Loyalty Programs			Total
Balance at Dec. 31, 2011	$	60,024		$	211	$	4,137		$	2,050		$	72,801		$	139,948		$	279,171
Actual		(5,703	)		-		(7,672	)		(2,089	)		(39,143	)		(129,320	)		(183,927	)
Provision		9,241			5,993		7,740			2,376			63,377			105,543			194,270
Balance at Mar. 31, 2012	$	63,562		$	6,204	$	4,205		$	2,337		$	97,035		$	116,171		$	289,514

	Reserve for Sales Returns			Deferred Revenue		Sales Discounts Reserve			Chargebacks Reserve			Managed Care & Medicaid Rebates Reserve			Consumer Rebate and Loyalty Programs			Total
Balance at Dec. 31, 2010	$	60,692		$	582	$	2,830		$	1,151		$	49,375		$	101,678		$	216,308
Actual		(12,028	)		-		(7,057	)		(1,274	)		(25,228	)		(80,623	)		(126,210	)
Provision		25,138			3,635		6,578			1,245			25,009			100,649			162,254
Balance at Mar. 31, 2011	$	73,802		$	4,217	$	2,351		$	1,122		$	49,156		$	121,704		$	252,352

The provision for product returns was $9.2 million, or 2.3% of gross product sales, and $25.1 million, or 7.4% of gross product sales, for the three months ended March 31, 2012 and 2011, respectively. The reserve for product returns increased $3.6 million, from $60.0 million as of December 31, 2011 to $63.6 million as of March 31, 2012. The decrease in the provision during the comparable periods was primarily related to additional estimated required reserves for newly-launched products recorded during the three months ended March 31, 2011.

The provision for sales discounts (or “cash discounts”) was $7.7 million, or 1.9% of gross product sales, and $6.6 million, or 1.9% of gross product sales, for the three months ended March 31, 2012 and 2011, respectively. The reserve for cash discounts increased $0.1 million, from $4.1 million as of December 31, 2011 to $4.2 million as of March 31, 2012. 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 managed care and Medicaid rebates was $63.4 million, or 15.6% of gross product sales, and $25.0 million, or 7.4% of gross product sales, for the three months ended March 31, 2012 and 2011, respectively. The reserve for managed care and Medicaid rebates increased $24.2 million, from $72.8 million as of December 31, 2011 to $97.0 million as of March 31, 2012. The increase in the provision during the comparable

45

periods and in the reserve during the three months ended March 31, 2012 was primarily due to new managed care contracts entered into during December 2011. It is expected that the new managed care contracts entered into during December 2011 will result in managed care rebates being a greater percentage of gross sales of our products, particularly SOLODYN^®, during 2012 as compared to 2011.

The provision for consumer rebates and loyalty programs was $105.5 million, or 26.0% of gross product sales, and $100.6 million, or 29.6% of gross product sales, for the three months ended March 31, 2012 and 2011, respectively. The reserve for consumer rebates and loyalty programs decreased $23.7 million, from $139.9 million as of December 31, 2011 to $116.2 million as of March 31, 2012. The increase in the provision during the comparable periods was primarily due to the continued growth in loyalty programs related to our aesthetics products. The decrease in the reserve for consumer rebates and loyalty programs during the first quarter of 2012 was due to the impact of our alternate fulfillment initiatives launched during the first quarter of 2012.

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 adopted ASU No. 2011-04 as of January 1, 2012 and the revised guidance, which relates to disclosure, did not impact 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. We adopted ASU No. 2011-05 as of January 1, 2012, and the adoption of this amendment only impacted the presentation of comprehensive income within our condensed consolidated financial statements. Comprehensive income is now presented in the condensed consolidated statements of comprehensive income that are now included as part of our condensed consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The updated guidance permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value before applying the two-step goodwill impairment model that is currently in place. If it is determined through the qualitative assessment that a reporting unit’s fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing companies to go directly to the quantitative assessment. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed in annual reporting periods beginning after December 15, 2011, with early adoption permitted. We adopted ASU 2011-08 as of January 1, 2012, and the revised guidance did not impact our results of operations and financial condition.

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-

46

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;

• 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;

• the effect of economic changes generally and in natural disaster-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 existing products and new products, including products we acquired from Graceway in December 2011;

• 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;

• our strategy to negotiate additional new, multi-year contracts with targeted managed care organizations and pharmacy benefit managers, which may result in increased managed care rebates and have a negative impact on sales, reserves, profitability and the average selling price for affected products, such as SOLODYN^®;

• our ability to continue offering patient discounts and rebates for our products;

• our ability to successfully launch and execute new patient rebate and related programs;

• 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, our ability to enter into agreements with companies introducing generic versions of our 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;

47

• legal defense costs, insurance expenses, settlement costs and the risk of an adverse decision or settlement related to product liability, patent protection, government investigations (including the civil investigative demand we recently received relating to various settlement and other agreements we entered into with makers of generic SOLODYN^® products and other efforts principally regarding SOLODYN^®), 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;

• 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 federal health care programs and FDA requirements, 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.

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. This Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2011 contains 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 March 31, 2012, 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, 2011.

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 March 31, 2012, 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

48

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 March 31, 2012, 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.

49

Part II.  Other Information

Item 1.    Legal Proceedings

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™ Gel, 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™ Gel. We also requested a temporary restraining order, which application was heard and denied by the Court on October 15, 2010. On December 14, 2011, the case was reassigned to a new judge, who issued a new case scheduling order pursuant to which a “Markman Hearing” was held on March 20, 2012. At a Markman Hearing, a court determines the scope of the patent’s claims. We are awaiting the results of the Markman Hearing, and a jury trial has been set to commence on September 17, 2012.

On March 20, 2012, we filed another suit against Stiefel, including naming Stiefel’s parent company, GlaxoSmithKline plc (“GSK”). The suit was filed in the United States District Court for the District of New Jersey for patent infringement, and more specifically that Stiefel and GSK’s manufacture and sale of VELTIN^TM Gel infringes one or more claims of U.S. Patent No. 6,387,383 (the “’383 Patent”) covering our product ZIANA^® Gel. The ’383 Patent is also listed in the FDA’s Approved Drug Products and Therapeutic Equivalence Evaluations (Orange Book) and expires in August 2020. We have rights to the ’383 Patent pursuant to an exclusive license agreement with the owner of the patent. In this action, we seek both monetary damages and a permanent injunction preventing Stiefel and/or GSK from engaging in infringing activities relating to the manufacture and sale of VELTIN^TM Gel. The case has only recently been filed and the defendants have not yet responded to the Complaint.

Actavis ZIANA^® Litigation

On March 30, 2011, we received a Paragraph IV Patent Certification Notice from Actavis Mid Atlantic LLC (“Actavis”) advising that Actavis has filed an ANDA with the FDA for approval to market a generic version of ZIANA^® (clindamycin phosphate 1.2% and tretinoin 0.025%) Gel. Actavis has not advised us as to the expected timing or approval. 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, and that the ’134 Patent and the ’383 Patent are otherwise invalid. 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. Originally, the suit sought an adjudication that Actavis’ ANDA infringes one or more claims of the ’134 Patent and the ’383 Patent, and that if approved, Actavis’ product will infringe those patents. In February 2012, we withdrew the ’134 Patent from the litigation and all claims concerning that patent were dismissed without prejudice. The relief we requested includes a request for a permanent injunction preventing the FDA from approving Actavis’ ANDA. As a result of the filing of the suit, we believe that Actavis’ 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. Currently, a “Markman Hearing” is scheduled for May 8, 2012, and a bench trial is set to commence on July 8, 2013. At a Markman Hearing, a court determines the scope of the patent’s claims.

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”)

50

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 U.S. Patent and Trademark Office (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. On August 12, 2011, the USPTO issued an initial action in the reexamination, confirming that several of the claims of the ’355 Patent are patentable, including several claims that we believe are infringed by Acella. The reexamination process is continuing. 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 scheduled for February 23, 2011. 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. In the meantime, Acella moved for summary judgment that the claims of the ’355 Patent are invalid, and that we are entitled only to a reasonable royalty, not lost profit damages. We opposed this motion. On November 3, 2011, the Court granted the motion with respect to validity, and dismissed the motion with respect to lost profits damages. We filed an appeal with the Court on November 30, 2011. Briefing in the appeal was suspended pending mediation ordered by the Court of Appeals. During that mediation, terms of settlement were discussed. The parties are currently considering the proposed terms of the settlement and have agreed to continue the suspension of the proceedings in the Court of Appeals.

LOPROX^® Patent Litigation

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”) on July 19, 2011, and against Watson Pharmaceuticals, Inc. (“Watson,” and collectively with Perrigo, Nycomed, and Taro, the “Defendants”) on October 21, 2011, in the U.S. 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. Watson acquired rights to a generic ciclopirox 1% shampoo from Perrigo on or about July 26, 2011, which shampoo was approved by the FDA on November 24, 2009. The ’909 Patent was issued to us by the USPTO on July 19, 2011 and expires in September 2017. 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 formally served each of defendants Perrigo, Nycomed, and Taro Pharmaceuticals U.S.A., Inc. with the complaints on October 13, 2011. Taro Pharmaceutical Industries, Ltd. was formally served on October 24, 2011. Watson was formally served on December 8, 2011. On February 6, 2012 and February 21, 2012, respectively, we entered into License and Settlement Agreements with Watson and Taro, and effective March 1, 2012, we entered into a License and Settlement Agreement with Perrigo (collectively, the “Loprox Settlement Agreements”). In connection with the Loprox Settlement Agreements, we and Watson, Taro and Perrigo, respectively, agreed to settle all legal disputes between us relating to LOPROX^® Shampoo and we agreed to withdraw our complaints against such parties pending in the U.S. District Court for the Southern District of New York. Subject to the terms and conditions contained in the Loprox Settlement Agreements, we granted each of Watson, Taro and Perrigo a non-exclusive royalty-bearing license to make and sell limited quantities of a generic version of LOPROX^® Shampoo. Our action against Nycomed is still pending.

Zydus Pharmaceuticals USA, Inc. SOLODYN^® Litigation

On April 27, 2012, we received a Paragraph IV Patent Certification from Zydus Pharmaceuticals USA, Inc. (“Zydus”), advising that Zydus has filed an ANDA with the FDA for generic versions of SOLODYN^® (minocycline HCl, USP) Extended Release Tablets in 45mg, 55mg, 65mg, 80mg, 90mg, 105mg and 135mg strengths. Zydus 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

51

requirements for proving bioequivalence. Zydus’s Paragraph IV Patent Certification alleges that our U.S. Patent Nos. 5,908,838, 7,541,347, 7,544,373, 7,790,705 and 7,919,483 are invalid and/or will not be infringed by Zydus’s manufacture, use or sale of the products for which the ANDA was submitted. The expiration dates for the patents are in 2018, 2027, 2027, 2025 and 2027, respectively. We intend to continue to vigorously defend our intellectual property relating to SOLODYN^®.

Civil Investigative Demand from the U.S. Federal Trade Commission

As previously disclosed in our SEC filings, we entered into various settlement and other agreements with makers of generic SOLODYN^® products following patent infringement claims and litigation. On May 2, 2012, we received a civil investigative demand from the U.S. Federal Trade Commission (the “FTC”) requiring that we provide to the FTC information and documents relating to such agreements, each of which was previously filed with the FTC and the Antitrust Division of the Department of Justice in accordancLODYNe with the requirements of the Medicare Modernization Act of 2003, and other efforts principally relating to SOLODYN^®. We intend to cooperate with this investigative process. If, at the conclusion of this process, the FTC believes that any of the agreements or efforts violates antitrust laws, it could challenge us through a civil administrative or judicial proceeding. It is not possible to predict the outcome of this process or any subsequent proceedings, which could result in the imposition of monetary and/or injunctive relief, including the invalidation of agreements. However, we believe that the subject agreements and efforts do not exceed the term or scope of its patents and are otherwise consistent with antitrust laws and applicable precedents. If the FTC ultimately challenges the agreements, we would expect to vigorously defend itself in any such action, which we would anticipate to be a multi-year, protracted process. However, no assurance can be given as to the timing or outcome of such process.

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 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.

52

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, 2011.

Other than the additional risks set forth below, 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, 2011.

Our agreements with makers of generic SOLODYN^® products are facing increased government scrutiny in the U.S.

We are and have been involved in numerous patent litigations that have resulted or may result in settlement agreements. We filed those agreements with the FTC and the Antitrust Division of the Department of Justice for review. The FTC has brought actions against some brand and generic companies that have entered into such agreements alleging violations of antitrust laws in connection therewith.

On May 2, 2012, we received a civil investigative demand from the FTC that requires us to provide the FTC information and documents relating to various settlement and other agreements with makers of generic SOLODYN^® products following patent infringement claims and litigation, and other efforts principally regarding SOLODYN^®. If, at the conclusion of this process, the FTC believes that these or other agreements or efforts violates antitrust laws, it could challenge us through an administrative or judicial proceeding, which could result in the imposition of monetary and/or injunctive relief, including the invalidation of agreements, any of which could have a material adverse effect on our results of operations and financial condition. In addition, any such litigation could be protracted, requiring a substantial commitment of our management’s time and cash expenditures over multiple years.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes our repurchases of equity securities for the three-month period ended March 31, 2012:

Period	Total Number of Shares Repurchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Repurchased Under the Plans or Programs (1)
January 1, 2012 to January 31, 2012		-	$	-		-
February 1, 2012 to February 29, 2012		-	$	-		-
March 1, 2012 to March 31, 2012		-	$	-		-
Total		-	$	-		-	$	49,914,188

(1) 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. The plan is scheduled to terminate on the earlier of the first anniversary of the plan or the time at which the repurchase limit of $200 million is reached, but may be suspended or terminated at any time at the Company’s discretion without prior notice. As of March 31, 2012, 4,438,233 shares at an average cost of $33.82 per share, or approximately $150 million in the aggregate, have been purchased as part of this plan.

53

Item 6.    Exhibits

Exhibit 10.1+*	Amendment No. 1 to License and Settlement Agreement among the Company, Ranbaxy Inc. and Ranbaxy Laboratories Limited, dated as of February 29, 2012
Exhibit 10.2+	Letter Agreement between the Company and Ipsen Biopharm Ltd. (formerly known as Ipsen, Ltd.), amending the Development and Distribution Agreement by and between Aesthetica, Ltd. and Ipsen Ltd. dated March 16, 2012
Exhibit 10.3+*	Amended and Restated Collaboration Agreement between Ucyclyd Pharma, Inc. and Hyperion Therapeutics, Inc., dated March 22, 2012
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 March 31, 2012, formatted in XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011, (ii) the Condensed Consolidated Statements of Income for each of the three-month periods ended March 31, 2012 and 2011, (iii) the Condensed Consolidated Statements of Comprehensive Income for each of the three-month periods ended March 31, 2012 and 2011, (iv) the Condensed Consolidated Statements of Cash Flows for each of the three-month periods ended March 31, 2012 and 2011, and (v) the Notes to the Condensed Consolidated Financial Statements.

+ Filed herewith

++ Furnished herewith

* Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

** 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.

54

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: May 8, 2012	By:	/s/ Jonah Shacknai
		Jonah Shacknai
		Chairman of the Board and
		Chief Executive Officer
		(Principal Executive Officer)
Date: May 8, 2012	By:	/s/ Richard D. Peterson
		Richard D. Peterson
		Executive Vice President,
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting
		Officer)

55

EX-10.1

Exhibit 10.1

*** INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

AMENDMENT NO. 1 TO

LICENSE AND SETTLEMENT AGREEMENT

THIS AMENDMENT NO. 1 TO LICENSE AND SETTLEMENT AGREEMENT (this “Amendment”) dated as of February 29, 2012 (the “Amendment Date”), is entered into between Medicis Pharmaceutical Corporation, a Delaware corporation with an address at 7720 North Dobson Road, Scottsdale, Arizona 85256 on behalf of itself and its Affiliates (collectively, “Medicis”), and Ranbaxy Inc., a Delaware corporation with an address at 600 College Road East, Princeton, New Jersey 08540 and Ranbaxy Laboratories Limited, a corporation organized under the laws of the Republic of India with an address at Plot 90, Sector 32, Gurgaon (Haryana) India - 122001, on behalf of themselves and their respective Affiliates (collectively, “Ranbaxy”).

WHEREAS, the parties previously entered into that certain License and Settlement Agreement dated as of May 4, 2010 (the “Agreement”);

WHEREAS, the parties wish to amend the Agreement in certain respects on the terms and conditions set forth herein.

NOW THEREFORE, capitalized terms not defined in this Amendment shall have the meaning ascribed in the Agreement, and the parties hereby agree as follows:

1. Section 1.16 of the Agreement is hereby amended and restated in its entirety as follows:

1.16 “Ranbaxy NDA” means New Drug Application *** seeking approval to market the Ranbaxy Product and any supplements or amendments to such New Drug Application.

2. Section 1.17 of the Agreement is hereby amended by adding the following new sentence to the end of Section 1.17:

***.

3. ***.

4. This Amendment shall be effective for all purposes as of the Amendment Date. Except as expressly modified herein, the Agreement shall continue to remain in full force and effect in accordance with its terms, including, without limitation, all volume limitations on sales of Ranbaxy Product (see, e.g., Section 3.1.5), the right of first offer (see, e.g., Section 3.5) and payment terms and audit rights (see, e.g., Section 4).

5. This Amendment may be executed in counterparts, each of which shall be deemed to be an original and together shall be deemed to be one and the same document.

6. In any action brought regarding the validity, construction and enforcement of this Amendment, it shall be governed in all respects by the laws of the State of Delaware, without regard to the principles of conflicts of laws. The federal and state courts in the State of Delaware shall have jurisdiction over the parties hereto in all matters arising hereunder and the parties hereto agree that the venue with respect to such matters will be a state or federal court in the State of Delaware.

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective duly authorized representatives effective as of the Amendment Date.

RANBAXY LABORATORIES LIMITED		MEDICIS PHARMACEUTICAL CORPORATION
By:	/s/ Rajiv Gulati	By:	/s/ Richard D. Peterson
Name:	Rajiv Gulati	Name:	Richard D. Peterson
Title:	President Global Pharmaceuticals	Title:	Executive VP, CEO & Treasurer
RANBAXY INC.
By:	/s/ Authorized Signatory
Name:	Authorized Signatory
Title:	Regional Director

EX-10.2

Exhibit 10.2

March 16, 2012

Ipsen Biopharm Ltd.

Attention: Company Secretary

190 Bath Road

Slough, Berkshire SL1 3XE

United Kingdom

Re: Termination of Japan Distribution Rights under Development and Distribution Agreement

Dear Company Secretary:

This letter is written in connection with the Development and Distribution Agreement dated March 17, 2006 between Ipsen Biopharm Ltd. (formerly known as Ipsen Ltd) (“Ipsen”) and Medicis Pharmaceutical Corporation (“Medicis”), as amended (the “Agreement”). Capitalized terms not otherwise defined in this letter have the meaning set forth in the Agreement.

Pursuant to the Agreement, Medicis was granted rights with respect to the Current Product in the Territory, which includes Japan. Without affecting the remaining rights and obligations of the parties under the Agreement, by signing this letter, Ipsen and Medicis hereby agree to terminate Medicis’ right to distribute the Current Product in Japan effective as of the date of this letter. Such termination is without liability to either party resulting from such termination.

If you agree with the foregoing, please sign and return to me a fully executed copy of this letter. Please do not hesitate to contact me should you have any questions.

Sincerely,

Medicis Pharmaceutical Corporation

By:	/s/ Mark A. Prygocki, Sr.
	Mark A. Prygocki, Sr.
	President

7720 N. Dobson Road, Scottsdale, AZ 85256

602.808.8800 Fax: 602.808.0822

Page 2 of 2

Letter dated March 16, 2012 re: termination of Japan rights

Acknowledged and agreed:

Ipsen Biopharm Ltd.

By:	/s/ John Charles Davis
Name:	John Charles Davis
Title:	Director and Company Secretary
Date:	March 26th, 2012

Cc:

SCRAS S.A.S.

Attn: General Counsel

24 rue Erlanger

75016 Paris, France

EX-10.3

Exhibit 10.3

*** INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

EXECUTION COPY

AMENDED AND RESTATED COLLABORATION AGREEMENT

by and between

UCYCLYD PHARMA, INC.

and

HYPERION THERAPEUTICS, INC.

Dated

March 22, 2012

EXECUTION COPY

TABLE OF CONTENTS

	Page
ARTICLE 1 DEFINITIONS		2
ARTICLE 2 AMENDMENT AND RESTATEMENT; PRE-CLOSING PERIOD		11
ARTICLE 3 RIGHTS TO PURCHASE ASSETS		16
ARTICLE 4 RIGHTS AND OBLIGATIONS OF THE PARTIES AFTER CLOSING		22
ARTICLE 5 REGULATORY AND COMPLIANCE MATTERS		23
ARTICLE 6 GOVERNANCE		26
ARTICLE 7 OTHER PAYMENTS		26
ARTICLE 8 INTELLECTUAL PROPERTY		27
ARTICLE 9 PATENTS AND LICENSED MARKS		32
ARTICLE 10 REPRESENTATIONS AND WARRANTIES		36
ARTICLE 11 TERM AND TERMINATION		40
ARTICLE 12 CONFIDENTIALITY AND NONDISCLOSURE		41
ARTICLE 13 INDEMNIFICATION, INSURANCE AND LIMITATION ON LIABILITY		43
ARTICLE 14 DISPUTE RESOLUTION		47
ARTICLE 15 MISCELLANEOUS		49

-i-

EXECUTION COPY

SCHEDULES AND EXHIBITS

SCHEDULES

Schedule 1 – Index of Defined Terms

Schedule 1.18 – Distribution Agreements

Schedule 1.19 – Domain Names

Schedule 1.36 – Hyperion Marks

Schedule 1.45 – Manufacturing Agreements

Schedule 1.51 – Marketed Products Marks

Schedule 3.6.2 – Inventory

Schedule 7.2 – Payment Obligations

Schedule 7.10 – Audit and Record Keeping Requirements

Schedule 10.2 – Ucyclyd Disclosure Schedule

EXHIBITS

Exhibit 1 – Note

Exhibit 2 – Security Agreement

Exhibit 3 – Amendment to Clinical Supply Agreement

Exhibit 4 – Form of Bill of Sale

Exhibit 5 – Form of Technology Assignment Agreement

Exhibit 6 – Form of Assignment and Assumption Agreement

Exhibit 7 – Form of Press Release

-ii-

EXECUTION COPY

This AMENDED AND RESTATED COLLABORATION AGREEMENT is entered into this 22nd day of March 2012 (the “Effective Date”), by and between UCYCLYD PHARMA, INC., a Maryland corporation, with its principal place of business at 7720 N. Dobson Road, Scottsdale, Arizona, 85256 (hereinafter referred to as “Ucyclyd”) and HYPERION THERAPEUTICS, INC., a Delaware corporation, with its principal place of business at 601 Gateway Blvd., Suite 200, South San Francisco, CA 94080 (hereinafter referred to as “Hyperion”). Ucyclyd and Hyperion are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Ucyclyd promotes, markets, and sells the pharmaceutical products commonly known in the United States as Buphenyl^® and Ammonul^®;

WHEREAS, pursuant to that certain Collaboration Agreement, dated August 23, 2007, as previously amended on or about November 24, 2008, June 29, 2009, and October 12, 2009 (the “Prior Collaboration Agreement”), Ucyclyd granted rights to Hyperion, exercisable in the future, to purchase certain worldwide rights to develop and commercialize Buphenyl^® Products and the Ammonul^® Product, as well as to develop and commercialize HPN-100 (defined below and previously referred to as GT4P in the Prior Collaboration Agreement);

WHEREAS, the Parties now desire to supersede the Prior Collaboration Agreement with (a) an Asset Purchase Agreement of even date herewith (the “APA”), under which Hyperion will purchase the rights to HPN-100 on the terms set forth therein and (b) this Amended and Restated Collaboration Agreement, under which Hyperion would have the right, exercisable in the future, to purchase certain worldwide rights to develop and commercialize Buphenyl Products and the Ammonul Product (including ***) (subject to Ucyclyd’s right to elect to retain such rights to the Ammonul Product (including ***)).

NOW, THEREFORE, in consideration of the mutual promises, covenants, and agreements set forth herein, both Parties to the Agreement agree as follows:

ARTICLE 1

DEFINITIONS

Capitalized terms used in the Agreement shall have the meanings ascribed to them in the body of the Agreement and in the attached Schedules, Exhibits, Attachments, Addenda and other documents attached hereto or as defined below. Schedule 1 contains an index of terms that are defined in the body of the Agreement or in the attached Schedules, Exhibits, Attachments, Addenda and other documents attached hereto or thereto.

1.1 “Active Moiety Product” means any product that comprises, incorporates or contains, in whole or in part, sodium phenylbutyrate or glycerol phenylbutyrate as an active pharmaceutical ingredient or any other active pharmaceutical ingredient that is, or converts to, phenylacetate.

1.2 “Affiliate” means, with respect to a Party, any person, corporation, partnership or other entity that directly or indirectly controls or is controlled by or is under common control with, such Party. For purposes of this definition, the term “control” (including, with correlative meaning, the terms “controlled by” or “under common control with”) means the

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 1 of 53

EXECUTION COPY

actual power, either directly or indirectly through one or more intermediaries, to direct or cause the direction of the management and policies of such entity, whether by the ownership of fifty percent (50%) or more of the voting stock of such entity, or by contract or otherwise. For purposes of this Agreement, the term “control” shall not apply to Persons that are venture capital or similar investment funds, and that acquired an ownership stake in a Party solely as a result of one or a series of bona fide private equity financings.

1.3 “Agreement” means this Amended and Restated Collaboration Agreement by and between the Parties, including all Schedules, Exhibits, Attachments, Addenda and other documents attached hereto or thereto or otherwise incorporated by reference, including the Purchase Transaction Documents (defined in subsection (b) of Section 3.5.3) when such Purchase Transaction Documents become effective in accordance with the Agreement or their respective terms.

1.4 ***

1.5 “Ammonul Product” means (a) the pharmaceutical product that Ucyclyd (directly or through its Affiliates or distributors) markets or sells in the United States pursuant to NDA 20-645 and any supplements thereto and (b) any other products that Ucyclyd (directly or through its Affiliates or distributors) markets or sells anywhere in the world that (i) contain the same combination of active pharmaceutical ingredients as the foregoing, (ii) are marketed or sold under the name “Ammonul” and (iii) have been approved by applicable Regulatory Agencies for the treatment of UCD.

1.6 “Ammonul Specific Know-How” means Marketed Products Know-How that relates to any of the Ammonul Product and *** (including any data developed by or on behalf of Hyperion under the Prior Collaboration Agreement in connection with Hyperion’s development efforts for ***), exclusive of any Marketed Products Know-How that also relates to (a) Buphenyl Products, (b) HPN-100, or (c) any other Active Moiety Product (other than the Ammonul Product or ***).

1.7 “APA” has the meaning set forth in the Recitals.

1.8 “API” means active pharmaceutical ingredient.

1.9 “Assets” means the following:

(a) if Ucyclyd does not exercise the Ammonul Option: (i) NDA 20-645; (ii) other Regulatory Approvals and Pricing Approvals, as applicable, for the Ammonul Product and ***, both inside the United States and outside the United States, to the extent held in the name of Ucyclyd or one of its Affiliates and transferable to Hyperion under applicable Legal Requirements; and (iii) all material documentation with respect to subparts (i) and (ii) as reasonably determined by Ucyclyd;

(b) (i) NDA 20-572; (ii) NDA 20-573; (iii) other Regulatory Approvals and Pricing Approvals, as applicable, for Buphenyl Products, both inside the United States and outside the United States, to the extent held in the name of Ucyclyd or one of its Affiliates and transferable to Hyperion under applicable Legal Requirements; and (iii) all material documentation with respect to subparts (i) and (ii) as reasonably determined by Ucyclyd;

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 2 of 53

EXECUTION COPY

(c) all Inventory (subject to Schedule 3.6.2);

(d) the Marketed Products Technology (including all of Ucyclyd’s and its Affiliates’ rights and interests in and to the Marketed Products Patents), exclusive of the Ammonul Specific Know-How if Ucyclyd exercises the Ammonul Option;

(e) the Assigned Agreements;

(f) the Marketed Products Marks containing “Buphenyl” and/or “Ammonaps”;

(g) the Domain Names containing “buphenyl”, “ammonaps”, and/or “ureacycle”; and

(h) the Marketed Products Marks containing “Ammonul” or “Ucyclyd”, the Domain Names containing “Ammonul” or “Ucyclyd”, and the 1-888-Phone Number (but in each case only if Ucyclyd does not exercise the Ammonul Option).

1.10 “Assigned Agreements” means, to the extent any of the following are in effect as of the Marketed Products Closing and are assignable to Hyperion: (a) all Distribution Agreements; and (b) all Manufacturing Agreements except for any such agreements to which *** and/or *** is a party.

1.11 “Buphenyl Powder” means the pharmaceutical product that Ucyclyd (directly or through its Affiliates or distributors) markets or sells in the United States pursuant to NDA 20-573 and any supplements thereto.

1.12 “Buphenyl Products” means (a) Buphenyl Powder, (b) Buphenyl Tablets, (c) the products that Ucyclyd (directly or through its Affiliates or distributors) markets or sells in the European Union under the name “Ammonaps” (EMA Product Number EMEA/H/C/000219), and (d) any other products that Ucyclyd (directly or through its Affiliates or distributors) markets or sells throughout the world that (i) contain sodium phenylbutyrate as the sole active pharmaceutical ingredient, (ii) are marketed or sold under the name “Buphenyl” or “Ammonaps,” and (iii) have been approved by applicable Regulatory Agencies for the treatment of UCD.

1.13 “Buphenyl Tablets” means the pharmaceutical products that Ucyclyd (directly or through its Affiliates or distributors) markets or sells in the United States pursuant to NDA 20-572 and any supplements thereto.

1.14 “Business Day” means any day except Saturday, Sunday or any other day on which commercial banks located in New York are authorized or required by law to be closed for business.

1.15 “Change in Control” means the consummation of: (a) any merger, consolidation, business combination or sale of shares of stock other than in a direct issuance of shares of stock by a Party for fair value, that, if completed, will result in the stockholders of such Party prior to such transaction not having voting control of the surviving entity immediately after the transaction such that they, acting in concert with

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 3 of 53

EXECUTION COPY

one another, could not elect a majority of the board of directors of the surviving entity; or (b) the sale, transfer, exchange or other disposition of all or substantially all of a Party’s assets or business relating to this Agreement (whether alone or in connection with a sale, transfer, exchange or other disposition of other assets or businesses of such Party). Notwithstanding the foregoing, Change in Control shall not include a financing transaction, either in the form of a private equity financing or public offering.

1.16 “cGMP” means: (a) all principles and guidelines of Current Good Manufacturing Practices (including any applicable guidance documents that have been issued (or may be issued in the future) by the FDA), as defined from time to time under the Food, Drug and Cosmetic Act, as codified in 21 C.F.R. Parts 210, 211, et seq. and being currently utilized within the pharmaceutical industry to manufacture the applicable type of Marketed Product(s); and (b) the ICH guide Q7a “ICH Good Manufacturing Practice Guide for Active Pharmaceutical Ingredients” as applied to investigational drugs (Section 19) and being currently utilized within the pharmaceutical industry to manufacture the applicable type of Marketed Product(s).

1.17 “Commercialization,” “Commercialize” or “Commercialized” means all activities that are undertaken for a particular Transferred Marketed Product that relate to the commercial marketing and sale of such Transferred Marketed Product including pre-commercialization, advertising, education, planning, marketing, promotion, distribution, market and product support studies and Phase IV Trials.

1.18 “Distribution Agreements” means the agreements with Third Parties for the distribution of the Transferred Marketed Products, including those agreements identified on Schedule 1.18.

1.19 “Domain Names” means the domain names set forth on Schedule 1.19.

1.20 “Excluded Person” means an Ineligible Person or a Person on an Exclusion List.

1.21 “Exclusion List(s)” mean the then-current: (a) HHS/OIG List of Excluded Individuals/Entities (available through the Internet at http://www.oig.hhs.gov); (b) General Services Administration’s List of Parties Excluded from Federal Programs (available through the Internet at http://www.epls.gov); and (c) FDA Debarment List (available through the Internet at http://www.fda. gov/ora/compliance_ref/debar/).

1.22 “Exclusivity Agreement” means that certain letter agreement by and between Ucyclyd and Hyperion dated March 14, 2007 and effective as of March 20, 2007, and as amended pursuant to that certain letter amendment dated June 8, 2007.

1.23 “Existing Ammonul Products” means (a) any Ammonul Product marketed or sold by Ucyclyd (directly or through its Affiliates or distributors), as of the Effective Date, for the treatment of UCD, and (b) the pharmaceutical product described in *** and any supplements thereto, as of the Effective Date, which has been the subject of *** (for clarity, for purposes of this definition, the ***).

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 4 of 53

EXECUTION COPY

1.24 “Existing Buphenyl Products” means the Buphenyl Products marketed or sold by Ucyclyd (directly or through its Affiliates or distributors) as of the Effective Date.

1.25 “Existing Confidentiality Agreement” means the confidentiality agreement between Hyperion and Ucyclyd dated January 5, 2007.

1.26 “Existing Indications” means, with respect to a particular Existing Marketed Product, (a) those indications for which such Existing Marketed Product is approved as of the Effective Date, or (b) for the ***.

1.27 “Existing Marketed Products” means any or all Existing Ammonul Products and Existing Buphenyl Products.

1.28 “FDA” means the United States Food and Drug Administration or any successor agency thereto.

1.29 “GAAP” means generally accepted accounting principles in effect in the United States at the applicable time. GAAP shall be applied by the Parties in a consistent manner.

1.30 “Generic Equivalent” means, regardless of whether a product is considered generic, branded, private-labeled or otherwise, a product that: (a) contains the same active ingredient(s) as a Transferred Marketed Product; (b) is identical in strength, dosage form, and route of administration to such Transferred Marketed Product; and (c) is a Therapeutic Equivalent to such Transferred Marketed Product.

1.31 “Governmental Authority” means any court, tribunal, arbitrator, agency, legislative body, commission, official or other instrumentality of: (a) any government of any country; or (b) a federal, state, province, county, city or other political subdivision thereof.

1.32 “HE”‘ means hepatic encephalopathy or hepatic encephalopathies.

1.33 “HPN-100” means any products containing glyceryl tri-(4phenylbutyrate) (including any analogs, metabolites, prodrugs, salts, isomers, enantiomers and other physical forms and derivatives thereof). For avoidance of doubt, these terms do not include Buphenyl Products, Ammonul Product, *** or other sodium phenylbutyrate products.

1.34 “HPN-100 Closing Date” means the date of the “Closing” under the APA.

1.35 “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (15 U.S.C. § 18a), and the rules and regulations promulgated thereunder.

1.36 “Hyperion Marks” means (a) the trademarks as set forth on Schedule 1.36, as may be amended by Hyperion from time to time, (b) on or after the Marketed Products Closing Date, any trademarks that are assigned to Hyperion hereunder as part of the Marketed Products Rights.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 5 of 53

EXECUTION COPY

1.37 “IND” means an investigational new drug application submitted by a sponsor to the FDA pursuant to 21 C.F.R. Part 312, or to the extent applicable outside the United States, any other similar application submitted to the appropriate Regulatory Agency in a country or group of countries other than the United States, and any supplements or amendments to any of the foregoing.

1.38 “Ineligible Person” means a Person who: (a) is currently excluded, debarred, suspended, or otherwise ineligible to participate in the Federal health care programs or in Federal procurement or non-procurement programs; (b) has been convicted of a criminal offense that falls within the ambit of 42 U.S.C. § 1320a-7(a), but has not yet been excluded, debarred, suspended, or otherwise declared ineligible; or (c) is listed on an Exclusion List.

1.39 “Inventory” or “Inventories” means the raw materials for, components of, works in progress of, firm orders for, inventory in transit of and inventory of the Transferred Marketed Products, including both clinical and commercial supply, that meet all relevant specifications and were manufactured in accordance with all Legal Requirements.

1.40 “Joint Steering Committee” or “JSC” means the body established pursuant to Section 6.2 (Joint Steering Committee) of the Prior Collaboration Agreement.

1.41 “Know-How” means any and all technical, scientific, regulatory, clinical, medical, marketing, sales, financial and business information and data, know-how, formulations, trade secrets, techniques, processes, ideas, concepts, designs, original works of authorship, enhancements, derivative works, adaptations, discoveries and inventions.

1.42 “Legal Requirements” means: (a) any applicable present and future national, state, local, foreign or similar laws whether under statute, rule, regulation, ordinance or otherwise; (b) applicable requirements under permits, orders, decrees, judgments or directives, and requirements of applicable Regulatory Agencies including cGMPs, the federal anti-kickback statute located at 42 U.S.C, § 1320, the PDM Act, and the Federal Food, Drug and Cosmetic Act; and (c) all regulations and other requirements of the applicable Regulatory Agencies.

1.43 “Lien” means any mortgage, lien (including mechanics, warehousemen, laborers and landlords liens), pledge, hypothecation, charge, community property interest, equitable interest, security interest, preemptive right, right of first refusal or similar restriction or right, option, judgment or title defect.

1.44 “Losses” means any and all liabilities, costs, damages, fines, fees, penalties, judgments, losses and expenses (including interest, court costs and reasonable fees of attorneys, accountants and other experts).

1.45 “Manufacturing Agreement(s)” means the agreements with Third Parties for the manufacture of finished Transferred Marketed Products, including those agreements identified on Schedule 1.45.

1.46 “Marketed Product(s)” means Buphenyl Products, Ammonul Product, and ***.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 6 of 53

EXECUTION COPY

1.47 “Marketed Products Closing” means the closing of the purchase of the Marketed Products Rights.

1.48 “Marketed Products Closing Date” means the date on which the Marketed Products Closing occurs in accordance with Section 3.5 of the Agreement.

1.49 “Marketed Products Closing Deadline” means the expiration of the period by which the Marketed Products Closing Date is to have occurred as set forth in Section 3.5.1, which period is subject to extension (a) by mutual written agreement of the Parties, (b) by reason of Section 3.5.4(e) or (c) pursuant to Section 10.4(b).

1.50 “Marketed Products Know-How” means: (a) Know-How used for, or prepared in connection with, the development or Commercialization of the Transferred Marketed Products and that, as of the Marketed Products Closing, is (i) owned by Ucyclyd, or (ii) in-licensed by Ucyclyd to the extent licensable or assignable to Hyperion; and (b) any and all intellectual property rights in or to any of the foregoing (other than Patents). Marketed Products Know-How includes the UCD Data, but does not include Ucyclyd Manufacturing Know-How.

1.51 “Marketed Products Marks” means: (a) the trademarks set forth on Schedule 1.51 and as may be updated from time to time by Ucyclyd upon written notice to Hyperion during the Pre-Closing Period; and (b) any new trademarks approved for use with the Marketed Products during the Pre-Closing Period, but excluding (i) Hyperion Marks and (ii) on or after the Marketed Products Closing Date, (A) any trademarks that are assigned to Hyperion hereunder as part of the Marketed Products Rights and (B) the Marketed Products Marks containing “Ammonul” if Ucyclyd exercises the Ammonul Option.

1.52 “Marketed Products Patents” means any and all Patents that claim or cover the composition of matter or use of the Transferred Marketed Products as of the Marketed Products Closing, but excluding any Ucyclyd Manufacturing Patents.

1.53 “Marketed Products Technology” means Marketed Products Patents and Marketed Products Know-How. Marketed Products Technology does not include: (a) Ucyclyd Manufacturing Technology; and (b) any Ammonul Specific Know-How if Ucyclyd exercises the Ammonul Option.

1.54 “NDA” means a new drug application filed with FDA pursuant to 21 C.F.R. Part 314.

1.55 “Note” means that certain Note that may be issued by Hyperion in favor of Ucyclyd in accordance with Section 3.3, the form of which is attached hereto as Exhibit 1.

1.56 “Patents” means all: (a) U.S. issued patents (including re-examinations, reissues, renewals, and all extensions and term restorations), inventors’ certificates and foreign counterparts thereof; (b) pending applications for U.S. patents, including provisional applications, continuations, continuations-in-part, continued prosecution, divisional and substitute applications; and (c) non-U.S. counterparts or equivalents of the foregoing in subsections (a) and (b).

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 7 of 53

EXECUTION COPY

1.57 “PDM Act” means the Prescription Drug Marketing Act of 1987, as amended from time to time, and any regulations promulgated thereunder.

1.58 “Person” means any natural person, corporation, partnership, trust, joint venture, Governmental Authority or other entity or organization.

1.59 “Pre-Closing Period” means the period commencing on the Effective Date and the first to occur of: (a) the Marketed Products Closing Date; (b) the expiration of the Marketed Products Option without being exercised; (c) if the Marketed Products Option is exercised but the Marketed Products Closing does not occur in accordance with Section 3.5, the expiration of the Marketed Products Closing Deadline; and (d) the date on which Hyperion foregoes the right to purchase the Marketed Products Rights pursuant to Section 10.4(b).

1.60 “Price Approval” means, with respect to any country in which the price at which the applicable Marketed Products are to be sold must be approved by a Regulatory Agency for reimbursement or payment purposes, the receipt of approval by the applicable Regulatory Agency with, respect to such price.

1.61 “Promotional Materials” means any training materials, brochures, website content, materials displayed on electronic media (including internet, websites, DVD or audio) or other promotional items or materials.

1.62 “Regulatory Agency” means, with respect to the United States, the FDA, and, in the case of a country other than the United States, such other appropriate regulatory agency or authority with similar responsibilities.

1.63 “Regulatory Approval” means the approval, license, registration or authorization of any federal, state or local Regulatory Agency, department, bureau or other governmental entity, necessary to lawfully manufacture, import, distribute, promote, sell and administer to humans the applicable Transferred Marketed Products in a country or region, but shall not include Price Approval in any country.

1.64 “Security Agreement” means that certain Security Agreement to be entered into between Hyperion and Ucyclyd in accordance with Section 3.3, the form of which is attached hereto as Exhibit 2.

1.65 ***.

1.66 “*** Orphan Designation” means (a) the orphan drug designation, dated ***, granted by the FDA to Ucyclyd for HPN-100 for *** and (b) the orphan drug designation, dated ***, granted by the FDA to Ucyclyd for Buphenyl Product for ***.

1.67 “Tax” or “Taxes” means all federal, state, local, foreign, and other net income, gross income, gross receipts, sales, value-added, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties, or other taxes, fees, assessments, or charges of any kind whatever, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto, and the term “Tax” means any one of the foregoing Taxes.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 8 of 53

EXECUTION COPY

1.68 “Therapeutic Equivalent” has the meaning given to it by the FDA in the current edition of the “Approved Drug Products with Therapeutic Equivalence Evaluations” (the “Orange Book”) as may be amended from time to time.

1.69 “Third Party” means any Person that is not a Party or an Affiliate of a Party.

1.70 “Transferred Marketed Product(s)” means the Marketed Products, but excluding Ammonul Product and *** if Ucyclyd exercises the Ammonul Option.

1.71 “UCD” means urea cycle disorder.

1.72 “UCD Data” has the meaning given to such term in the APA.

1.73 “Ucyclyd Manufacturing Know-How” means (a) any and all Know-How necessary for the manufacture of the Transferred Marketed Products, including any and all documentation, Drug Master Files (individually a “DMF” and collectively “DMFs”), protocols, manufacturing processes, starting materials, purification technologies and specifications for either or both of such Transferred Marketed Products, in each case that as of the Marketed Products Closing is (i) owned by Ucyclyd, or (ii) in-licensed by Ucyclyd to the extent licensable or assignable to Hyperion; and (b) any and all intellectual property rights in or to any of the foregoing (other than Patents). Notwithstanding the foregoing, Manufacturing Know-How does not include any method of treatment, packaging, drug delivery, composition, formulation or dosage unit of a Transferred Marketed Product, but does include any processes for manufacturing or supplying the method of treatment, packaging, drug delivery, composition, formulation or dosage unit of a Transferred Marketed Product.

1.74 “Ucyclyd Manufacturing Patents” means any and all Patents that claim a method of manufacturing the Transferred Marketed Products and that, as of the Marketed Products Closing, are (a) owned by Ucyclyd, or (b) in-licensed by Ucyclyd to the extent licensable or assignable to Hyperion.

1.75 “Ucyclyd Manufacturing Technology” means Ucyclyd Manufacturing Patents and Ucyclyd Manufacturing Know-How.

1.76 “Ucyclyd’s Actual Knowledge” means the actual knowledge of a particular fact or other matter being possessed as of the pertinent date by (a) the President and Chief Executive Officer of Ucyclyd or the Executive Vice President, Chief Financial Officer and Treasurer of Ucyclyd and (b) with respect to Section 10.2(f), Section 10.2(h), Section 10.2(i)(i), and Section 10.2(k) only: the President and Chief Executive Officer of Ucyclyd; the Executive Vice President, Chief Financial Officer and Treasurer of Ucyclyd; or the *** for Medicis and its Affiliates.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 9 of 53

EXECUTION COPY

ARTICLE 2

Amendment and Restatement; pre-CLOSING period

2.1 Amendment and Restatement. Effective on the Effective Date, except as otherwise set forth in this Section 2.1, this Agreement hereby amends, restates, and supersedes the Prior Collaboration Agreement, and any and all provisions of the Prior Collaboration Agreement are of no further force and effect (except to the extent expressly restated or referenced herein).

2.2 Commercialization of Marketed Products During the Pre-Closing Period.

2.2.1 During the Pre-Closing Period, Ucyclyd shall have the sole right and responsibility to: (a) receive, accept and fill orders for the Marketed Products; (b) process invoicing, order processing and collection of accounts receivable for Marketed Product sales based on demand and in accordance with GAAP; (c) manufacture and/or have manufactured Marketed Products for clinical use and commercial sale, as well as manage the supply and distribution chain for Marketed Products; and (d) record Marketed Products sales in Ucyclyd’s books of account in a manner consistent with its standard practices, and in any event in accordance with GAAP. All such activities during the Pre-Closing Period shall be at Ucyclyd’s sole cost and expense.

2.2.2 During the Pre-Closing Period, subject to the remainder of this Section 2.2.2 and this Article 2, Ucyclyd has sole authority with respect to the commercial terms and conditions with respect to the sale and distribution of Marketed Products, including matters such as the price at which the Marketed Products will be sold and whether any discounts, rebates or other deductions should be made, paid or allowed. During the Marketed Products Option Period, without Hyperion’s prior written approval, which approval shall not be unreasonably withheld, delayed or conditioned, Ucyclyd shall not make changes to Ucyclyd’s practices with respect to discounts, rebates or other deductions that are not consistent with Ucyclyd’s past practices.

2.2.3 During the Pre-Closing Period, Ucyclyd shall not ***.

2.3 Manufacturing of Marketed Products During the Pre-Closing Period.

2.3.1 During the Pre-Closing Period, except as otherwise provided in this Section 2.3, Ucyclyd shall have the sole right and responsibility to manufacture and/or have manufactured Marketed Products, as well as manage the supply and distribution chain for Marketed Products.

2.3.2 (a)***. Each of the foregoing agreements shall be deemed a Manufacturing Agreement to be transferred to Hyperion upon the Marketed Products Closing.

(b) At Hyperion’s request during the Pre-Closing Period, ***. Any additional agreement described in subsection (ii) above that is entered into at Hyperion’s request and agreed by the manufacturer as set forth above shall be deemed a Manufacturing Agreement to be novated to Hyperion upon the Marketed Products Closing.

2.3.3 At any time during the Pre-Closing Period, Hyperion shall have the right to qualify an alternative manufacturer selected by Hyperion in anticipation of Hyperion’s use of such alternative manufacturer following the Marketed Products Closing. With respect to any

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 10 of 53

EXECUTION COPY

qualification hereunder: (a) Hyperion shall be responsible solely for qualifying such alternate manufacturer; (b) Hyperion shall pay all related costs, including all fees associated with obtaining any approvals in accordance with any Legal Requirements; and (c) Ucyclyd shall establish with such manufacturer, at Hyperion’s sole cost and expense (including paying Ucyclyd for those activities requested by Hyperion and undertaken by Ucyclyd in connection therewith and reimbursing Ucyclyd for all reasonable, documented expenses in excess of *** with respect to out-of-pocket expenses and hours incurred in excess of an aggregate of *** for Ucyclyd personnel), the relevant Ucyclyd Manufacturing Technology and, if required for purposes of qualifying and manufacturing the Marketed Products, the Marketed Products Technology. Such manufacturer shall have a limited, non-transferable right of reference to any applicable DMFs solely for purposes of manufacturing and supplying the applicable Marketed Product to Hyperion (it being understood that prior to the Marketed Products Closing Hyperion would only use such manufactured product for qualification purposes). Nothing contained in this Section shall be construed as granting Hyperion the right to ***.

2.3.4 During the Pre-Closing Period, Ucyclyd will continue to supply Buphenyl Products to Hyperion for clinical use pursuant to that certain Clinical Supply Agreement between the Parties, effective as of January 31, 2008 (the “Clinical Supply Agreement”), as amended by the amendment attached hereto as Exhibit 3.

2.4 Diligence Information.

2.4.1 Following a written request from Hyperion at any time during the Pre-Closing Period on or after ***, Ucyclyd shall make available to Hyperion in accordance with terms set forth in this Section 2.4 below, no later than *** after receipt of such request, the following information (the “Diligence Information”):

(a) a reasonably detailed summary of sales data for the Marketed Products for the most recent twelve (12) calendar months for which data is then available, broken down by calendar month, including (i) sales volumes and revenue by drug, formulation, and geography, (ii) itemized gross to net sales deductions, and (iii) activity in the patient assistance program (including the program vendor name, number of submitted requests, denied requests (with reasons for denial, if available), enrolled patients, and volume of drug consumed during the reporting period); provided, however, that in no circumstances shall Hyperion be provided with data regarding individually negotiated prices with particular customers;

(b) any inventory or shipment reports regarding the Marketed Products that Ucyclyd receives from Third Party vendors in the distribution channel for Marketed Products (including *** (or any successor distributor of the Marketed Products), Ucyclyd’s United States warehouse, and Ucyclyd’s Canadian warehouse), in each case covering the previous year, at monthly or quarterly intervals;

(c) the quantity and dating of available Inventory (including breakdowns for finished product and API) as well as a summary of any planned manufacturing runs for Marketed Products (including the approximate size and timing of such runs);

(d) a list of all Manufacturing Agreements then in force, along with copies of the Manufacturing Agreements that would be assigned to Hyperion upon the Marketed Products Closing Date;

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 11 of 53

EXECUTION COPY

(e) a list and description of all ongoing investigator-sponsored activities involving the Marketed Products or other investigator-sponsored use of the Marketed Products, in each case that are then being supported by Ucyclyd;

(f) the following information regarding manufacturing of Marketed Products:

(i) copies of batch records for all lots in commercial distribution and copies of certificates of analysis (CoAs) for such lots;

(ii) copies of batch records for those product lots for which product has expired less than one (1) year ago and copies of CoAs for such lots;

(iii) list of all lots then currently on stability, and corresponding stability reports for such lots;

(iv) list of product quality complaints for those product lots for which product has expired less than one (1) year ago, responses to complaints for such product lots, and copies of corresponding investigations with respect to such complaints;

(v) list of all product recalls for the past three (3) years (including the ***) and copies of corresponding investigations;

(vi) list of all out of specification (OOS) results for those product lots for which product has expired less than one (1) year ago and corresponding investigations;

(vii) list of all corrective action and preventative action (CAPA) plans for those product lots for which product has expired less than one (1) year ago;

(viii) list of audits of finished product and API vendors for the past two (2) audits, and if reasonably practicable, copies of audit reports resulting from such audits for those vendors that at the time of the diligence request are still producing finished product and API for the applicable Marketed Products;

(ix) copies of annual product reviews required by cGMPs for the past five (5) years; and

(x) copies of labeling die lines for bottle labels, carton, package inserts and patient information leaflet, in each case for the then-current finished forms of Marketed Products;

(g) the following information regarding drug safety of Marketed Products: line listing of all safety reports; copies of all pharmacovigilance files (case files for each safety report); list of all 15-day reports; and copies of annual safety reports for the past five (5) years;

(h) the following information regarding medical information for Marketed Products: list of the categories of the types of medical information requests received in the past five (5) years;

(i) the following regulatory information regarding Marketed Products within the past five (5) years: copies of government correspondence index; copies of all

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 12 of 53

EXECUTION COPY

correspondence to and from FDA (e.g., letters, faxes, email); copies of all promotional material submissions to FDA; a summary of outstanding regulatory business with FDA regarding the Marketed Products, and all FDA Regulatory Health Project Manager contact information;

(j) copies all INDs and NDAs for the Marketed Products (including IND amendments, NDA amendments and NDA supplements);

(k) a list of all Distribution Agreements then in force, along with copies of the Distribution Agreements that would be assigned to Hyperion upon the Marketed Products Closing Date;

(l) a copy of the current Marketed Products returns policy;

(m) current WAC and WAC history (from January 1, 2000 to present) for Marketed Products, current AMP and AMP history (from January 1, 2000 to present), and Medicaid units, by NDC #, sales, and rebates by quarter, for Marketed Products for the previous twenty-four (24) months;

(n) a copy of all Promotional Materials for Marketed Products used within the previous twelve (12) months; and

(o) a copy of all market research reports or Third Party sales or market data regarding the Marketed Products acquired in the previous twenty-four (24) months.

2.4.2 The Diligence Information will be made available to Hyperion, in a reasonably organized manner, for review and inspection (but not copying) only at a location designated by Ucyclyd in either Scottsdale or Phoenix, Arizona, during a single period of *** mutually agreed by the Parties but not to occur within *** prior to or after the end of a calendar quarter unless otherwise agreed by Ucyclyd in its sole discretion. Alternatively, the Parties may agree to have all of the Diligence Information uploaded to an electronic data room for further review and inspection by Hyperion, in which case the terms, conditions and restrictions set forth in Section 2.4.4 shall apply.

2.4.3 In the event the Parties proceed with a physical review and inspection of the documents at the location designated by Ucyclyd as described in Section 2.4.2, during such review and inspection, Hyperion may designate documents to be uploaded to an electronic data room for further review and inspection by Hyperion, provided the amount of information to be uploaded is reasonable.

2.4.4 The Diligence Information made available in the electronic data room will remain available to Hyperion for a period of *** following the date on which the last of the Diligence Information initially requested by Hyperion is uploaded to the electronic data room. Hyperion bears the sole cost and expense of the data room (including the uploading of documents). The documents may not be saved, downloaded, copied, or transmitted by Hyperion or any of its representatives. Such documents will be printable by Hyperion, but such printing will be trackable by Ucyclyd via the electronic data room. All printed versions of such documents must be returned to Ucyclyd at the end of the review and inspection period.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 13 of 53

EXECUTION COPY

2.4.5 In addition, after receiving the Diligence Information, Hyperion may, at any time during the Pre-Closing Period, request a one-time update to the Diligence Information (a “Diligence Information Update”). No later than *** after receipt of such request for a Diligence Information Update, Ucyclyd shall disclose to Hyperion, via an electronic data room, any changes or updates to the items included in the Diligence Information.

2.4.6 Ucyclyd shall use commercially reasonable efforts to answer, in a timely manner, any questions that Hyperion may have concerning the Diligence Information or Diligence Information Update, provided that Hyperion consolidates such questions in an organized manner so as to minimize, to the extent reasonably practicable, disruption to the business of Ucyclyd and its Affiliates.

2.5 Manufacturing Facility Inspection.

2.5.1 During the Pre-Closing Period and following the conclusion of the *** diligence review described in Section 2.4.2 above, Hyperion shall have the right, by written notice to Ucyclyd, to request that Ucyclyd request that the applicable Third Party manufacturer of the Marketed Products permit an inspection of the manufacturing facilities where the Marketed Products are manufactured, filled and finished by a Third Party that is (a) mutually agreed by the Parties, (b) retained by Hyperion at Hyperion’s sole cost and expense, and (c) subject to confidentiality obligations to Ucyclyd but is permitted to disclose to Hyperion only the results of the inspection.

2.5.2 Within a reasonable period of time following Ucyclyd’s receipt of such written request from Hyperion, Ucyclyd shall request and facilitate the conduct of such an inspection of the applicable Third Party manufacturer. Notwithstanding the foregoing, Ucyclyd shall only be required to require that the applicable Third Party manufacturer permit such inspection to the extent that (a) such inspection is *** and (b) allowing such Third Party to conduct such inspection would not ***; provided, however, that even if subsection (a) or (b) applies, Ucyclyd shall remain obligated to request permission from such Third Party manufacturer to conduct such inspection (but, for clarity, shall not be required to conduct such inspection unless such Third Party manufacturer grants such permission).

2.6 Investigator Sponsored Trials. During the Pre-Closing Period, Ucyclyd shall have the right to support investigator-sponsored activities involving the Marketed Products or other investigator-sponsored use of the Marketed Products.

2.7 Marketed Product Sales Volume. Following Hyperion’s exercise of the Marketed Products Option, Ucyclyd shall use commercially reasonable efforts to ensure that the average monthly sales volume of the Transferred Marketed Products leading up to the Marketed Products Closing Date does not substantially exceed the average monthly sales volume of the applicable Transferred Marketed Products during the ***, and in any event Ucyclyd will not take any affirmative action to cause such outcome. Hyperion acknowledges that the Marketed Products are life-saving drugs and the foregoing shall not preclude Ucyclyd from responding to bona fide increased demand to meet patient needs.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 14 of 53

EXECUTION COPY

ARTICLE 3

RIGHTS TO PURCHASE ASSETS

3.1 Purchase Right. Subject to the terms and conditions of the Agreement, including payment by Hyperion of any amounts due to Ucyclyd as of the relevant date and the rights of Ucyclyd pursuant to Section 3.4 below, Ucyclyd hereby grants to Hyperion an option (the “Marketed Products Option”) to purchase all of Ucyclyd’s rights, title and interests in the Transferred Marketed Products (which shall include the Assets and shall exclude the Excluded Assets) (collectively, the “Marketed Products Rights”). Such Marketed Products Option will be exercisable by Hyperion, by written notice to Ucyclyd (which written notice shall specify that it is the “MARKETED PRODUCTS OPTION EXERCISE NOTICE”) (the “Exercise Notice”), upon the earlier of (a) the date of the written notification from the FDA approving any NDA for HPN-100 for the treatment of UCD and (b) June 30, 2013 and will remain exercisable for *** thereafter (the “Marketed Products Option Period”). Notwithstanding the foregoing, if any NDA for HPN-100 in UCD is approved prior to January 1, 2013, then the Marketed Products Option Period will commence on January 1, 2013 and will continue for *** thereafter, and Hyperion may exercise the Marketed Products Option at any time during this *** period.

3.2 Excluded Assets. The term “Excluded Assets” means: (a) any *** technology or other formulation technology resulting from development efforts of Ucyclyd, Medicis and its Affiliates relating to Active Moiety Products (for clarity, such technology is licensed to Hyperion pursuant to Section 4.01(d)(ii) of the APA); (b) the 1-888-Phone Number (only if Ucyclyd exercises the Ammonul Option); (c) any work product and intellectual property rights that (i) are owned or controlled by Ucyclyd or one or more Ucyclyd Affiliates as of the Effective Date or are later acquired (pursuant to acquisition, license or otherwise) or developed by or on behalf of Ucyclyd or a Ucyclyd Affiliate and (ii) result from research or development efforts with respect to ***; and (d) any *** Orphan Designation. In addition, Excluded Assets also includes the Ammonul Specific Know-How if Ucyclyd exercises the Ammonul Option.

3.3 Purchase Price. If the Marketed Products Option is exercised pursuant to Section 3.1 above, then Hyperion shall pay Ucyclyd (or shall set off against the payment due from Ucyclyd as set forth below and as applicable) the aggregate total purchase price listed below (the “Marketed Products Purchase Price”):

(a) If Ucyclyd elects to retain rights to Ammonul Product (including ***) as described in Section 3.4 below, the Marketed Products Purchase Price will be $19 million, which will be paid in full at the Marketed Products Closing Date and will be set off against the payment due from Ucyclyd to Hyperion under Section 3.4, leaving a net payment from Ucyclyd to Hyperion of $13 million.

(b) If Ucyclyd does not retain rights to Ammonul Product (including ***) as described in Section 3.4 below, the Marketed Products Purchase Price will be $22 million, which either (at Hyperion’s election) will be paid by Hyperion in full at the Marketed Products Closing Date or will be paid by delivering to Ucyclyd on the Marketed Products Closing Date (i) the Note and (ii) the Security Agreement, each as executed by an authorized officer of Hyperion. As specified therein, the Note shall be repaid by Hyperion in eight (8) equal quarterly installments commencing on the first Business Day of the first calendar quarter following the Marketed Products Closing Date and continuing on the first Business Day of each calendar quarter thereafter in accordance with the terms and conditions of the Note. Hyperion’s obligations under the Note shall be secured by a first priority lien in and to the Collateral (as defined in the Security Agreement) in accordance with the terms and conditions of the Security Agreement.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 15 of 53

EXECUTION COPY

3.4 Rights to Ammonul.

(a) Following Ucyclyd’s receipt of the Exercise Notice from Hyperion, Ucyclyd shall have the option (the “Ammonul Option”) to retain all rights to the Ammonul Product (including ***) including the right to develop and commercialize the Ammonul Product for all indications (the “Ammonul Rights”), subject to Section 7.02 of the APA. For the avoidance of doubt, the foregoing sentence is not intended to grant any rights or licenses under Hyperion’s intellectual property beyond the licenses set forth in Section 8.2.2. The Ammonul Option must be exercised, if at all, by written notice to Hyperion within *** after Ucyclyd’s receipt of the Exercise Notice from Hyperion, which written notice shall specify that it is the “AMMONUL RIGHTS OPTION EXERCISE NOTICE”. If Ucyclyd exercises the Ammonul Option, in consideration for Hyperion foregoing its right to purchase Ammonul Product (including ***), Ucyclyd will pay Hyperion $32 million, due on the Marketed Products Closing Date, which will be set off against the payment due from Hyperion to Ucyclyd under Section 3.3, leaving a net payment from Ucyclyd to Hyperion of $13 million. For clarity, if Hyperion exercises the Marketed Products Option but fails to close on the transaction to purchase the Transferred Marketed Products in accordance with Section 3.5 and Ucyclyd exercised the Ammonul Option, no payment is due from Ucyclyd to Hyperion with respect to the exercise of the Ammonul Option and Ucyclyd shall be free to exercise the Ammonul Rights with no obligation to Hyperion.

(b) If Ucyclyd retains rights to the Ammonul Product (including ***) by exercising the Ammonul Option, then effective upon the Marketed Products Closing Date, Hyperion will receive a right of first negotiation solely with respect to the Ammonul Rights should Ucyclyd (or any Affiliate or any acquirer of Ucyclyd) later decide to sell, exclusively license, or otherwise transfer the Ammonul Rights to a Third Party (for clarity, the foregoing only applies to the sale, license or other transfer of the Ammonul Rights and not to (i) any Change in Control of Ucyclyd (or any Affiliate, including a parent, or acquirer) (excluding, for purposes of this Section, subsection (b) of the definition of Change in Control) or (ii) sale where Ammonul Product is one of *** approved or marketed products being sold as a bundle to the Third Party). Hyperion must exercise the option within *** following receipt of written notice from Ucyclyd regarding Ucyclyd’s desire to sell, license or otherwise transfer the Ammonul Rights to a Third Party. If Hyperion exercises such right of first negotiation, the Parties shall engage in negotiations promptly with respect to any such sale, license or other transfer. If, within *** following Ucyclyd’s receipt of written notice from Hyperion exercising the right of first negotiation, the Parties fail to reach a written binding agreement on the material terms (e.g., binding term sheet or letter of intent) under which the Ammonul Rights will be transferred to Hyperion, Ucyclyd will be free to sell, license or transfer the Ammonul Product (including ***) to a Third Party, provided that the terms of such deal, in the aggregate, are no more favorable to the Third Party than the aggregate of the terms last offered by Hyperion. For clarity, the rights under this subsection (b) automatically terminate if Hyperion does not close on the purchase of the Transferred Marketed Products.

3.5 Closing.

3.5.1 Closing Date. If Hyperion exercises the Marketed Products Option, the Parties shall mutually agree upon a date for the Marketed Products Closing, which date shall be not later than *** following the date of Ucyclyd’s receipt of the Exercise Notice from Hyperion.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 16 of 53

EXECUTION COPY

3.5.2 Account for Purchase Payment. No less than *** prior to the Marketed Products Closing Date, each Party shall designate an account for the receipt of the Marketed Products Purchase Price or other payments due on the Marketed Products Closing Date (as applicable) and shall provide the other Party with written wire instructions to such account.

3.5.3 Closing Mechanics.

(a) On the Marketed Products Closing Date, Hyperion shall become obligated to pay Ucyclyd the Marketed Products Purchase Price in accordance with Section 3.3(a) or 3.3(b) (as applicable).

(b) On the Marketed Products Closing Date, the Parties shall execute and deliver all documents set forth below (the “Purchase Transaction Documents”), under which Ucyclyd shall sell, transfer, assign and convey all Assets to Hyperion:

(i) a bill of sale in the form attached to the Agreement as Exhibit 4, under which Ucyclyd transfers the ownership of certain Assets (including all Inventories described in Section 3.6.2) to Hyperion, which shall be signed by both Ucyclyd and Hyperion;

(ii) a Technology Assignment Agreement in the form attached to the Agreement as Exhibit 5, under which Ucyclyd shall assign all Marketed Products Technology, which shall be signed by Ucyclyd;

(iii) an Assignment and Assumption Agreement of all Assigned Agreements in the form attached to the Agreement as Exhibit 6, which shall be countersigned by Ucyclyd and accompanied by all consents required from the applicable Third Parties to such Assigned Agreements to Hyperion as attachments to such Assignment and Assumption Agreement; and

(iv) the Articles of Transfer to be filed with the Maryland State Department of Assessments and Taxation, if required under Section 3-107 of the Maryland Code of Corporations and Associations, which shall be signed by both Ucyclyd and Hyperion.

3.5.4 HSR Act Clearance.

(a) As promptly as practicable following the exercise of the Marketed Products Option (but in any event no later than *** after such exercise), each of Ucyclyd and Hyperion shall file or supply, or cause to be filed or supplied, all notifications and information required to be filed or supplied pursuant to the HSR Act (if any) in connection with the sale of the Marketed Products Rights to Hyperion hereunder, subject to the Parties cooperating to maintain the confidentiality of any such information, to the extent practicable under Legal Requirements. Each of Ucyclyd and Hyperion shall furnish to the other such necessary information and reasonable assistance as the other may request in connection with its preparation of any filing or submission which is necessary under the HSR Act. As promptly as practicable, Ucyclyd and Hyperion shall make, or cause to be made, all such other filings and submissions under laws, rules and regulations applicable to them, or to their Affiliates, as may be required for them to consummate the transaction contemplated hereby in accordance with the terms of the Agreement. Ucyclyd and Hyperion shall keep one another appraised of the status of any communications with, and inquiries or requests for additional information from, any Governmental Authority, including the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice, and shall comply

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 17 of 53

EXECUTION COPY

promptly with any such inquiry or request. Each Party shall bear its own costs in completing and making any required filings pursuant to subsections (a) and (b) of this Section 3.5.4; provided, however, that Hyperion shall be responsible solely for any required filing fees under the HSR Act.

(b) Following the exercise of the Marketed Products Option, Hyperion shall: (i) determine the fair market value of the transaction described in the Agreement for HSR Act purposes (including both the scenario where Ucyclyd exercises the Ammonul Option and the scenario where Ucyclyd does not exercise the Ammonul Option, if Ucyclyd has not yet elected one or the other); (ii) communicate in writing to Ucyclyd the fair market value determination(s) as soon as reasonably practicable; and (iii) discuss with counsel of Ucyclyd the methodology and evidence Hyperion employed in making such determination not later than the Marketed Products Closing. Each Party shall bear its own costs in completing and making any required filings pursuant to subsections (a) and (b) of this Section 3.5.4; provided, however, Hyperion shall be responsible solely for any required filing fees.

(c) Each of Ucyclyd and Hyperion shall use commercially reasonable efforts, and shall act in good faith, to resolve any objections that may be asserted by a Governmental Authority (including the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice) with respect to the transaction contemplated hereby, and shall cooperate with each other to contest any challenges to the transactions contemplated hereby by any such Governmental Authority. The Parties agree to cooperate in good faith and to use their respective commercially reasonable efforts to obtain any government clearances or approvals required under the HSR Act, to respond to any government requests for information under the HSR Act, and to contest and resist any action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) that restricts, prevents or prohibits the consummation of the transaction contemplated by the Agreement under the HSR Act or which is otherwise required to consummate the transactions contemplated by the Agreement. Hyperion shall pay the reasonable costs and expenses incurred by Ucyclyd, including attorneys’ fees, in connection with efforts to contest, resist, vacate, lift, reverse or overturn any such decree, judgment, injunction or other order. For any other cooperation provided by a Party pursuant to this subsection (c), including responding to any government requests for information under the HSR Act, each Party shall bear its own costs in providing such cooperation.

(d) Notwithstanding the foregoing, in the event a Governmental Authority (including the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice) challenges the transaction on antitrust grounds, and the challenge cannot be resolved by consent decree, the Parties may terminate the Term of the Agreement pursuant to Section 11.2(b).

(e) In any event, if a filing is required under the HSR Act in connection with the sale of the Marketed Products Rights to Hyperion hereunder, the Marketed Products Closing shall not occur unless and until the expiration or early termination of the waiting period for the HSR Act.

3.5.5 Specific Performance. The Parties agree that irreparable damage may occur if any portion of this Section 3.5 were not performed in accordance with the terms hereof and that the Parties shall be entitled to seek specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.

3.6 Transition at Closing. To the extent the Parties identify activities not covered in this Section 3.6 or otherwise in the Agreement that are to be conducted by the Parties in

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 18 of 53

EXECUTION COPY

connection with the transition of the Assets to Hyperion following the Marketed Products Closing (the “Other Transition Activities”), the Parties agree (a) to negotiate in good faith a transition services agreement by ***, which agreement will require reimbursement of Ucyclyd by Hyperion for (i) the Other Transition Activities undertaken by Ucyclyd in connection with such transition that in the aggregate exceed *** of work and (ii) any out-of-pocket expenses incurred by Ucyclyd in excess of ***, and (b) to execute such transition services agreement as soon as reasonably practicable following the exercise of the Marketed Products Option (but in any event prior to the expected Marketed Products Closing Date). Hyperion agrees that all transition activities shall be conducted, to the extent reasonably practicable, to minimize disruption to the business of Ucyclyd and its Affiliates. The preceding sentence is not intended to waive Ucyclyd’s compliance with any deadlines set forth herein or in the aforementioned transition services agreement.

3.6.1 Regulatory Filings and Clinical Data. Ucyclyd shall, as soon as permissible following the Marketed Products Closing Date (but in any event no later than *** after the Marketed Products Closing Date) notify the FDA (or the applicable Regulatory Agency or Government Authority) of the transfer to Hyperion of the NDAs, INDs, and other Regulatory Approvals, and any Pricing Approvals, for the Transferred Marketed Products and shall promptly provide a copy of such notice to Hyperion. Ucyclyd shall use commercially reasonable efforts to complete any and all other regulatory requirements necessary for such transfer, in accordance with all Legal Requirements. On the Marketed Products Closing Date, to the extent not previously provided, Ucyclyd will forward to Hyperion copies of the applicable NDAs, INDs, copies of regulatory correspondence and periodic and other reports (including SAEs, alert reports, and any adverse event reports and the underlying data) with the FDA and all clinical data in connection with the Transferred Marketed Products in Ucyclyd’s (or its Affiliates’) possession.

3.6.2 Inventories.

(a) At the Marketed Products Closing, Hyperion shall be responsible for purchasing remaining Inventory of the Transferred Marketed Products, subject to the terms, conditions, and limitations set forth in Schedule 3.6.2 and this Section 3.6.2.

(b) Hyperion shall pay Ucyclyd an amount equal to ***.

(c) To the extent Inventory to be transferred to Hyperion is located at facilities owned or controlled by Ucyclyd, Ucyclyd shall transfer such Inventory, within *** after the Marketed Products Closing Date, to the location designated by Hyperion at Hyperion’s cost and expense. To the extent Inventory to be transferred to Hyperion is located at a manufacturer’s facility, Hyperion shall be responsible for arranging for the transfer of such Inventory to the location designated by Hyperion and, as necessary, Ucyclyd shall instruct the manufacturer to facilitate such transfer to Hyperion. Following the Marketed Products Closing Date and prior to the transfer of applicable Inventory, upon Hyperion’s request, Ucyclyd shall fill emergency orders from such Inventories as directed by Hyperion.

(d) During the period of *** following the Marketed Products Closing Date, Hyperion will have *** audit right to confirm the manufacturing costs reported by Ucyclyd. In connection with such audit, the Parties shall comply with the audit and record-keeping requirements set forth on Schedule 7.10.

3.6.3 Technology Transfer. No later than *** after the Marketed Products Closing Date, Ucyclyd shall deliver to Hyperion all Manufacturing Know-How and Marketed Products Know-How not already in Hyperion’s possession at the time of Marketed Products Closing.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 19 of 53

EXECUTION COPY

3.6.4 Use of Ucyclyd Name During Transition. If the Ucyclyd name is not included in the Assets transferred to Hyperion on the Marketed Products Closing, then during the period of *** following the Marketed Products Closing Date, Hyperion shall have the right to use the Ucyclyd name in connection with (a) the sale of Inventory labeled with the Ucyclyd name and (b) any other activities reasonably necessary to support the transition of the Transferred Marketed Products to Hyperion (but excluding for use on any part of Transferred Marketed Products (including any labeling and packaging) that were manufactured by or on behalf of Hyperion), in each case to the extent such use is consistent with applicable Legal Requirements.

3.6.5 Accounts Receivables.

(a) Ucyclyd will be entitled to all revenue from sales of the Transferred Marketed Products until the Marketed Products Closing Date and will maintain liability for payment of all gross to net sales deductions (including returns, rebates and chargeback) of Transferred Marketed Products that were sold prior to the Marketed Products Closing Date. For clarity, if Ucyclyd exercises the Ammonul Option, Ucyclyd will continue to be entitled to all revenue from sales of Ammonul and will continue to maintain liability for all gross to net sales deductions of the Ammonul Product following the Marketed Products Closing Date.

(b) During the period of *** following the Marketed Products Closing Date, Hyperion will have *** audit right to confirm the allocation of revenue and deductions between pre-Marketed Products Closing Date sales and post-Marketed Products Closing Date sales. In connection with such audit, the Parties shall comply with the audit and record-keeping requirements set forth on Schedule 7.10.

(c) In the event that following the Marketed Products Closing Date, Ucyclyd or its Affiliates receive any payment relating to any accounts receivable relating to the Assets or the Transferred Marketed Products that accrued on or following the Marketed Products Closing Date, such payment will be the property of, and will be promptly forwarded and remitted to, Hyperion. Ucyclyd or its Affiliates will endorse and deliver to Hyperion any cash, checks or other documents received by Ucyclyd or its Affiliates on account of any such accounts receivable and will advise Hyperion of any gross to net sales deductions that may arise subsequent to the Marketed Products Closing Date with respect to Transferred Marketed Products sold on or following the Marketed Products Closing Date.

(d) In the event that following the Marketed Products Closing Date, Hyperion or its Affiliates receive any payment relating to any accounts receivable that accrued prior to the Marketed Products Closing Date, such payment will be the property of, and will be immediately forwarded and remitted to, Ucyclyd. Hyperion or its Affiliates will promptly endorse and deliver to Ucyclyd any cash, checks or other documents received by Hyperion or its Affiliates on account of any such accounts receivable and will advise Ucyclyd of any gross to net sales deductions that may arise subsequent to the Marketed Products Closing Date with respect to Transferred Marketed Products sold prior to the Marketed Products Closing Date.

ARTICLE 4

RIGHTS AND OBLIGATIONS OF THE PARTIES AFTER CLOSING

4.1 Commercialization of Transferred Marketed Products.

4.1.1 Commercialization. Subject to the terms and conditions of this Agreement (including rights of Third Parties under the Distribution Agreements), on and following the

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 20 of 53

EXECUTION COPY

Marketed Products Closing, Hyperion shall have the sole authority and responsibility for worldwide Commercialization of all Transferred Marketed Products, including the worldwide manufacture and supply of Transferred Marketed Products for use in all such Commercialization activities. Following the Marketed Products Closing, Hyperion shall be solely responsible for all costs and expenses for Commercialization of Transferred Marketed Products including the supply and manufacture thereof.

4.1.2 Pricing, Pricing Approvals and Product Distribution. On and following the Marketed Products Closing, Hyperion shall have the sole authority for: (a) determining the overall pricing strategy for all Transferred Marketed Products; (b) obtaining Price Approvals for the Transferred Marketed Products as may be required; and (c) managing distribution of each Transferred Marketed Product in each applicable country.

4.1.3 Sales and Inventory. On and following the Marketed Products Closing, subject to Section 3.6.4, Hyperion shall be responsible for booking sales, stocking inventory and collecting accounts receivable for all Transferred Marketed Products.

4.1.4 Labeling and Promotional Materials. On and following the Marketed Products Closing:

(a) Hyperion shall have the sole authority and responsibility for the development, use and approval of Promotional Materials for the Transferred Marketed Products and, for clarity, Ucyclyd shall not have any rights of review or approval; and

(b) Hyperion shall have the sole authority and responsibility to seek and obtain any necessary FDA approvals of any label, labeling, package inserts and packaging, and Promotional Materials used in connection with the Transferred Marketed Products and for determining whether the same requires FDA submission or approval.

4.2 Development of Transferred Marketed Products. On and following the Marketed Products Closing, Hyperion shall have the sole authority for conducting development activities with respect to the Transferred Marketed Products for any and all indications in any country or territory in the world solely at its expense.

ARTICLE 5

REGULATORY AND COMPLIANCE MATTERS

5.1 General Compliance.

(a) Each Party shall comply, in all material respects, with all Legal Requirements applicable to it and its activities under the Agreement.

(b) Each Party shall perform its obligations under the Agreement in compliance with all Federal health care program and FDA requirements, including the Federal anti-kickback statute, 42 U.S.C. § 1320a-7b(b) and all other Legal Requirements.

(c) During the Pre-Closing Period, and thereafter to the extent arising from, activities prior to the Marketed Products Closing, Ucyclyd shall have the right to control, in its sole discretion, any response regarding any alleged violation or other failure to comply with any Legal Requirements, any law or regulation applicable to any Federal health care program, or applicable FDA requirements, in each case related to the Marketed Products. For any such response made after the Marketed Products Closing, Ucyclyd shall provide Hyperion with written notice of such response unless such notice is prohibited by applicable Legal Requirements or is impracticable under the circumstances.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 21 of 53

EXECUTION COPY

(d) Following the Marketed Products Closing, except to the extent arising from activities prior to the Marketed Products Closing, Hyperion shall have the sole authority and responsibility to respond regarding any such alleged violation or other failure to comply with any Legal Requirements, any law or regulation applicable to any Federal health care program, or applicable FDA requirements related to the Transferred Marketed Products.

5.2 Regulatory Filings and Approvals.

      5.2.1 During the Pre-Closing Period.

(a) Subject to the terms of Section 5.4 (Communication with Governmental Authorities or Regulatory Agencies), during the Pre-Closing Period, Ucyclyd shall have the sole authority and responsibility to maintain and seek revisions of any FDA approval for the Marketed Products, and Hyperion shall not file any document with the FDA or any other Governmental Authority or Regulatory Agency relating to any Marketed Product without the prior written consent of Ucyclyd; provided, however, that the foregoing shall not prevent Hyperion from making any filings with the FDA or any other Governmental Authority or Regulatory Agency relating to HPN-100, even if such filings contain data regarding the Marketed Products but as long as such data is used accurately and in accordance with applicable Legal Requirements and Hyperion discloses to Ucyclyd, concurrent with or promptly after such filing, only those portions of such filings describing or characterizing data regarding the Marketed Products plus the actual data regarding the Marketed Products referenced therein.

(b) Any information provided to Ucyclyd pursuant to subsection (a) shall be deemed to be Confidential Information of Hyperion. Ucyclyd and/or its Affiliates shall use such information solely for purposes of verifying that any data regarding the Marketed Products is used accurately and Hyperion has complied with applicable Legal Requirements. Ucyclyd and and/or its Affiliates shall not use such information for any other purpose, including for purposes of commercializing any of its or their products. Neither Ucyclyd nor any of its Affiliates shall claim any intellectual property rights based on such information. Access to such information shall be limited only to those personnel of Ucyclyd or its Affiliates who need to know such information in order to assess Hyperion’s compliance with applicable Legal Requirements (including review by external legal or regulatory counsel or consultants who are not otherwise advising Ucyclyd or its Affiliates with respect to orphan drug products). Notwithstanding anything the contrary set forth above, in no event shall such information be disclosed to personnel at Ucyclyd or its Affiliates who are responsible for commercial or research and development or regulatory decisions for any orphan drug product, whether marketed or in development; provided, however, that if the personnel, counsel, or consultants conducting the initial review of such information conclude in good faith that such information indicates that data regarding the Marketed Products is not being used accurately or that Hyperion has not complied with applicable Legal Requirements, then such information may be reviewed by those personnel responsible for regulatory decisions if necessary to confirm such conclusion. For the avoidance of doubt, Hyperion’s obligation to share such information with Ucyclyd under this Section 5.2.1 shall expire at the end of the Pre-Closing Period, and at such time, Ucyclyd shall return or destroy (and certify as destroyed) all copies of such information in the possession of Ucyclyd or its Affiliates. Any disputes between the Parties regarding Hyperion’s use of data regarding the Marketed Products in Hyperion’s filings for HPN-100 shall be resolved pursuant to Section 14.2, except that the arbitration shall be an expedited proceeding before *** as a single arbitrator, provided that he is available, and if he is not available, before a replacement arbitrator nominated by JAMS.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 22 of 53

EXECUTION COPY

5.2.2 Following the Marketed Product Closing. Subject to the terms of Section 5.4 (Communication with Governmental Authorities or Regulatory Agencies), on and following the Marketed Products Closing, (a) Hyperion shall have sole authority and responsibility to maintain and seek revisions of any Regulatory Approval for the Transferred Marketed Products; and (b) Ucyclyd shall not file any document with the FDA or any other Governmental Authority or Regulatory Agency relating to any Transferred Marketed Product without the prior written consent of Hyperion unless otherwise required to do so under applicable Legal Requirements (in which case Ucyclyd shall provide Hyperion with written notice of such filing unless such notice is prohibited by applicable Legal Requirements or is impracticable under the circumstances). For clarity, if Ucyclyd retains Ammonul Product the foregoing restriction does not apply with respect to Ammonul Product.

5.3 Adverse Events and Safety Reporting. The Parties have previously entered into that certain Safety Data Exchange Agreement, dated August 23, 2007 (“SDEA”), which governs disclosure between the Parties of safety-related information relevant to Buphenyl Products and HPN-100. The Parties agree that, effective as of the Effective Date, the SDEA hereby is terminated.

5.4 Communication with Governmental Authorities or Regulatory Agencies.

(a) During the Pre-Closing Period, without the prior written consent of Ucyclyd or unless so required by applicable Legal Requirements (and then only pursuant to the terms of this Section 5.4(a)), Hyperion shall not correspond or communicate with the FDA or with any other Governmental Authority or Regulatory Agency, whether within the United States or otherwise, concerning the Marketed Products or otherwise take any action concerning any authorization or permission under which the Marketed Products are sold or any application for the same; provided, however, that the foregoing shall not prevent Hyperion from making any filings with the FDA or any other Governmental Authority or Regulatory Agency relating to HPN-100, even if such filings contain data regarding the Marketed Products but as long as such data is used accurately and in accordance with applicable Legal Requirements and Hyperion discloses to Ucyclyd, concurrent with or promptly after such filing, only those portions of such filings describing or characterizing data regarding the Marketed Products plus the actual data regarding the Marketed Products referenced therein. Any information provided to Ucyclyd pursuant to the preceding sentence shall be subject to the terms and conditions of subsection (b) of Section 5.2.1.

(b) On and following the Marketed Products Closing, except as may be permitted in Section 3.6 or applicable Legal Requirements, Hyperion shall have the sole authority to correspond or communicate with the FDA or with any other Governmental Authority or Regulatory Agency, whether within the United States or otherwise, concerning the Transferred Marketed Products. In addition, on and following the Marketed Products Closing, upon receipt of any communication from the FDA or from any other Governmental Authority or Regulatory Agency relating to any Transferred Marketed Product, Ucyclyd shall forward immediately to Hyperion a copy or description of the same and respond to all inquiries by Hyperion relating thereto. If Ucyclyd is advised by its counsel that it must communicate with the FDA or with any other Governmental Authority or Regulatory) Agency, then Ucyclyd shall so advise Hyperion immediately and, unless the applicable Legal Requirements prohibit, provide Hyperion in advance with a copy of any proposed written communication with the FDA or any other Governmental Authority or Regulatory Agency and comply with any and all reasonable direction of Hyperion concerning any meeting or written or oral communication with the FDA or any other Governmental Authority or Regulatory Agency.

5.5 Complaints; Medical Inquiries; Product Information Requests.

(a) Ucyclyd shall have the sole right to respond to any complaints from consumers, physicians or other Persons with respect to the Marketed Products during the Pre-

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 23 of 53

EXECUTION COPY

Closing Period, and Hyperion shall have the sole right to respond to any such complaints with respect to the Transferred Marketed Products on and following the Marketed Products Closing. To the extent that Ucyclyd receives any complaints with respect to the Transferred Marketed Products on and following the Marketed Products Closing, Ucyclyd shall promptly (but in any event within ***) forward such complaints to Hyperion.

(b) During the Pre-Closing Period, Ucyclyd shall respond to all medical inquiries and information requests with respect to the Marketed Products. On and following the Marketed Products Closing, Hyperion shall have the sole right, authority and responsibility to respond to such inquiries and requests with respect to Transferred Marketed Products. To the extent that Ucyclyd receives any such inquiries and requests with respect to the Transferred Marketed Products on and following the Marketed Products Closing, Ucyclyd shall promptly (but in any event within ***) forward such inquiries and requests to Hyperion.

5.6 Recalls or Other Corrective Action.

(a) Ucyclyd shall have sole authority and responsibility for, and shall make all decisions with respect to, any recall, market withdrawals or any other corrective action related to the Marketed Products during the Pre-Closing Period. Ucyclyd shall promptly (but in any event within ***) notify Hyperion in the event that Ucyclyd decides to initiate any recall or market withdrawal of a Marketed Product.

(b) Hyperion shall have sole authority and responsibility for, and shall make all decisions with respect to, any recall, market withdrawals or any other corrective action related to the Transferred Marketed Products on and following Marketed Products Closing.

ARTICLE 6

GOVERNANCE

6.1 Dissolution of JSC. As of the Effective Date of this Agreement, the JSC formed under the Prior Collaboration Agreement is hereby dissolved.

ARTICLE 7

Other PAYMENTs

7.1 Ucyclyd Payments. From January 1, 2013, until the earlier of (a) the date of written notification from the FDA approving any NDA for HPN-100 for the treatment of UCD, (b) June 30, 2013 and (c) the date on which Hyperion declines in writing the option to the Marketed Products Rights, Ucyclyd will pay Hyperion $500,000 per month due on or before ***, pro-rated for any partial months. For clarity, if approval of any NDA for HPN-100 in UCD occurs prior to January 1, 2013, then no payments are due under this Section 7.1.

7.2 Hyperion Payments. If Hyperion exercises the Marketed Products Option, Hyperion shall make the regulatory milestone payments, Net Sales milestone payments, and other ongoing payments, in each case, that are provided in Schedule 7.2.

7.3 No Reduction for Generic Equivalents. In the event any Person develops, markets, promotes, manufactures, sells, offers to sell, distributes or imports a Generic Equivalent, nothing in the Agreement shall be construed to allow a reduction in any of Hyperion’s payment obligations under the Agreement.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 24 of 53

EXECUTION COPY

7.4 Payment Procedure. All payments due under the Agreement shall be paid in United States Dollars by wire transfer, or by such other method mutually agreed upon by the Parties. Each Party shall designate an account for the receipt of the applicable payments due and shall provide the other Party with written wire instructions to such account.

7.5 Currency Conversion. Monetary conversions from the currency of a foreign country, in which Transferred Marketed Products are sold, into U.S. currency shall be determined using the Average Exchange Rate. The “Average Exchange Rate” shall be the average of the official exchange rate in force in that country for financial transactions on the first and last Business Day of the calendar month for which the payments are being paid. If there is no such official exchange rate, the conversion shall be made at the rate for such remittances on the date as published in the United States edition of The Wall Street Journal.

7.6 Taxes.

(a) Each Party will be responsible for any and all Taxes applicable to its own business.

(b) Each Party may withhold from payments due to the other Party any withholding Tax that is required by law to be paid to any taxing authority with respect to such payments. The Party that has withheld such Tax shall provide to the other Party all relevant documents and correspondence and written evidence of the payment of such Tax and any other cooperation or assistance as may be reasonably necessary to enable the Party subject to the withholding Tax to claim exemption from such Tax and to receive a full refund of such Tax or claim a foreign Tax credit. The Parties also agree to cooperate with each other in the event a Party seeks deductions under any double taxation or other similar treaty or agreement from time to time in force.

(c) The Parties will cooperate to more accurately determine and minimize their respective Tax liability. Each Party will provide Tax information or Tax documents reasonably requested by the other Party. Each Party will promptly notify the other of any claim for Taxes asserted with respect to the Agreement by a taxing authority with jurisdiction over either Party. With respect to any claim arising out of a Tax form or return signed by a Party to the Agreement, the signing Party may control the response to and settlement of the claim, but the other Party shall have the right to participate to the extent it may be liable.

7.7 Continuing Payment Obligations. The obligation of each Party to pay any and all payments required under the Agreement shall remain in effect notwithstanding any alleged infringement by any Person of any of the Transferred Marketed Products, the Marketed Products Technology, or the Ucyclyd Manufacturing Technology.

7.8 Late Payments. Any undisputed payments owed by a Party to the other Party under the Agreement that are not paid on or before the date such payments are due shall accrue daily interest, to the extent permitted by applicable Legal Requirements, at the rate announced by Bank of America (or its successor) as its prime rate in effect on the date that such payment was first due plus *** percent (***%).

7.9 No Additional Payment. Except as expressly set forth in the Agreement, the Parties shall have no obligation under the Agreement to pay or reimburse the other Party for any other amounts, including any other costs or expenses incurred by the other Party in connection with the performance of its obligations under the Agreement. This provision shall in no way limit a Party’s ability to collect damages for any breach by the other Party or in any way limit a Party’s indemnification obligations under the Agreement.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 25 of 53

EXECUTION COPY

7.10 Financial Audit and Record-Keeping Requirements. The Parties shall comply with the audit and record-keeping requirements set forth on Schedule 7.10.

7.11 No Set-Off. Except as expressly provided in the Agreement, neither Party shall have the right to set off any amounts due from the other Party against any undisputed damages, charges or other amounts due from such Party to such other Party.

ARTICLE 8

INTELLECTUAL PROPERTY

8.1 Ownership Rights of Intellectual Property. Subject to the terms and conditions of this Agreement, ownership of intellectual property shall be determined as set forth in this Section 8.1 (Ownership Rights of Intellectual Property).

8.1.1 Pre-Closing.

(a) Marketed Products Technology. Until the Marketed Products Closing, Ucyclyd remains the sole and exclusive owner of all Marketed Products Technology and all Marketed Products Technology is considered the Confidential Information of Ucyclyd. For clarity, if the Marketed Products Closing does not occur, Ucyclyd remains the sole and exclusive owner of all Marketed Products Technology and all Marketed Products Technology remains the Confidential Information of Ucyclyd.

(b) Ucyclyd Manufacturing Technology. Ucyclyd remains the sole and exclusive owner of all Ucyclyd Manufacturing Technology at all times prior to the Marketed Products Closing and during such period all Ucyclyd Manufacturing Technology is considered the Confidential Information of Ucyclyd.

8.1.2 On and Following Marketed Products Closing.

(a) Marketed Products Technology. Upon the Marketed Products Closing, Ucyclyd shall assign all Marketed Products Technology to Hyperion under the Technology Assignment Agreement. Thereafter, Hyperion shall be the sole and exclusive owner of all such Marketed Products Technology and all such assigned Marketed Products Technology shall be considered the Confidential Information of Hyperion. For clarity, if Ucyclyd exercises the Ammonul Option, Ucyclyd remains the sole and exclusive owner of all Ammonul Specific Know-How and all Ammonul Specific Know-How remains the Confidential Information of Ucyclyd.

(b) Ucyclyd Manufacturing Technology. On and following the Marketed Products Closing, Ucyclyd remains the sole and exclusive owner of all Ucyclyd Manufacturing Technology, and during such period all Ucyclyd Manufacturing Technology is considered the Confidential Information of Ucyclyd, in each case subject to assignment of the Ucyclyd Manufacturing Technology to Hyperion pursuant to Section 8.2.1. For clarity, on and following the Marketed Products Closing, the Ucyclyd Manufacturing Technology is licensed to Hyperion pursuant to Section 8.2.1, unless and until assigned to Hyperion as provided therein.

(c) Ucyclyd’s Cooperation. On and following the Marketed Products Closing, Ucyclyd shall, on behalf of itself and all Affiliates, cooperate with Hyperion to provide all assistance to and execute all documents reasonably required by Hyperion to establish, assign, perfect and affirm any and all of Hyperion’s rights to Marketed Products Technology in accordance with subsection (a) of Section 8.1.2. On and following assignment of the Ucyclyd Manufacturing

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 26 of 53

EXECUTION COPY

Technology to Hyperion pursuant to Section 8.2.1, Ucyclyd shall, on behalf of itself and all Affiliates, cooperate with Hyperion to provide all assistance to and execute all documents reasonably required by Hyperion to establish, assign, perfect and affirm any and all of Hyperion’s rights to such Ucyclyd Manufacturing Technology. In the case of any cooperation provided by Ucyclyd following the *** of the Marketed Products Closing with respect to the Marketed Products Technology and following the *** of the assignment pursuant to Section 8.2.1 with respect to the Ucyclyd Manufacturing Technology, Hyperion agrees to reimburse Ucyclyd for the actual, documented, out-of-pocket costs and expenses incurred by Ucyclyd in connection with such cooperation. Ucyclyd shall use commercially reasonable efforts to secure the signature of Ucyclyd or its Affiliates (as the case may be) to any document required to file, prosecute, register or memorialize the assignment of any rights described in this subsection (c); provided, however, if Ucyclyd is unable to secure such signature within *** of any request by Ucyclyd for such signature, Ucyclyd hereby irrevocably designates and appoints Hyperion and Hyperion’s duly authorized officers and agents as Ucyclyd’s agents and attorneys-in-fact to act for and on Ucyclyd’s behalf and instead of Ucyclyd solely to the extent required to further the filing, prosecution, registration, memorializing of assignment, issuance and enforcement of such rights and only to the extent Ucyclyd was unable to secure such signature, all with the same legal force and effect as if executed by Ucyclyd. The foregoing is deemed a power coupled with an interest and is irrevocable.

8.2 Licenses.

8.2.1 Ucyclyd Manufacturing Technology.

(a) On and after the Marketed Products Closing, subject to the terms and conditions of the Agreement, Ucyclyd hereby grants to Hyperion a worldwide, perpetual, ***, exclusive (even as to Ucyclyd except as set forth in this subsection (a)), sublicenseable (through multiple tiers), fee-earning license under the Ucyclyd Manufacturing Technology to make or have made the Transferred Marketed Products; provided, however, Ucyclyd and its Affiliates shall retain the right to use the Ucyclyd Manufacturing Technology to make or have made any products as to which Ucyclyd and its Affiliates are not otherwise restricted pursuant to Section 7.02 of the APA. Upon expiration of the Term, if Hyperion has closed on the purchase of the Marketed Products Rights and Ucyclyd did not exercise the Ammonul Option, the Ucyclyd Manufacturing Technology shall be promptly assigned to Hyperion and deemed Confidential Information of Hyperion; provided, however, effective upon such assignment to Hyperion, Hyperion hereby grants to Ucyclyd a worldwide, perpetual, ***, non-exclusive, sublicenseable (through multiple tiers), fully-paid license under the Ucyclyd Manufacturing Technology to make or have made any products as to which Ucyclyd and its Affiliates are not otherwise restricted pursuant to Section 7.02 of the APA.

(b) Prior to any assignment of the Ucyclyd Manufacturing Technology to Hyperion pursuant to subsection (a) above, all Ucyclyd Manufacturing Technology shall be considered the Confidential Information of Ucyclyd, and to the extent that Hyperion takes possession of, or otherwise has access to, any Ucyclyd Manufacturing Technology, Hyperion agrees to keep such Ucyclyd Manufacturing Technology confidential in accordance with the confidentiality and non-disclosure obligations set forth in this Agreement protecting Ucyclyd Confidential Information. Hyperion also shall ensure that its contract manufacturers and any other Third Parties being granted access to Ucyclyd Manufacturing Technology as permitted in this Agreement shall keep the Ucyclyd Manufacturing Technology confidential. The foregoing shall not be construed as a limitation on Hyperion’s rights to access such Ucyclyd Manufacturing Technology or to practice the rights (either by itself or through a Third Party) granted to it under this Agreement.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 27 of 53

EXECUTION COPY

8.2.2 Licenses to Ucyclyd.

(a) If Hyperion exercises the Marketed Products Option and Ucyclyd exercises the Ammonul Option, then, on and after the Marketed Products Closing Date, subject to the terms and conditions of this Agreement, Hyperion hereby grants to Ucyclyd a worldwide, perpetual, ***, non-exclusive, sublicenseable (through multiple tiers), fully-paid license, under the Marketed Products Technology assigned to Hyperion under this Agreement, to research, develop, make, have made, use, sell, offer for sale, and import (i) the Ammonul Product, (ii) *** and (iii) any other products containing, in combination, sodium phenylacetate (including any salts, analogs, metabolites, prodrugs and other physical forms or derivatives of sodium phenylacetate) and sodium benzoate (including any salts, analogs, metabolites, prodrugs and other physical forms or derivatives of sodium benzoate) that are not otherwise restricted pursuant to Section 7.02 of the APA).

(b) If Hyperion exercises the Marketed Products Option, then, on and after the Marketed Products Closing Date, subject to the terms and conditions of this Agreement, Hyperion hereby grants to Ucyclyd, a limited, perpetual, ***, non-exclusive, non-transferable (except as permitted by Section 15.14), fully-paid right to use and reference the UCD Data assigned to Hyperion under this Agreement solely for any products as to which Ucyclyd and its Affiliates are not otherwise restricted pursuant to Section 7.02 of the APA.

8.2.3 Retained Know-How. Nothing in this Agreement or the APA shall preclude the employees or contractors of either Party or their respective Affiliates from using Know-How that is retained in their unaided memories. As used herein, “unaided memory” means that the applicable employee or contractor did not intentionally memorize the Know-How for the purpose of appropriating the Know-How and subsequently using or disclosing it. Nothing in this Section 8.2.3 shall be deemed to grant to either Party a license under the other Party’s patents or copyrights.

8.3 Trademarks, Domain Names and 1-888 Phone Number.

8.3.1 Ownership.

(a) During the Pre-Closing Period, Ucyclyd shall remain the sole and exclusive owner of all Marketed Products Marks, it being understood that some or all of the Marketed Products Marks will be assigned to Hyperion as part of the Assets for the Transferred Marketed Products at the Marketed Products Closing. Nothing contained in this Agreement shall be construed to prohibit Hyperion from referring to the Marketed Products, in a fair and accurate manner and consistent with applicable Legal Requirements, in written or electronic descriptions of Hyperion’s rights to the Marketed Products that are consistent with Section 15.9 or in written or electronic descriptions of clinical trials conducted by or on behalf of Hyperion that utilize, at least in part, Marketed Products. Notwithstanding the foregoing, Hyperion acknowledges that (i) under the Distribution Agreements, certain Third Party distributors outside the United States have been granted exclusive rights to use Marketed Products Marks in connection with distribution of Marketed Products outside of the United States, and (ii) Hyperion’s rights to the Marketed Products Marks on and after the Marketed Products Closing shall be subject to the rights then existing that have been granted to distributors outside of the United States under the Distribution Agreements.

(b) Hyperion shall at all times remain the sole and exclusive owner of the Hyperion Marks.

8.3.2 Domain Names and 1-888 Phone Number. During the Pre-Closing Period, Ucyclyd shall remain the sole and exclusive owner of all Domain Names and the 1-888 Phone Number, and shall be responsible for the maintenance of, and shall maintain in effect, such Domain Names and the 1-888 Phone Number. If Ucyclyd does not exercise the Ammonul Option, then at the Marketed Products Closing, Ucyclyd shall assign to Hyperion all right, title, and interest in

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 28 of 53

EXECUTION COPY

and to the Domain Names that are part of the Assets and the 1-888 Phone Number, and thereafter Hyperion shall be responsible for such maintenance. If Ucyclyd does exercise the Ammonul Option, then (a) at the Marketed Products Closing, Ucyclyd shall assign to Hyperion all right, title, and interest in and to the Domain Names that are included in the applicable Assets for the Buphenyl Products, (b) Ucyclyd shall retain ownership (and maintenance responsibility) for the Domain Names that are not included in the Assets and the 1-888 Phone Number, and (c) as soon as reasonably practicable following the Marketed Products Closing, Ucyclyd shall work with Hyperion to ensure that customers of the Transferred Marketed Products who call the 1-888 Phone Number are provided with the option of being forwarded to a phone number designated by Hyperion.

8.4 Covenant Not to Sue.

(a) If Hyperion exercises the Marketed Products Option, Ucyclyd agrees, effective as of the Marketed Products Closing Date, that neither it nor any of its Affiliates shall assert or attempt to enforce against Hyperion, its Affiliates, or any of its or their licensees, sublicensees, or distributors of a Transferred Marketed Product (each, a “Hyperion Party”), any intellectual property right owned or licensed by Ucyclyd or any Affiliate (including any intellectual property owned or licensed by successors or assigns of Ucyclyd or its Affiliates that is based on an intellectual property right owned or licensed by Ucyclyd or any Affiliate), as of the Marketed Products Closing Date or thereafter, with respect to the development, use, making, having made, importing, selling, or offering for sale, by or on behalf of a Hyperion Party anywhere in the world, of a Transferred Marketed Product solely to the extent that the Transferred Marketed Product is an Existing Marketed Product and solely with respect to the applicable Existing Indications for such Existing Marketed Product. For clarity, this subsection (a) extends to any successors or assigns of a Hyperion Party and is binding on the successors and assigns of Ucyclyd and its Affiliates.

(b) Hyperion agrees, effective as of the Effective Date, that neither it nor any of its Affiliates shall assert or attempt to enforce against Ucyclyd, its Affiliates, or any of its or their licensees, sublicensees, or distributors of a Marketed Product (each, a “Ucyclyd Party”), any intellectual property right owned or licensed by Hyperion or its Affiliates (including any intellectual property owned or licensed by successors or assigns of Hyperion or its Affiliates that is based on an intellectual property right owned or licensed by Hyperion or any Affiliate), as of the Effective Date or thereafter, with respect to: (i) the development, use, making, having made, importing, selling, or offering for sale during the Pre-Closing Period (and thereafter, if Hyperion does not exercise the Marketed Products Option), by or on behalf of a Ucyclyd Party anywhere in the world, of a Marketed Product solely to the extent that such Marketed Product is an Existing Marketed Product and solely with respect to the applicable Existing Indications for such Existing Marketed Product; and (ii) if Ucyclyd exercises the Ammonul Option, the development, use, making, having made, importing, selling, or offering for sale on or after the Marketed Products Closing Date, by or on behalf of a Ucyclyd Party anywhere in the world, of any or all Ammonul Product or *** solely to the extent that the Ammonul Product and ***, as the case may be, are Existing Ammonul Products and solely with respect to the applicable Existing Indications for such Existing Marketed Product. The foregoing covenant shall not apply to the extent of any activities by a Ucyclyd Party that are otherwise restricted pursuant to Section 7.02 of the APA. For clarity, this subsection (b) extends to any successors or assigns of a Ucyclyd Party and is binding on the successors and assigns of Hyperion and its Affiliates.

8.5 No Liens. Except as expressly set forth in the Agreement, during the Pre-Closing Period, neither Ucyclyd nor its Affiliates shall sell, transfer, assign, mortgage, pledge, lease, grant a security interest in (e.g., as collateral for a loan or other financing) or otherwise encumber (other than granting licenses in the ordinary course of business where the terms of such licenses do not extend beyond the Marketed Products Closing Date) any of the Marketed Products Technology or the Ucyclyd Manufacturing Technology.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 29 of 53

EXECUTION COPY

ARTICLE 9

PATENTS AND LICENSED MARKS

9.1 Patent Prosecution and Maintenance.

9.1.1 Marketed Products Patents

(a) During the Pre-Closing Period, Ucyclyd shall have the sole and exclusive right to file, prosecute, and maintain Marketed Products Patents anywhere in the world.

(b) Effective upon the Marketed Products Closing, Hyperion shall have the sole right to control prosecution and maintenance of the Marketed Products Patents. Promptly following the Marketed Products Closing Date, Ucyclyd shall transfer to Hyperion any and all documents constituting or comprising Ucyclyd’s patent prosecution files for the Marketed Products Patents. Ucyclyd shall assist and cooperate with Hyperion, upon Hyperion’s request and sole expense, in Hyperion’s filing, prosecution or maintenance of the Marketed Products Patents. For the avoidance of doubt, following the Marketed Products Closing, Ucyclyd shall maintain the rights with respect to control of prosecution and maintenance of the Ucyclyd Manufacturing Patents as set forth in Section 9.1.2. The Parties agree that the Parties have a common interest with respect to the Marketed Products Patents.

9.1.2 Rights in Ucyclyd Manufacturing Patents

(a) During the Term and subject to this Article 9 (Patents and Licensed Marks), as between Hyperion and Ucyclyd, Ucyclyd shall have the first right to file, prosecute, and maintain Ucyclyd Manufacturing Patents. If, following the Marketed Products Closing, Ucyclyd files a Ucyclyd Manufacturing Patent under this Section 9.1.2, following the date of such filing, Ucyclyd shall provide Hyperion with a copy of the filed application, office action, response to office action, request for terminal disclaimer, request for reissue or reexamination with respect to such Ucyclyd Manufacturing Patent and Hyperion shall have the right to provide any comments or suggestions with respect to such filing and the continued prosecution and amendment of such filing, including any reasonably requested claim amendments to any patent application, responses to office actions or requests for reissue or reexamination. Ucyclyd shall use good faith efforts to consider such comments and suggestions. Following the expiration of the Term, Ucyclyd shall transfer to Hyperion any and all documents constituting or comprising Ucyclyd’s patent prosecution files for the Ucyclyd Manufacturing Patents. The Parties agree that the Parties have a common interest with respect to the Ucyclyd Manufacturing Patents.

(b) Hyperion has the right to request Ucyclyd to file for, and to maintain Ucyclyd Manufacturing Patents in the United States and foreign countries if such rights are available, if practicable. Hyperion shall submit such notice in writing and shall identify the countries in which Hyperion requests for such Ucyclyd Manufacturing Patents to be filed. Ucyclyd shall have the right in its sole discretion to prepare, file and maintain such Ucyclyd Manufacturing Patents provided that Ucyclyd shall not be required to file in foreign countries if such request from Hyperion is not received from Hyperion at least *** prior to any statutory required filing date in the applicable foreign country for the patent application.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 30 of 53

EXECUTION COPY

(c) If, at any time following the Marketed Products Closing, Ucyclyd decides not to file any application as set forth in Section 9.1.2(b), or to discontinue the prosecution or maintenance of any Ucyclyd Manufacturing Patents, Ucyclyd shall notify Hyperion in writing promptly, but in no event later than *** prior to the next deadline for filing or due date for any response without any petition for extension. Hyperion shall have the right, but not the obligation, to undertake such filing, prosecution or maintenance of such particular Ucyclyd Manufacturing Patents, and Ucyclyd shall assist and cooperate with Hyperion in connection with all such filings, prosecution and maintenance at Hyperion’s request and sole expense.

9.1.3 Patent Prosecution and Maintenance Costs.

(a) During the Pre-Closing Period, Ucyclyd shall be responsible solely for any and all costs and expenses incurred in connection with any filings, prosecution and maintenance of any Marketed Products Patents. During the Term, Ucyclyd shall be responsible for any and all costs and expenses incurred in connection with any filings, prosecution and maintenance of any Ucyclyd Manufacturing Patents; provided that Hyperion shall be responsible for Third Party costs and expenses with respect to Ucyclyd Manufacturing Patents for any filings requested by Hyperion pursuant to Section 9.1.2(b). Each Party shall reimburse the other Party promptly following invoice with respect to any such costs and expenses subject to reimbursement hereunder.

(b) On and after the Marketed Products Closing, (i) Hyperion shall be responsible solely for any and all costs and expenses incurred in connection with any filings, prosecution and maintenance of any Marketed Products Patents, and (ii) Ucyclyd shall be responsible for any and all costs and expenses incurred in connection with any filings, prosecution and maintenance of any Ucyclyd Manufacturing Patents; provided that Hyperion shall be responsible for Third Party costs and expenses with respect to Ucyclyd Manufacturing Patents for any filings requested by Hyperion pursuant to Section 9.1.2(b).

9.2 Enforcement

9.2.1 Pre-Closing. During the Pre-Closing Period, Ucyclyd shall have the sole and exclusive right to institute, prosecute, and control any action or proceeding with respect to any infringement of the Marketed Products Patents or the Ucyclyd Manufacturing Patents (an “Action”), at its sole expense.

9.2.2 Post-Closing.

(a) Effective upon the Marketed Products Closing, Hyperion shall have the sole right to institute, prosecute, and control any Action with respect to the Marketed Products Patents, at its own expense. If such an Action was initiated prior to Marketed Products Closing and continues on and following Marketed Products Closing, the Parties shall co-operate and transition the control of such Action and all information, filings, documents and other materials relating thereto from Ucyclyd to Hyperion. Ucyclyd shall assist Hyperion in such Action on and following Marketed Products Closing upon Hyperion’s request and at Hyperion’s sole expense (provided such expenses are reasonable), and shall consent to be joined as a party in such Action where required by the applicable Legal Requirements. Any recovery from such Action shall first be used to reimburse each Party for its costs and expenses incurred in connection with such Action. Any remaining recovery shall be retained by Hyperion; provided, however, that ***.

(b) On and following the Marketed Products Closing with respect to the Ucyclyd Manufacturing Patents:

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 31 of 53

EXECUTION COPY

(i) Ucyclyd shall have the first right to institute, prosecute, and control any Action with respect to any infringement of the Ucyclyd Manufacturing Patents, at its sole expense. Hyperion agrees to cooperate fully with Ucyclyd, at Ucyclyd’s request and expense (provided such expenses are reasonable), in any such Action, and to be joined as a party in such Action where required by the applicable Legal Requirements.

(ii) If Ucyclyd declines to bring or defend any such Action within *** following receipt of a written request from Hyperion to do so; or Ucyclyd discontinues the enforcement or defense of any such Action, Hyperion shall have the right (subject to the sentence below), but not the obligation, to undertake such Action at its sole discretion and expense, to institute, prosecute, and control such Action using counsel of its own choice. In such case, Ucyclyd shall assist Hyperion in such Action at Hyperion’s request and expense (provided such expenses are reasonable), and shall consent to be joined as a party in such Action where required by the applicable Legal Requirements.

(iii) The Party instituting an Action under this Section 9.2 shall keep the other Party fully informed of the progress of any negotiations and proceedings related to any such Action and shall consult with the other Party and obtain the other Party’s prior written consent to make any final settlement, consent judgment or other voluntary disposition of the matter. Any recovery from such Action shall first be used to reimburse each Party for its costs and expenses incurred in connection with such Action, and the remainder of such recovery shall split between the Parties, with *** being retained by the Party instituting the Action and *** being retained by the other Party.

9.2.3 Settlements. In no event shall either Party settle any Action referred to in this Section 9.2 with any Third Party, if such settlement would have a material adverse effect on any of the current or future rights of the other Party (as determined by that Party in its reasonable discretion), without the prior written approval of such other Party, which approval shall not be unreasonably withheld. With respect to any recovery made by Hyperion pursuant to an Action brought by Hyperion against a Third Party for the infringement of any Marketed Product Patent, such recovery, net of any actual expenses or costs incurred by Hyperion in obtaining such recovery (including reasonable legal and expert fees), shall be ***.

9.3 Prosecution and Maintenance of Marketed Products Marks and Domain Names.

(a) During the Pre-Closing Period, Ucyclyd shall be solely responsible for filing, prosecution and maintenance of the Marketed Products Marks, including filing all necessary maintenance and use documents and applying for renewal. At any time during the Term, Hyperion shall execute any documents as shall be reasonably required by Ucyclyd to confirm Ucyclyd’s ownership of the Marketed Products Marks or to otherwise give effect to the provisions of this Agreement.

(b) Hyperion shall be solely responsible for filing, prosecution and maintenance of the Hyperion Marks, including filing all necessary maintenance and use documents and applying for renewal. At any time during the Term, Ucyclyd shall execute any documents as shall be reasonably required by Hyperion to confirm Hyperion’s ownership of the Hyperion Marks or to otherwise give effect to the provisions of this Agreement.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 32 of 53

EXECUTION COPY

(c) Each Party shall bear all expenses incurred in connection with the filing, prosecution and maintenance of any trademarks or Domain Names (including the 1-888 Phone Number) owned by such Party.

9.4 Enforcement of Licensed Marks.

During the Pre-Closing Period, Ucyclyd shall have the sole and exclusive right, but not the obligation, to institute an action or a proceeding at its sole expense against any such infringement with respect to the Marketed Products Marks (including the Domain Names and the 1-888 Phone Number, to the extent each contain a Licensed Mark and are owned by Ucyclyd). Following the Marketed Products Closing, Hyperion shall have the sole and exclusive right to institute such action or proceeding with respect to the Marketed Products Marks.

9.5 USPTO Inter Partes Proceedings for Licensed Marks. During the Pre-Closing Period, Ucyclyd shall have the sole right, but not the obligation, to institute, defend, control and settle any inter partes proceedings instituted in the United States Patent and Trademark Office or, if in a foreign country, the equivalent governing body, with respect to Marketed Products Marks.

9.6 No Contest.

9.6.1 For Patents.

(a) During the Pre-Closing Period, Hyperion shall not directly or indirectly, individually, or in association or in combination with any other Person, attack or contest the validity, enforceability, status, registration of, or Ucyclyd’s ownership of, or right in or to use the Marketed Products Technology, including products, methods and processes in whole or in part based on, utilizing or otherwise incorporating the Marketed Products Technology, nor shall Hyperion willingly become an adverse party to Ucyclyd in any action contesting the validity, enforceability, status or registration of, or any of their ownership of or rights in or to use, the Marketed Products Technology, as the case may be. Notwithstanding the foregoing, Hyperion in response to any objection or rejection issued by a patent authority shall be able to comment to such patent authority on Marketed Products Technology during patent prosecution according to Section 9.1 and such comment shall not be interpreted as any violation of this Section 9.6.1.

(b) At any time, Hyperion shall not directly or indirectly, individually, or in association or in combination with any other Person, attack or contest the validity, enforceability, status, registration of, or Ucyclyd’s ownership of, or right in or to use the Ucyclyd Manufacturing Technology thereupon, including products, methods and processes in whole or in part based on, utilizing or otherwise incorporating the Ucyclyd Manufacturing Technology, nor shall Hyperion willingly become an adverse party to Ucyclyd in any action contesting the validity, enforceability, status or registration of, or any of their ownership of or rights in or to use, the Ucyclyd Manufacturing Technology, as the case may be. Notwithstanding the foregoing, Hyperion in response to any objection or rejection issued by a patent authority shall be able to comment to such patent authority on Ucyclyd Manufacturing Technology during patent prosecution according to Section 9.1 and such comment shall not be interpreted as any violation of this Section 9.6.1.

(c) On and following the Marketed Products Closing, Ucyclyd shall not directly or indirectly, individually, or in association or in combination with any other Person, attack or contest the validity, enforceability, status, registration of, or Hyperion’s ownership of, or right in or to use the Marketed Products Technology, including products, methods and processes in whole or in part based on, utilizing or otherwise incorporating the Marketed Products Technology, nor shall Ucyclyd willingly become an adverse party to Hyperion (or any licensors of the Marketed Products

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 33 of 53

EXECUTION COPY

Technology, if applicable) in any action contesting the validity, enforceability, status or registration of, or any of its (or their) ownership of or rights in, the Marketed Products Technology, as the case may be.

9.6.2 For Licensed Marks and Hyperion Marks.

(a) At any time, Hyperion agrees that it shall not: (i) contest, oppose or challenge, or assist any Person in contesting, opposing or challenging, Ucyclyd’s ownership of the Marketed Products Marks (including the Domain Names and the 1-888 Phone Number, to the extent each contain a Marketed Products Mark) or (ii) at any time do or suffer to be done any act or thing that will in any way impair Ucyclyd’s ownership of the Marketed Products Marks, the Domain Names and the 1-888 Phone Number or any registration thereof. Hyperion shall not register or attempt to register any Marketed Products Marks (including the Domain Names and the 1-888 Phone Number, to the extent each contain a Marketed Products Mark) or any marks confusingly similar to the Marketed Products Marks (including the Domain Names and the 1-888 Phone Number, to the extent each contain a Marketed Products Mark) or any other mark owned by Ucyclyd in any jurisdiction without the prior written consent of Ucyclyd. This Section 9.6.2(a) shall only apply to a particular Marketed Products Mark, a particular Domain Name, or the 1-888 Phone Number if it has not been assigned to Hyperion hereunder.

(b) At any time, Ucyclyd agrees that it shall not: (i) contest, oppose or challenge, or assist any Person in contesting, opposing or challenging, Hyperion’s ownership of the Hyperion Marks; or (ii) at any time do or suffer to be done any act or thing that will in any way impair Hyperion’s ownership of the Hyperion Marks or any registration thereof. Ucyclyd shall not at any time register or attempt to register any marks or any marks confusingly similar to the Hyperion Marks without the prior written consent of Hyperion.

ARTICLE 10

REPRESENTATIONS AND WARRANTIES

10.1 Mutual Representations and Warranties. Each Party represents and warrants to the other Party that:

(a) such Party has the full corporate right, power, and authority to execute, deliver, and perform the Agreement and to consummate the transactions contemplated hereby and thereby and the execution, delivery, and performance of the Agreement and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of such Party;

(b) the Agreement has been duly executed and delivered by an authorized officer of such Party, and is a legal, valid, and binding obligation of such Party enforceable against it in accordance with its terms, except as enforcement may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity) and the effect of applicable bankruptcy, insolvency, moratorium and other similar laws of general application relating to or affecting creditors’ rights generally, including the effect of statutory or other laws regarding fraudulent conveyances and preferential transfers;

(c) such Party’s execution, delivery and performance of the Agreement shall not constitute a breach or default under any contract or agreement to which such Party is a party or by which it is bound or otherwise violate the rights of any Third Party or violate any Legal Requirement;

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 34 of 53

EXECUTION COPY

(d) neither it nor any of its personnel (including subcontractors) carrying out activities under this Agreement have been nor are disqualified or debarred under Section 306 of the Federal Food, Drug and Cosmetic Act (as amended by the Generic Drug Enforcement Act of 1992), 21 U.S.C. § 336 or are listed on any Exclusion List;

(e) during the Pre-Closing Period, it shall not use in any capacity the services of any Person debarred or disqualified under the provisions of Section 306 of the Federal Food, Drug and Cosmetic Act (as amended by the Generic Drug Enforcement Act of 1992), 21 U.S.C. § 336 or listed on an Exclusion List to carry out any activity under the Agreement and will notify the other Party immediately in the event the Party is made aware that any Person carrying out any activity under the Agreement is debarred or disqualified or listed on an Exclusion List; and

(f) during the Pre-Closing Period, it shall not use any Ineligible Person or a Person on an Exclusion List in connection with the performance of any of its obligations or activities under the Agreement.

10.2 Additional Representations of Ucyclyd. Ucyclyd represents to Hyperion, as of the Effective Date, that except as set forth on Schedule 10.2:

(a) Ucyclyd owns good and marketable title to all of the Assets, free and clear of any and all Liens, and Medicis and its Affiliates (other than Ucyclyd) have assigned any and all of their rights and interests in and to all of the Assets to Ucyclyd;

(b) Ucyclyd has not granted any rights to any Third Party to manufacture, sell or distribute the Marketed Products;

(c) Schedule 10.2 contains a correct and complete list of all of the issued and unexpired patents and pending patent applications with respect to the manufacture, sale or use of Marketed Products and which are owned or licensed by Ucyclyd or its Affiliates;

(d) neither Ucyclyd nor any officer, director or agent of Ucyclyd has employed any broker, finder, nor agent with respect to the Agreement or the transactions contemplated hereby;

(e) (i) neither Ucyclyd nor its Affiliates has assigned, sublicensed or granted rights to any Third Party, any rights to the Marketed Products Technology, and (ii) there are no outstanding Liens made by Ucyclyd or its Affiliates on such Marketed Products Technology;

(f) to Ucyclyd’s Actual Knowledge, all Assigned Agreements are valid, binding and enforceable in accordance with their respective terms, subject to: (i) applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and by general equitable principles; and (ii) laws relating to the availability of specific performance, injunctive relief, or other equitable remedies against Ucyclyd and each other party thereto, and to the best of Ucyclyd’s Actual Knowledge are in full force and effect;

(g) Ucyclyd has not received any written notice regarding any actual breach of, or default under any Assigned Agreement;

(h) there are no Marketed Products Patents owned or controlled by Ucyclyd or its Affiliates; to the extent there are any Marketed Products Patents as of the Marketed Products Closing Date, to Ucyclyd’s Actual Knowledge, neither Ucyclyd nor any of its Affiliates has received any written notification from any Third Party alleging the invalidity or non-enforceability of any of the Marketed Products Patents owned or controlled by Ucyclyd or its Affiliates;

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 35 of 53

EXECUTION COPY

(i) (i) to Ucyclyd’s Actual Knowledge, neither Ucyclyd nor any of its Affiliates has received any written notification from any Third Party alleging that the making, use or sale of any Marketed Product infringes the patents of such Third Party, and (ii) to Ucyclyd’s Actual Knowledge, there is no basis for such an allegation;

(j) the Distribution Agreements and the Manufacturing Agreements constitute the entire list of agreements between Ucyclyd or any of its Affiliates on one side and any Third Party on the other side regarding the manufacture and distribution of the Marketed Products;

(k) the Domain Names constitute the entire list of domain names owned by Ucyclyd or any of its Affiliates that contain the terms “Buphenyl,” “Ammonul” and “ureacycle” or, to Ucyclyd’s Actual Knowledge, that are specifically used or were registered by Ucyclyd or its Affiliates in connection with the marketing of the Marketed Products;

(l) Ucyclyd has the right to grant to Hyperion the licenses granted to Hyperion under the Agreement; and

(m) the rights and licenses granted to Hyperion by Ucyclyd under the Agreement constitute all of the rights and licenses in Ucyclyd’s possession that are necessary to exercise Hyperion’s rights under the Agreement and for Hyperion to perform its obligations under the Agreement.

10.3 Additional Representations and Warranties of Hyperion. In addition to the other representations and warranties of Hyperion in the Agreement, Hyperion represents and warrants to Ucyclyd that:

(a) neither it nor any personnel have been convicted of any offense currently required to be listed under FDA regulations;

(b) any payment due by Hyperion to Ucyclyd under the Agreement shall not result in, or otherwise render, Hyperion insolvent or unable to pay its debts as they mature; and

(c) that it is entering into the Agreement solely on the basis of (i) the representations and warranties made by Ucyclyd as set forth in this Article 10 and (ii) the results of its own inspections of the Assets, the intellectual property rights being licensed under the Agreement and the other rights being acquired under the Agreement, and as between Ucyclyd and Hyperion.

10.4 Obligation to Update Representations and Warranties.

(a) If, at any time after the Effective Date through the Marketed Products Closing Date, any of the warranties of either Party contained in the Agreement are no longer true and correct, such Party shall notify the other Party promptly in writing specifying the basis for any such warranty no longer being true and correct.

(b) At the Marketed Products Closing, except as set forth below in this subsection (b), Ucyclyd shall reaffirm the representations made to Hyperion under Section 10.2 effective as of the Marketed Products Closing Date and shall update Schedule 10.2 to reflect any disclosures to be made as of the Marketed Products Closing Date; provided, however, that: (i) the representation under Section 10.2(l) shall be made on the Marketed Products Closing Date only

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 36 of 53

EXECUTION COPY

with respect to those licenses that continue to remain in effect following the Marketed Products Closing Date as contemplated under the license rights granted as of the Marketed Products Closing Date (i.e., Commercialization and sale rights worldwide); and (ii) Hyperion acknowledges and agrees that any such amendment, supplement or disclosure shall not give rise to any liability of, or by, Ucyclyd unless such amendment, supplement or disclosure is made as of the Marketed Products Closing Date under Sections 10.2(a), (e)(i), (e)(ii), (k) or (l) above and the matter or item that is the subject of such amendment, supplement or disclosure: (A) is not due to the acts or omissions of Hyperion; (B) would have a material adverse effect on title to the Assets or the rights of Hyperion (or its Affiliates or sublicensees) to develop or commercialize the Assets, and (C) resulted from the acts or omissions of Ucyclyd. If all of the conditions described above have occurred, then upon written notice from Hyperion to Ucyclyd, Hyperion shall have the right to delay the Marketed Products Closing until Ucyclyd has cleared such effect on title to the Assets or the rights of Hyperion (or its Affiliates or sublicensees) to develop or commercialize the Assets. If Ucyclyd does not clear such effect within *** following receipt of written notice from Hyperion delaying the Marketed Products Closing, then Hyperion shall have the right to forego such purchase of the Marketed Products Rights, in which case the Term of the Agreement shall be considered terminated. For any other amendments, supplements, or disclosures made to Schedule 10.2, Hyperion shall have the right, at its sole option, to either (a) consummate the purchase of the Marketed Products Rights pursuant to Article 3 or (b) terminate the Term of the Agreement and forego such purchase of the Marketed Products Rights.

(c) At the Marketed Products Closing, each of the Parties shall reaffirm the representations under Section 10.1(a), (b) and (c), effective as of the Marketed Products Closing Date, with respect to those documents to be executed by the Parties upon Marketed Products Closing.

10.5 Limitation of Warranties. EXCEPT AS SET FORTH IN THE AGREEMENT, EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE PARTIES MAKE NO REPRESENTATIONS OR WARRANTIES TO EACH OTHER, EXCEPT AS EXPRESSLY CONTAINED IN THE AGREEMENT, AND ANY AND ALL PRIOR REPRESENTATIONS AND WARRANTIES MADE BY ANY PARTY OR ITS REPRESENTATIVES, WHETHER VERBALLY OR IN WRITING, ARE DEEMED TO HAVE BEEN MERGED INTO THE AGREEMENT, IT BEING INTENDED THAT NO SUCH PRIOR REPRESENTATIONS OR WARRANTIES SHALL SURVIVE THE EXECUTION AND DELIVERY OF THE AGREEMENT. EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO: (A) MARKETED PRODUCTS TECHNOLOGY OR UCYCLYD MANUFACTURING TECHNOLOGY, OR (B) THE ISSUANCE, VALIDITY, SCOPE, UTILITY OR ENFORCEABILITY OF ANY OF THE MARKETED PRODUCTS PATENTS OR UCYCLYD MANUFACTURING PATENTS.

ARTICLE 11

TERM AND TERMINATION

11.1 Term. The term of the Agreement shall commence on the Effective Date and unless terminated earlier in accordance with the terms of the Agreement, shall continue until the occurrence of one of the following events:

(a) if the Marketed Products Option is not exercised, the expiration of the Marketed Products Option;

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 37 of 53

EXECUTION COPY

(b) if the Marketed Products Option is exercised but the Marketed Products Closing does not occur, the Marketed Products Closing Deadline; or

(c) if the Marketed Products Option is exercised and the Marketed Products Closing does occur, the date at which there are no remaining payment obligations between the Parties under the Agreement (the “Term”).

11.2 Termination Rights. The Parties shall have the following termination rights:

(a) Either Party shall have the right, but not the obligation, to terminate a royalty-bearing or fee-bearing license granted to the other Party under the Agreement, in the event the breaching Party fails to pay to the non-breaching Party under the Agreement an amount due with respect to such license and such failure to pay is not remedied within *** following the receipt of written notice of such failure to pay from the non-breaching Party. Such termination shall be effective on the expiration of such notice period if the breaching Party has failed to remedy such failure to pay prior to the expiration of such notice period. Termination of a license shall not affect any other licenses under the Agreement. In the event payment under this Agreement is disputed in good faith, the license shall not be terminated pending resolution of the dispute under Article 14. If the dispute is resolved such that payment is due, the license shall not be terminated unless and until the breaching Party fails to make such payment within *** after final resolution.

(b) This Agreement shall be terminated pursuant to Section 3.5.4(d) for irresolvable challenge to any HSR filing in connection with the Marketed Products Closing.

11.3 Effect of Termination or Expiration.

(a) The termination of this Agreement for any reason (other than termination of this Agreement under Section 11.2(b) or the expiration of the Term under Section 11.1(a) or 11.1(b)) shall not affect the Parties’ rights and obligations under the Agreement, and in particular, the Marketed Products Option, any and all licenses to intellectual property that are not otherwise terminated as permitted by Section 11.2(a) (and obligations to grant licenses to intellectual property in the future subject to termination as permitted by Section 11.2(a)) and any remaining payment obligations shall continue in full force and effect, notwithstanding such termination or expiration. For clarity, the Marketed Products Option shall terminate upon termination of this Agreement under Section 11.2(b) or the expiration of the Term under Section 11.1(a) or 11.1(b).

(b) Following assignment of the Marketed Products Rights to Hyperion hereunder, termination or expiration of this Agreement for any reason shall not affect Hyperion’s ownership of the Marketed Products Rights.

(c) In the event of any alleged breach or non-performance of the other Party, each Party shall have the right, subject to Section 13.6 and Article 14, to seek (i) monetary damages or (ii) any other remedy available to it at law or in equity that would not have the effect of affecting the Parties’ rights and obligations under this Agreement.

11.4 No Prejudice to Rights. Termination of the Term of the Agreement shall be without prejudice to:

(a) The rights of the Parties to any payments due prior to the effective date of termination;

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 38 of 53

EXECUTION COPY

(b) Any remedies that either Party may then have under the Agreement or at law or in equity; and

(c) Either Party’s right to obtain performance of any obligations set forth in the Agreement that survive termination by their express terms or as set forth in Section 10.5 (Limitation of Warranties).

11.5 Survival. In addition to any terms or conditions of the Agreement that by their express terms (including pursuant to Section 11.3, if applicable) or by the nature of the provision survive the termination of the Term of the Agreement, the following provisions shall survive any expiration or termination of the Term of the Agreement: any representation or warranty under Article 10 that is the subject of a claim which occurred prior to the expiration of the Term of the Agreement asserted by the Party seeking indemnification or a claim hereunder in a reasonably detailed writing delivered to the other Party prior to the termination or expiration of the Term of the Agreement shall survive with respect to such claim or dispute until the final resolution thereof; Article 12; Article 13; Article 14; Article 15; Section 7.10, Schedule 7.10 (until expiration of the period specified therein); Section 11.3; Section 11.4; and this Section 11.5. In addition, any other provision required to interpret and enforce the Parties’ rights and obligations under this Agreement also shall survive to the extent required for the full, observation and performance of this Agreement by the Parties hereto.

ARTICLE 12

CONFIDENTIALITY AND NONDISCLOSURE

12.1 Confidential Information. “Confidential Information” means any technical, scientific, regulatory, clinical, medical, financial, marketing or business information disclosed by a Party to the other Party under the Agreement, the APA, the Prior Collaboration Agreement, or the Existing Confidentiality Agreement, irrespective of the form of the communication. Confidential Information also includes information or other property that is designated in this Agreement as constituting the “Confidential Information” of a Party.

12.2 Confidentiality Obligation. Except to the extent expressly authorized by this Agreement, the APA, or the Party owning the particular item of Confidential Information, each Party shall keep confidential and shall not publish or otherwise disclose to any Third Party, or use for any purpose other than as set forth in this Agreement or the APA, any of the other Party’s Confidential Information.

12.3 Exceptions. Each Party’s obligations set forth in this Article 12 shall not apply to any specific portion of information that it can establish:

(a) was already known to the such Party, as evidenced by its written records, other than under an obligation of confidentiality, at the time of disclosure by the disclosing Party;

(b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;

(c) became generally available to the public or otherwise part of the public domain after its disclosure other than through any act or omission of the receiving Party in breach of the Agreement or the Existing Confidentiality Agreement; or

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 39 of 53

EXECUTION COPY

(d) was disclosed to the receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the disclosing Party not to disclose such information to others.

Specific Confidential Information shall not be deemed to be available to the public or in the prior possession of the receiving Party merely because it is embodied in more general information available to the public or in the receiving Party’s possession. Any combination of known information shall be within any of the foregoing exceptions only if the combination as such is within such exception.

12.4 Authorized Disclosure

(a) Each Party may disclose the other Party’s Confidential Information: (i) as required by an order from a court or governmental agency with competent jurisdiction; or (ii) if, and to the extent, such disclosure is otherwise necessary to comply with any applicable Legal Requirements, provided that such Party promptly informs the other Party of the need for such disclosure and uses commercially reasonable efforts to seek (or assist the disclosing Party in obtaining) a protective order or confidential treatment for such disclosure. If the receiving Party becomes aware of any unauthorized use or disclosure of the Confidential Information of the disclosing Party, the receiving Party shall promptly and fully notify the disclosing Party of all facts known to it concerning such unauthorized use or disclosure.

(b) Each Party may disclose the other Party’s Confidential Information, to the extent such disclosure is reasonably necessary, to its Affiliates and its or their employees, agents, officers, directors, advisors, auditors, consultants, contractors, licensees or sublicensees on a need-to-know basis for the sole purpose of performing its obligations or exercising its rights under this Agreement; provided that in each case, the disclosees are bound by obligations of confidentiality and non-use consistent with those contained in this Agreement.

(c) Each Party may disclose the other Party’s Confidential Information, to the extent such disclosure is reasonably necessary, to any bona fide potential or actual investor, acquirer, or merger partner (and any employees, agents, officers, directors, advisors, consultants, contractors thereof) for the sole purpose of evaluating an actual or potential investment, acquisition, or other similar transaction; provided that in connection with such disclosure, such Party shall use all reasonable efforts to inform each disclosee of the confidential nature of such Confidential Information and cause each disclosee to treat such Confidential Information as confidential.

12.5 Survival. The obligations of confidentiality and non-disclosure under the Agreement shall survive the termination or expiration and non-renewal of the Term of the Agreement.

ARTICLE 13

INDEMNIFICATION, INSURANCE AND LIMITATION ON LIABILITY

13.1 Third Party Claims. If Hyperion receives written notice of any claims, suits, proceedings or causes of action brought by any Third Party (the “Claims”) related to any Marketed Product, Hyperion shall promptly inform the other Party.

13.2 Indemnification.

13.2.1 Indemnification by Ucyclyd. Ucyclyd shall defend, indemnify and hold Hyperion, its Affiliates and their respective directors, officers, employees, subcontractors, agents and

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 40 of 53

EXECUTION COPY

representatives (collectively, the “Hyperion Indemnitees”) harmless from and against all Losses incurred in connection with any Third Party (including any Governmental Authority or Regulatory Agency) suit, claim, action or proceeding arising out of or resulting from any of the following, whether arising under the Prior Collaboration Agreement or on or after the Effective Date:

(a) Ucyclyd’s breach of any representation, warranty or covenant by Ucyclyd set forth in this Agreement or the Prior Collaboration Agreement;

(b) the development, manufacture, use, handling, marketing, promotion, storage, sale, importation, exportation or other disposition of any of the Marketed Products by any of the Ucyclyd Indemnitees or subcontractors, including liabilities for death, personal injury or product liability resulting from any of the foregoing;

(c) any actual or alleged bodily injury or death, damage to personal or real property, notwithstanding the form in which any such action is brought (e.g., contract, tort or otherwise), to the extent such injuries or damages arise directly or indirectly from acts, errors or omissions that constitute negligence, willful misconduct or violation of any Legal Requirements by a Ucyclyd Indemnitee;

(d) any actual or alleged breach or failure to perform any of the obligations to be performed by Ucyclyd in connection with any agreement between Ucyclyd and any of Ucyclyd’s subcontractors relating to the Marketed Products, to the extent such cause of action results from Ucyclyd’s failure to fulfill its obligations under the applicable agreement with such subcontractor;

(e) any failure of Ucyclyd to meet the regulatory requirements applicable to the Marketed Products for which Ucyclyd is responsible under this Agreement prior to the Marketed Products Closing;

(f) any aspect of the employment of Ucyclyd employees, or the termination of such employment, including claims relating to: (i) any violation by Ucyclyd or its officers, directors, employees, representatives or agents of the Legal Requirements protecting persons or members of protected classes or categories or prohibiting discrimination or harassment on the basis of a protected characteristic; (ii) payment or failure to pay any salary, wages or other compensation due and owing to any Ucyclyd employees; (iii) payment or failure to pay any pension or other benefits of any Ucyclyd employees; (iv) liability for: (A) any social security or other employment taxes for Ucyclyd employees; (B) workers’ compensation claims and premium payments for Ucyclyd employees; and (C) contributions applicable to the wages and salaries of such Ucyclyd personnel; (v) claims by Ucyclyd employees for wages, benefits, discrimination or harassment of any kind, wrongful termination or discharge or denial of severance or termination payments upon leaving Ucyclyd’s employ; (vi) claims for breach of express or implied employment contract of such employees; and (vii) claims that Hyperion is an employer, co-employer or joint employer of any Ucyclyd employee; or

(g) any failure by Ucyclyd to pay applicable Taxes on the sale of Marketed Products by Ucyclyd prior to the Marketed Products Closing Date, together with any interest and penalties, assessed or imposed against Hyperion for which Ucyclyd has responsibility pursuant to the Agreement or applicable Legal Requirements;

provided, however, that Ucyclyd shall not be required to indemnify any of the Hyperion Indemnitees to the extent that any Losses arise out of or result from: (x) the negligence, recklessness or willful misconduct of any Hyperion Indemnitee; or (y) any failure of a Hyperion Indemnitee to comply with the Agreement; or (z) any act or omission for which Hyperion is required to indemnify a Ucyclyd Indemnitee under Section 13.2.2.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 41 of 53

EXECUTION COPY

13.2.2 Indemnification by Hyperion. Hyperion shall defend, indemnify and hold Ucyclyd, its Affiliates, each of their respective directors, officers, employees, licensors, agents, subcontractors and representatives (collectively the “Ucyclyd Indemnitees”) harmless from and against all Losses incurred in connection with any Third Party (including any Governmental Authority or Regulatory Agency) suit, claim, action or proceeding arising out of or resulting from any of the following, whether arising under the Prior Collaboration Agreement or on or after the Effective Date:

(a) Hyperion’s breach of any representation, warranty or covenant by Hyperion set forth in the Agreement or the Prior Collaboration Agreement;

(b) the development, manufacture, use, handling, marketing, promotion, storage, sale, importation, exportation or other disposition of any of the Marketed Products by any of the Hyperion Indemnitees or subcontractors, including liabilities for death, personal injury or product liability resulting from any of the foregoing;

(c) any claim of infringement by a Third Party arising from Hyperion’s use of the Hyperion Marks in connection with the promotion or sale of any of the Marketed Products

(d) any actual or alleged bodily injury or death, damage to personal or real property, notwithstanding the form in which any such action is brought (e.g., contract, tort or otherwise), to the extent such injuries or damages arise directly or indirectly from acts, errors or omissions that constitute negligence, willful misconduct or violation of any Legal Requirements by any Hyperion Indemnitee;

(e) any actual or alleged breach or failure to perform any of the obligations to be performed by Hyperion in connection with any Assigned Agreement, to the extent such cause of action arises on and following Marketed Products Closing and is a result of Hyperion’s failure to fulfill its obligations under the applicable agreement;

(f) any actual or alleged breach or failure to perform any of the obligations to be performed by Hyperion in connection with any agreement between Hyperion and any of Hyperion’s subcontractors to the extent such cause of action results from Hyperion’s failure to fulfill its obligations under the applicable agreement with such subcontractor;

(g) any aspect of the employment of Hyperion employees, or the termination of such employment, including claims relating to: (i) any violation by Hyperion or its officers, directors, employees, representatives or agents of the Legal Requirements protecting persons or members of protected classes or categories or prohibiting discrimination or harassment on the basis of a protected characteristic; (ii) payment or failure to pay any salary, wages or other compensation due and owing to any Hyperion employees; (iii) payment or failure to pay any pension or other benefits of any Hyperion employees; (iv) liability for: (A) any social security or other employment taxes for Hyperion employees; (B) workers’ compensation claims and premium payments for Hyperion employees; and (C) contributions applicable to the wages and salaries of such Hyperion personnel; (v) claims by Hyperion employees for wages, benefits, discrimination or harassment of any kind, wrongful termination or discharge or denial of severance or termination payments upon leaving Hyperion’s employ; (vi) claims for breach of express or implied employment contract of such employees; and (vii) claims that Ucyclyd is an employer, co-employer or joint employer of any Hyperion employee; or

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 42 of 53

EXECUTION COPY

(h) any failure by Hyperion to pay applicable Taxes, together with any interest and penalties, assessed or imposed against Ucyclyd for which Hyperion has responsibility pursuant to the Agreement or applicable Legal Requirements;

provided, however, that Hyperion shall not be required to indemnify any of the Ucyclyd Indemnitees to the extent that any Losses arise out of or result from: (x) the negligence, recklessness or willful misconduct of any Ucyclyd Indemnitee including failure by a Ucyclyd Indemnitee to comply with Legal Requirements; (y) any failure of a Ucyclyd Indemnitee to comply with the Agreement; or (z) any act or omission for which Ucyclyd is required to indemnify a Hyperion Indemnitee under Section 13.2.1.

13.3 Procedures for Indemnification.

13.3.1 General. The Party seeking indemnification (the “Indemnified Party”) shall promptly notify the other Party (the “Indemnifying Party”) of any claims covered under the terms of Section 13.2 or any other provision of the Agreement whereby a Party agrees to indemnify the other Party, as applicable, for which the Indemnified Party seeks indemnification; provided, however, that any delay in giving such notice shall not relieve the Indemnifying Party hereunder except to the extent such delay materially prejudices the Indemnifying Party’s ability to defend against such claim or materially increases the amount of damages awarded or paid in settlement of such claim. For a period that shall not exceed *** following any such notification, the Indemnified Party and Indemnifying Party shall investigate and discuss in good faith whether such claim is subject to indemnification under the applicable provisions of the Agreement. During such discussions, the Indemnified Party shall give the Indemnifying Party full access to all records, data and personnel of the Indemnified Party as may be reasonably necessary to make such determination. If the Parties are unable to agree on whether the Indemnifying Party is required to indemnify the Indemnified Party under the terms of the Agreement, the Indemnifying Party, at its option, shall either assume or decline defense of the claims, including negotiations for its settlement or compromise.

13.3.2 Defense Assumed. If the Indemnifying Party assumes defense of a claim as described herein, the Indemnified Party shall reasonably cooperate with the Indemnifying Party in the defense of such claim and may be represented, at the Indemnified Party’s expense, by counsel of its choice, provided that, where the Indemnifying Party has assumed defense of a claim, the Indemnifying Party shall have sole control over such defense. The Indemnifying Party shall not be responsible for defending any claims other than those described in Section 13.2 or any other provision of the Agreement whereby a Party agrees to indemnify the other Party, as applicable, even if brought in the same suit. In addition to the foregoing, if a court of competent jurisdiction later determines that a claim for which the Indemnifying Party assumed defense was not eligible for indemnification hereunder within *** following such determination, the Indemnified Party shall reimburse the Indemnifying Party in full for all judgments, costs and expenses (including reasonable attorneys’ fees) incurred in connection with such claim.

13.3.3 Defense Declined. If the Indemnifying Party declines to assume defense of any claim, and it is later determined by a court of competent jurisdiction that such claim was eligible for indemnification hereunder within *** following such determination, the Indemnifying Party shall reimburse the Indemnified Party in full for all judgments, costs and expenses (including reasonable attorneys’ fees) incurred in connection with such claim.

13.3.4 Settlement of Claims. The Indemnifying Party shall not settle any claim without the prior written consent of the Indemnified Party if such settlement: (a) materially diminishes any of the Indemnified Party’s rights under the Agreement or seeks to impose additional obligations

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 43 of 53

EXECUTION COPY

on the Indemnified Party; or (b) arises out of or is a part of any criminal action, suit or proceeding or contains a stipulation or admission or acknowledgement of any liability or wrongdoing (whether in contract, tort or otherwise) on the part of the Indemnified Party.

13.3.5 Contributory Negligence; Right of Contribution. Nothing contained herein shall bar a claim for contributory negligence or a Party’s right of contribution.

13.4 Insurance.

13.4.1 Ucyclyd’s Insurance Obligations. Through the Marketed Products Closing Date, or if there is no Marketed Products Closing the termination date of this Agreement, and for a *** period thereafter, Ucyclyd shall obtain and maintain, insurance from an insurance company or companies having a Best’s Financial Performance Rating (“FPR”) of *** and a minimum Financial Size Category (“FSC”) of *** or higher (if FPR is ***, then FSC must be *** or higher) as follows: (a) workers’ compensation in the amount required by applicable state law; (b) comprehensive general liability insurance, including products liability and premises and operations coverage, with minimum limits of not less than $*** per occurrence and $*** annual aggregate for all claims against all losses; and (c) professional liability insurance appropriate for the work to be conducted by Ucyclyd under the Agreement with minimum limits of $*** per claim and $*** annual aggregate. Such insurance shall designate Hyperion and its Affiliates as “additional insureds” on comprehensive general liability policies. In the event the insurance policy obtained by Ucyclyd is a “claims made” policy (as opposed to an “occurrence” policy), Ucyclyd shall obtain comparable insurance (by obtaining an extended reporting period or otherwise) for not less than *** following the expiration and non-renewal or termination of the Agreement. Hyperion shall promptly notify Ucyclyd in the event that any of the foregoing insurance policies are terminated or canceled (unless they are replaced, without any gap in coverage, by another policy that meets the requirements of this Section). Ucyclyd’s insurance coverage must be primary coverage without right of contribution from any insurance of Hyperion or its Affiliates. At Hyperion’s reasonable request, Ucyclyd shall provide Hyperion certificates of insurance evidencing the coverage and limits required by this Section 13.4.

13.4.2 Hyperion’s Insurance Obligations. No later than the Marketed Products Closing Date, Hyperion shall obtain, and Hyperion shall maintain, throughout the Term, insurance from an insurance company or companies having a Best’s FPR of *** and a minimum FSC of *** or higher (if FPR is ***, then FSC must be *** or higher) as follows: (a) workers’ compensation in the amount required by applicable state law; (b) comprehensive general liability insurance, including products liability and premises and operations coverage, with minimum limits of not less than $*** per occurrence and $*** annual aggregate for all claims against all losses; and (c) professional liability insurance appropriate for the work to be conducted by Hyperion under the Agreement with minimum limits of $*** per claim and $*** annual aggregate. Such insurance shall designate Ucyclyd and its Affiliates as “additional insureds” on comprehensive general liability policies. In the event the insurance policy obtained by Hyperion is a “claims made” policy (as opposed to an “occurrence” policy), Hyperion shall obtain comparable insurance (by obtaining an extended reporting period or otherwise) for not less than *** following the expiration and non-renewal or termination of the Agreement. Hyperion shall promptly notify Ucyclyd in the event that any of the foregoing insurance policies are terminated or canceled (unless they are replaced, without any gap in coverage, by another policy that meets the requirements of this Section). Hyperion’s insurance coverage must be primary coverage without right of contribution from any insurance of Ucyclyd or its Affiliates. At Ucyclyd’s reasonable request, Hyperion shall provide Ucyclyd certificates of insurance evidencing the coverage and limits required by this Section 13.4.

13.5 Insurance Proceeds. Any indemnification under this Article 13 shall be made net of any insurance proceeds recovered by the Indemnified Party; provided, however, that if,

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 44 of 53

EXECUTION COPY

following the payment to the Indemnified Party of any amount under this Article 13, such Indemnified Party recovers any insurance proceeds in respect of the claim for which such indemnification payment was made, the Indemnified Party shall promptly pay an amount equal to the amount of such proceeds (but not exceeding the amount of such indemnification payment) to the Indemnifying Party.

13.6 Limitation on Liability. EXCEPT FOR DAMAGES RESULTING FROM A BREACH OF A PARTY’S CONFIDENTIALITY OBLIGATIONS UNDER THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR LOST PROFITS, PUNITIVE, INDIRECT, INCIDENTAL, EXEMPLARY, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING OUT OF, OR IN CONNECTION WITH, THIS AGREEMENT. FOR THE AVOIDANCE OF DOUBT, ANY DAMAGES AWARDED TO A THIRD PARTY FOR WHICH A PARTY IS OBLIGATED TO INDEMNIFY THE OTHER PARTY IN ACCORDANCE WITH ARTICLE 13 OF THIS AGREEMENT SHALL BE CONSIDERED DIRECT DAMAGES AND, THEREFORE, IS NOT SUBJECT TO ANY CAP ON LIABILITY.

ARTICLE 14

DISPUTE RESOLUTION

14.1 Governing Law.

(a) Except as set forth in subsection (b) below, the Agreement shall be governed by the laws of the State of Delaware (other than with respect to principles of conflicts of laws thereunder).

(b) All matters relating to this arbitration clause and any arbitration hereunder shall be governed by the Federal Arbitration Act, Chapters 1 and 2.

14.2 Dispute Resolution Procedure.

(a) Except for any disputes with respect to the coverage, validity or enforceability of any Patent (which shall be resolved in federal courts with competent jurisdiction), all other disputes shall be finally settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules (the “Rules”).

(b) The dispute shall be resolved by a panel of three (3) arbitrators (the “Arbitration Panel”). As long as they are each able and available to perform the duties of an arbitrator, the Arbitration Panel shall consist of the following three arbitrators: ***, *** and ***. If only one of these arbitrators gives notice that he or she is unable or unavailable to serve on the Arbitration Panel, then the remaining two arbitrators shall select a replacement for that arbitrator within *** of such notice. Under such circumstances, no ex parte communications between the remaining arbitrators and the Parties regarding selection of a replacement arbitrator shall be allowed. If more than one of these arbitrators is unable or unavailable to serve on the Arbitration Panel regarding the dispute, then the entire Arbitration Panel shall be reconstituted as follows: within *** after the commencement of arbitration, each Party shall select one person to act as arbitrator, and the two (2) so selected shall select a third arbitrator within *** of the commencement of the arbitration. If the arbitrators selected by the Parties are unable or fail to agree upon the third arbitrator within the allotted time, the third arbitrator shall be appointed by the American Arbitration Association in accordance with its rules. All arbitrators shall serve as neutral, independent and impartial arbitrators. Each arbitrator shall have at least *** experience with pharmaceutical, commercial or intellectual property matters as the nature of the dispute may require.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 45 of 53

EXECUTION COPY

(c) The arbitration shall take place in Los Angeles, California.

(d) Except as may be required by applicable Legal Requirements, neither a Party nor its representatives nor a witness nor an arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of both Parties. Any documentary or other evidence given by a Party or witness in the arbitration shall be treated as confidential by any Party whose access to such evidence arises exclusively as a result of its participation in the arbitration, and shall not be disclosed to any Third Party (other than a witness or expert), except as may be required by applicable Legal Requirements,

(e) Discovery will be limited to the request for and production of documents and depositions. For clarity, there shall be no interrogatories or requests to admit. With regard to electronic discovery, (i) there shall be production of electronic documents only from sources used in the ordinary course of business; (ii) absent a showing of compelling need, no such documents are required to be produced from backup servers, tapes or other media; (iii) the description of custodians from whom electronic documents may be collected shall be narrowly tailored to include only those individuals whose electronic documents may reasonably be expected to contain evidence that is material to the dispute, and (iv) where the costs and burdens of e-discovery are disproportionate to the nature of the dispute or to the amount in controversy, or to the relevance of the materials requested, the Arbitration Panel will either deny such requests or order disclosure on condition that the requesting Party advance the reasonable cost of production to the other side, subject to the allocation of costs in the final award. Subject to the foregoing limitations, all discovery will be guided by the Federal Rules of Civil Procedure. All issues concerning discovery upon which the Parties cannot agree will be submitted to the Arbitration Panel for determination.

(f) The arbitrators shall have the right to award or include in their award any relief which they deem proper in the circumstances, including money damages (with interest on unpaid amounts from date due), specific performance, injunctive relief, reasonable legal fees, costs and expenses in accordance with subsection (g) below, but subject to the limitations set forth in Section 13.6.

(g) The Arbitration Panel shall award to the prevailing Party, if any, as determined by the Arbitration Panel, *** of its costs and expenses (including reasonable attorneys’ fees) incurred in connection with the arbitration. If the Arbitration Panel determines a Party to be the prevailing Party under circumstances where the prevailing Party won on some but not all of the claims and counterclaims, the arbitrator(s) may award the prevailing Party a percentage below *** of the reasonable costs and expenses (including attorneys’ fees) incurred by the prevailing Party in connection with the arbitration, as appropriate to reflect the level of winning claims and counterclaims.

(h) Notwithstanding the foregoing, either Party has the right to apply to any court of competent jurisdiction for provisional relief, including pre-arbitral attachments, a temporary restraining order, temporary injunction, permanent injunction or order of specific performance, as may appear reasonably necessary to preserve the rights of either Party. The application by either Party to a judicial authority for such measures shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant powers reserved to the arbitrator. If either Party institutes any action or proceeding to preserve its rights pursuant to this subsection (h) then the prevailing Party in such action or proceeding shall reimburse the other Party for its reasonable costs and expenses incurred including attorneys’ fees.

(i) Judgment upon any award(s) rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The Parties hereby waive all objection which it may

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 46 of 53

EXECUTION COPY

have at any time to the laying of venue of any proceedings brought in such courts, waives any claim that such proceedings have been brought in an inconvenient forum and further waives the right to object with respect to such proceedings that any such court does not have jurisdiction over such Party.

14.3 Waiver of Jury Trial. Each Party hereby irrevocably waives all rights to a jury trial in connection with any dispute under the Agreement.

14.4 Continued Performance. Except where clearly prevented by the area in dispute, both Parties shall continue performing their obligations under the Agreement while the dispute is being resolved under this Article 14 unless and until the dispute is resolved or until the Agreement is terminated as set forth in the Agreement.

ARTICLE 15

MISCELLANEOUS

15.1 Relationship of the Parties. Each Party shall bear its own costs and expenses incurred in the performance of its obligations hereunder without charge or expense to the other Party except as expressly set forth in the Agreement. Neither Party shall have any responsibility for the hiring, termination or compensation of the other Party’s employees or for any employee benefits of such employee. Each of the Parties shall be furnishing its services under the Agreement as an independent contractor, and, nothing in the Agreement shall create any association, partnership or joint venture between the Parties or any employer-employee relationship. No agent, employee or servant of either Party shall be or shall be deemed to be the employee, agent or servant of the other Party and each Party shall be solely and entirely responsible for its acts and the acts of its employees. It is understood and agreed that each Party shall have the status of an independent contractor under the Agreement and that nothing in the Agreement shall be construed as authorization for either Party to act as agent for the other. Neither Party shall incur any liability for any act or failure to act by employees of the other Party.

15.2 Force Majeure. If the performance by either Party of any obligation under the Agreement is prevented, restricted, interfered with or delayed by reason of any cause beyond the reasonable control of the Party liable to perform, including fire, accident, labor difficulty, strike, riot, civil commotion, act of God, delay or errors by shipping companies (“Force Majeure”), the Party so affected shall, upon giving written notice to the other Party and subject to the terms in the Agreement, be excused from such performance to the extent of such prevention, restriction, interference or delay except to the extent that the Party claiming the benefit of the Force Majeure is directly at fault in causing or failing to prevent such default or delay, and provided that such default or delay cannot reasonably be circumvented by the Party claiming the benefit of the Force Majeure through the use of alternate sources, work-around plans or other means, and shall continue performance promptly whenever such causes are removed. When such circumstances arise, the Parties shall discuss what, if any, modification of the terms of the Agreement may be required in order to arrive at an equitable solution. Notwithstanding the foregoing, Hyperion acknowledges and agrees that Hyperion shall not be excused from the purchase under Section 3.1 or its payment obligations under the Agreement due to any of the foregoing. Any changes in Legal Requirements shall not be considered an event of Force Majeure.

15.3 Counterparts. The Agreement, or any part thereof requiring signing by the Parties, may be executed in two or more counterparts with “wet” signatures by duly authorized officers or representatives, each of which shall be an original as against any Party whose signature appears thereon but both of which together shall constitute one and the same instrument. A facsimile or email transmission of such signed Agreement, and those parts thereof requiring signing by the Parties, shall be legal and binding on both Parties.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 47 of 53

EXECUTION COPY

15.4 Notices. Except as otherwise set forth in the Agreement, in any case where any notice or other communication is required or permitted to be given under the Agreement, such notice or communication shall be in writing, and sent by overnight express or registered or certified mail (with return receipt requested) or sent via facsimile with confirmation by overnight express or registered or certified mail (with return receipt requested) with the recipient and shall be sent to the following address (or such other address as either Party may designate from time to time in writing):

If to Hyperion:

Hyperion Therapeutics, Inc.

601 Gateway Boulevard, Suite 200

South San Francisco, California 94080

Telephone: (650) 745-7802

Fax: (650) 745-3568

Attention: Chief Executive Officer

With a copy to:

Hogan Lovells LLP

525 University Ave., 3^rd Floor

Palo Alto, CA 94301

Attention: Laura Berezin

Telephone: (650) 463 4000

Fax: (650) 463-4199

If to Ucyclyd:

Ucyclyd Pharma, Inc.

7720 North Dobson Road

Scottsdale, AZ 85256

Attention: President

Facsimile: (480) 291-5163

With copies to:

Ucyclyd Pharma, Inc.

7720 North Dobson Road

Scottsdale, AZ 85256

Attention: Legal Department

Facsimile: (480) 291-5163

15.5 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of the Agreement.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 48 of 53

EXECUTION COPY

15.6 Performance by Affiliates. Each Party may perform some or all of its obligations, and/or exercise some or all of its rights, under the Agreement through its Affiliates. To the extent a Party desires to use an Affiliate to perform some of its obligations under this Agreement, such Party shall require that such performance by such Affiliate be in compliance with the applicable terms and conditions under this Agreement that would be applicable were such Party to perform such obligations directly.

15.7 Amendment. The Agreement may be varied, amended or extended only by the written agreement of the Parties through their duly authorized officers or representatives, specifically referring to the Agreement. For clarity, the Parties agree that any agreement contained in an electronic mail communication shall not constitute a “written agreement” and the Agreement will be varied, amended or extended only pursuant to a written separate document that is signed with “wet” signatures by duly authorized officers or representatives, specifically referring to the Agreement. A facsimile or email transmission of such signed document, and those parts thereof requiring signing by the Parties, shall be legal and binding on both Parties.

15.8 Severability. In case any one or more of the provisions contained in the Agreement shall, for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability, shall not affect any other provision of the Agreement, but the Agreement shall be construed as if such invalid, illegal, or unenforceable provision or provisions had never been contained in the Agreement, unless the deletion of such provision or provisions would result in such a material change as to cause completion of the transactions contemplated in the Agreement to be impossible and provided that the performance required by the Agreement with such clause deleted remains substantially consistent with the intent of the Parties.

15.9 Publicity. Neither Party shall issue or release any media release or public announcement (including any announcements made via any posting on the World Wide Web or Internet), or other similar publicity announcing the existence of this Agreement or relating to any term or condition of the Agreement in any country or the relationships created by the Agreement without *** prior written notice to the other Party and the prior written consent of the other Party. Except as may be required by applicable law or regulation or the rules of the applicable Regulatory Agency, the Parties shall not issue or release to the public any statement including any public announcement or advertisement utilizing Ucyclyd’s or its Affiliate’s or Hyperion’s or its Affiliate’s corporate identifiers without the prior written approval of Ucyclyd or Hyperion, as applicable, which approval shall not be unreasonably withheld or delayed. Notwithstanding the foregoing:

(a) The content of a press release announcing the execution of this Agreement and the APA shall be in the form of Exhibit 7. Ucyclyd and Hyperion agree that the content of such press release, or any portion thereof, may be re-used by either Ucyclyd or Hyperion as long as any such partial use of content is fair and accurate. During the Pre-Closing Period, in response to inquiries from Third Parties in the distribution chain or manufacturing chain for Marketed Products (such as distributors, manufacturers, hospitals, pharmacies and physicians) regarding the rights of Hyperion with respect to the Marketed Products, Ucyclyd shall have the right to disclose to such Third Parties, under written obligations to Ucyclyd of confidentiality and non-use no less restrictive than those set forth in Article 12, the terms of this Agreement relating to the potential acquisition of the Marketed Products by Hyperion, including terms relating to Ucyclyd’s right to retain Ammonul Product and ***, but excluding any financial terms.

(b) Following Hyperion’s exercise of the Marketed Products Option, the Parties shall discuss and agree on a mutually acceptable press release regarding the occurrence of the Marketed Products Closing, to be issued on or about the Marketed Products Closing Date.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 49 of 53

EXECUTION COPY

(c) The foregoing press releases may be released by one or both of Ucyclyd and Hyperion and neither Party is required to participate in any joint press release.

(d) A Party shall not be required to seek the permission of the other Party to publicly disclose any information regarding the terms of this Agreement that has entered the public domain (other than as a result of a breach of this Agreement or the APA by such Party).

(e) Each Party shall have the right to file a copy of this Agreement with the U.S. Securities and Exchange Commission, other U.S. regulatory agencies, or any similar regulatory agency in a country other than the United States, or any stock exchange or other securities trading institution (in each case, a “Securities Regulatory Agency”), and to otherwise disclose to the Securities Regulatory Agency and/or make publicly available this Agreement (and/or specific terms thereof), in each case as required by applicable law or regulation or the rules of the applicable Securities Regulatory Agency. The other Party will have an opportunity, for *** (or such shorter period as may be required based on the nature of the filing with the Regulatory Agency – e.g., 8-K filing) after receipt, to review and comment on the portion of a Party’s proposed disclosure or filing that relates to this Agreement (including the right to request redaction of material terms to the extent permitted by applicable law or regulation), and the Party intending to disclose will consider in good faith any reasonable comments thereon provided by the other during such time period.

(f) Hyperion shall contact the following Ucyclyd representatives for any approvals under this Section 15.9: the Principal Intellectual Property Counsel for Medicis and its Affiliates. Ucyclyd shall contact the following Hyperion representatives for approval under this Section 15.9: President and Chief Executive Officer.

(g) Hyperion acknowledges that Medicis and its Affiliates are subject to a Corporate Integrity Agreement and that they shall have the right, without having to comply with the foregoing provisions of this Section 15.9, to disclose to the Office of the Inspector General (in the event Medicis deems such disclosure is required to comply with the CIA) the fact that the transactions contemplated by this Agreement have occurred. To the extent that Medicis is required or requested to disclose the Agreement or the other Transaction Documents to the Office of the Inspector General, Ucyclyd will comply with the provisions of this Section 15.9.

15.10 Third Party Beneficiaries. Except with respect to a Hyperion Indemnitee’s or a Ucyclyd Indemnitee’s defense and indemnification rights under the Agreement, none of the provisions of the Agreement shall be for the benefit of or enforceable by any Third Party, including any creditor of either Party hereto, and no such Third Party shall obtain any right under any provision of the Agreement or shall by reasons of any such provision make any claim in respect of any debt, liability or obligation (or otherwise) against either Party hereto.

15.11 Headings. The descriptive headings contained in the Agreement are included for convenience of reference only and shall not affect the meaning or interpretation of the Agreement.

15.12 Construction.

(a) Wherever any provision of the Agreement uses the terms “include,” “includes,” or “including”, such term shall be deemed to mean “include, without limitation,” “includes, without limitation” and “including, without limitation” or “include, but not limited to,” “includes, but not limited to,” or “including, but not limited to.”

(b) Any reference to “days” means calendar days unless otherwise specified as the defined term “Business Days.”

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 50 of 53

EXECUTION COPY

(c) The recitals set forth at the start of the Agreement, along with the Schedules, Exhibits (including the Purchase Transaction Documents)., Attachments and Addenda to the Agreement together with the Assets, and the terms and conditions incorporated in such recitals, Schedules, Exhibits, Attachments and Addenda shall be deemed integral parts of the Agreement, are hereby incorporated by reference and all references in the Agreement to the “Agreement” shall encompass such recitals, Schedules, Exhibits (including the Purchase Transaction Documents), Attachments and Addenda and the terms and conditions incorporated in such recitals, Schedules, Exhibits, Attachments and Addenda.

(d) Communications via electronic mail shall not be sufficient to fulfill any requirement for written approval or other approval in writing as set forth in this Agreement.

(e) Unless otherwise explicitly stated, in the event of any conflict between the terms and conditions of the main body of the Agreement and the terms and conditions of any of the Schedules, Exhibits or Attachments to the Agreement, the terms and conditions of the main body of the Agreement shall prevail.

(f) Any terms and conditions that may be set forth in any invoice or order form (other than quantities and prices consistent with the Agreement) are void and of no force and effect.

(g) This Agreement has been prepared jointly and shall not be strictly construed against either Party. The Parties agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting Party shall not be applied in the construction or interpretation of the Agreement.

(h) The masculine, feminine or neuter gender and the singular or plural number shall each be deemed to include the others whenever the context so indicates.

(i) Except as otherwise expressly set forth in the Agreement, under no circumstances does a Party to the Agreement, as a result of the Agreement, obtain any ownership interest in or other right or license to any technology, regulatory submissions or intellectual property of the other Party, including items owned, acquired, licensed or developed by the other Party, or transferred by the other Party to such Party at any time pursuant to the Agreement.

(j) Unless otherwise set forth in the Agreement, all references to Sections, Articles, Exhibits and Schedules in the Agreement are to Sections, Articles, Exhibits, Attachments, Addenda and Schedules of and to the Agreement.

15.13 No Waiver of Rights. No failure or delay on the part of either Party in the exercise of any power or right under the Agreement shall operate as a waiver thereof. No single or partial exercise of any right or power under the Agreement shall operate as a waiver of such right or of any other right or power. The waiver by either Party of a breach of any provision of the Agreement shall not operate or be construed as a waiver of any other or subsequent breach under the Agreement.

15.14 Assignment.

(a) Neither Party may assign its rights or obligations under this Agreement except as otherwise expressly provided in this Section 15.14.

(b) Prior to the HPN-100 Closing Date, Hyperion may only assign or transfer the Agreement (i) to an Affiliate or (ii) otherwise pursuant to (and only pursuant to) a

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 51 of 53

EXECUTION COPY

Change in Control, in each case with the prior written consent of Ucyclyd, which consent shall not be unreasonably withheld, conditioned or delayed. Both Parties agree that it shall be reasonable for Ucyclyd to withhold its consent to any Change in Control only if the Person that would become the successor to Hyperion’s interests under this Agreement pursuant to such Change in Control, at the time of the closing of the transaction resulting in the Change in Control:

***

(c) On or after the HPN-100 Closing Date, Hyperion may assign or transfer the Agreement (i) to an Affiliate or (ii) to a Third Party pursuant to a Change in Control (including a Third Party acquirer or other transferee of all or substantially all of Hyperion’s HPN-100 business, whether by merger, acquisition, sale of stock, sale or assets, or otherwise), in each case without the prior written consent of Ucyclyd.

(d) Ucyclyd shall have the right to assign the Agreement, or any right to receive payments hereunder, (i) to an Affiliate or (ii) to a Third Party pursuant to a Change in Control at any time upon written notice to Hyperion but without the consent of Hyperion.

(e) Any rights granted to a Party under the Agreement shall inure to the benefit of any acquirer of, or successor in interest to, such Party.

(f) A Party making a permitted assignment hereunder shall promptly notify the other Party of such assignment. Any purported assignment in contravention of this Section 15.14 shall be null and void and of no effect. No assignment shall release either Party from responsibility for the performance of any accrued obligation of such Party hereunder. This Agreement shall be binding upon and enforceable against the permitted successors, transferees or assignees of either of the Parties.

15.15 Entire Agreement. The terms and conditions in the Agreement constitute the entire agreement between the Parties relating to the subject matter of the Agreement and shall supersede all previous communications between the Parties with respect to the subject matter of the Agreement including (a) the Exclusivity Agreement; (b) the Existing Confidentiality Agreement; (c) the ***; and (d) the SDEA. For the avoidance of doubt, all Confidential Information disclosed or otherwise generated in connection with any or all of the foregoing superseded agreements shall be subject to the confidentiality obligations under the Agreement. Neither Party has entered into the Agreement in reliance upon any representation, warranty, covenant, or undertaking of the other Party that is not set forth or referred to in the Agreement.

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 52 of 53

EXECUTION COPY

IN WITNESS WHEREOF, the Parties hereto have caused the Agreement to be executed by their duly authorized officers as of the Effective Date.

UCYCLYD PHARMA, INC.		HYPERION THERAPEUTICS, INC.
By:	/s/ Richard D. Peterson	By:	/s/ Donald J. Santel
	Richard D. Peterson Executive Vice President, Chief Financial Officer and Treasurer		Donald J. Santel President and Chief Executive Officer

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDED AND RESTATED COLLABORATION AGREEMENT

Page 53 of 53

CONFIDENTIAL

FINAL

SCHEDULE 1

INDEX OF DEFINED TERMS

Defined Term	Section Reference
Ammonul Option	Section 3.4(a) (Rights to Ammonul)
Ammonul Rights	Section 3.4(a) (Rights to Ammonul)
Arbitration Panel	Section 14.2(b) (Dispute Resolution Procedure)
Average Exchange Rate	Section 7.5 (Currency Conversion)
Claims	Section 13.1 (Third Party Claims)
Clinical Supply Agreement	Section 2.3.4 (Manufacturing of Marketed Products During the Pre-Closing Period)
Confidential Information	Section 12.1 (Confidential Information)
Diligence Information	Section 2.4.1 (Diligence Information)
Diligence Information Update	Section 2.4.5 (Diligence Information)
Excluded Assets	Section 3.2 (Excluded Assets)
Exercise Notice	Section 3.1 (Purchase Right)
Force Majeure	Section 15.2 (Force Majeure)
FPR	Section 13.4.1 (Ucyclyd’s Insurance Obligations)
FSC	Section 13.4.1 (Ucyclyd’s Insurance Obligations)
Hyperion Indemnitees	Section 13.2.1 (Indemnification by Ucyclyd)
Hyperion Party	Section 8.4(a) (Covenant Not to Sue)
Indemnified Party	Section 13.3.1 (General)
Indemnifying Party	Section 13.3.1 (General)
Marketed Products Option	Section 3.1 (Purchase Right)
Marketed Products Option Period	Section 3.1 (Purchase Right)
Marketed Products Purchase Price	Section 3.3 (Purchase Price)
Marketed Products Rights	Section 3.1 (Purchase Right)

SCHEDULE 1 TO UCYCLYD / HYPERION AMENDED AND RESTATED COLLABORATION AGREEMENT

PAGE 1 OF 2

CONFIDENTIAL

FINAL

Defined Term	Section Reference
Other Transition Activities	Section 3.6 (Transition at Closing)
Purchase Transaction Documents	Section 3.5.3(b) (Closing Mechanics)
Rules	Section 14.2(a) (Dispute Resolution Procedure)
SDEA	Section 5.3 (Adverse Events and Safety Reporting)
Securities Regulatory Agency	Section 15.9(e) (Publicity)
Term	Section 11.1 (Term)
Ucyclyd Indemnitees	Section 13.2.2 (Indemnification by Hyperion)
Ucyclyd Party	Section 8.4(b) (Covenant Not to Sue)

SCHEDULE 1 TO UCYCLYD / HYPERION AMENDED AND RESTATED COLLABORATION AGREEMENT

PAGE 2 OF 2

SCHEDULE 1.18

DISTRIBUTION AGREEMENTS

***

***

***

***

***

***

***

SCHEDULE 1.16 TO UCYCLYD / HYPERION AMENDED AND RESTATED COLLABORATION AGREEMENT

PAGE 1 OF 1

SCHEDULE 1.19 TO AMENDED AND RESTATED COLLABORATION AGREEMENT

DOMAIN NAMES

(a) The Domain Names to be assigned to Hyperion, regardless of whether Ucyclyd exercises the Ammonul Option, are as follows:

***

***

***

***

***

***

***

***

***

***

***

***

(b) The additional Domain Names to be assigned to Hyperion if Ucyclyd does not exercise the Ammonul Option are as follows:

***

***

***

***

***

***

***

***

***

***

***

***

***

***

***

***

***

SCHEDULE 1.36

LIST OF HYPERION MARKS

SCHEDULE 1.36 TO UCYCLYD / HYPERION AMENDED AND RESTATED COLLABORATION AGREEMENT

PAGE 1 OF 1

SCHEDULE 1.45

MANUFACTURING AGREEMENTS

As of the Effective Date:

1. ***;

2. ***; and

3. ***.

***.

SCHEDULE 1. 43 TO UCYCLYD / HYPERION AMENDED AND RESTATED COLLABORATION AGREEMENT

PAGE 1 OF 1

SCHEDULE 1.51 TO AMENDED AND RESTATED COLLABORATION AGREEMENT

MARKETED PRODUCTS MARKS

(a) The Marketed Products Marks to be assigned to Hyperion, regardless of whether Ucyclyd exercises the Ammonul Option, are as follows:

Trademark	Country	Reg. No./ Reg. Date	Appl. No./ Date Filed	Ownership	Status
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***

(b) The additional Marketed Products Marks to be assigned to Hyperion if Ucyclyd does not exercise the Ammonul Option are as follows:

Trademark	Country	Reg. No./ Reg. Date	Appl. No./ Date Filed	Ownership	Status
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***

Trademark	Country	Reg. No./ Reg. Date	Appl. No./ Date Filed	Ownership	Status
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***
***	***	***	***	***	***

SCHEDULE 3.6.2

INVENTORY

Ammonul Product

Finished Product: To the extent the Ammonul Product is purchased by Hyperion and not otherwise retained by Ucyclyd, Hyperion shall pay Ucyclyd, in accordance with Section 3.6.2(b), for the Inventory of AMMONUL IV 50ML 10% VIAL remaining from the Inventory on hand as of *** plus no more than *** validation lot (approximately *** units per lot) scheduled to be produced in connection with the ***, such payment not to exceed the sum of (i) $*** per unit for Inventory remaining from the Inventory on hand as of *** and (ii) (A) $*** times (B) the number of validation lots then in Inventory. (For clarity, the $*** does not include the cost of API, which is addressed below). All Inventory purchased by Hyperion shall have a remaining shelf life of at least ***, and Hyperion shall not be required to purchase any portion of such Inventory that is reasonably likely to expire prior to being sold, which calculation shall be based on the ***, provided that if the number of units sold during *** during such *** is ***, then such *** will be excluded from the calculation for purposes of determining the quotient and the quotient will be based on the other ***.

In addition, Hyperion shall reimburse Ucyclyd, or otherwise be responsible, for the following costs:

1. Stability testing—$*** per validation batch; however, with respect to the first batch Medicis will be responsible for the first $***.

2. Equipment costs

a. Change parts for existing equipment—actual, documented costs (currently estimated at $***); and

b. Additional equipment if current equipment cannot process Ammonul vials—actual, documented costs (currently estimated at $***).

c. Aggregate equipment costs ((a) and (b) above) shall not exceed $***.

3. Validation Support Costs – total costs are $***; however, Medicis will be responsible for $*** of the $***.

API (SPA): To the extent the Ammonul Product is purchased by Hyperion and not otherwise retained by Ucyclyd, Hyperion shall pay Ucyclyd, in accordance with Section 3.6.2(b), for (i) the remaining Inventory of SPA (approximately *** as of ***) plus (ii) the amount of SPA purchased by Ucyclyd for the validation lots required by the FDA (with the amount of SPA under subpart (ii) not to exceed ***). In no event shall Hyperion be obligated to purchase any SPA in Inventory, beyond the amounts referenced above.

Components: To the extent that the Ammonul Product is purchased by Hyperion and not otherwise retained by Ucyclyd, Hyperion shall pay Ucyclyd, in accordance with Section 3.6.2(b), for primary container components and packaging materials in Inventory that were purchased by *** in accordance with the applicable agreement between Ucyclyd and ***, such payment not to exceed $***.

Buphenyl Product

Finished Product:

1. Ammonaps. Hyperion shall pay Ucyclyd, in accordance with Section 3.6.2(b), for all finished product in Inventory that was produced to fulfill firm orders for Ammonaps from Ucyclyd’s distributor(s) outside the United States (including any work in progress), excluding any such finished product that is sold to the applicable distributor prior to the Marketed Products Closing Date (for clarity, payments made or owed by the distributor for such excluded finished product is and will remain Ucyclyd’s receivable).

2. Buphenyl Powder and Buphenyl Tablets. Hyperion shall pay Ucyclyd, in accordance with Section 3.6.2(b), for remaining Inventory of Buphenyl Powder and Buphenyl Tablets, not to exceed an amount equal to the sum of:

(i) ***; and

(ii) ***.

with *** percent (***%) of such amount having a remaining shelf life of at least ***, *** percent (***%) having a remaining shelf life of at least ***, *** percent (***%) having a remaining shelf life of at least ***, *** percent (***%) having a remaining shelf life of at least ***, and *** percent (***%) having a remaining shelf life of at least ***.

API (SPB): Hyperion shall pay Ucyclyd, in accordance with Section 3.6.2(b), for *** of SPB Inventory (based on projected forecasts).

Components: Hyperion shall pay Ucyclyd, in accordance with Section 3.6.2(b), for packaging material in Inventory that was purchased by *** in accordance with the applicable agreement between Ucyclyd and ***, not to exceed $***.

SCHEDULE 7.2 TO AMENDED AND RESTATED COLLABORATION AGREEMENT

PAYMENT OBLIGATIONS

1. Definitions. Capitalized terms used in this Schedule 7.2 shall have the meanings ascribed to them below or if not defined below, then as set forth in Article 1 of the Agreement.

1.1 “Annual Period” means each calendar year.

1.2 “Bundled Product” means when a Marketed Product is sold or otherwise transferred or delivered with one or more other products or services in circumstances where the price of the Marketed Product is either not shown separately on the invoice or is shown as nil (free of charge).

1.3 “Bundled Product Adjustment” means the following:

(a) In the event of a Bundled Product, then Net Sales for such Bundled Product shall be calculated, on a country-by-country basis, by multiplying ***.

(b) If, on a country-by-country basis, the Marketed Products are sold separately in finished form in such country but the other products or services in the Bundled Product are not sold separately in finished form in such country, Net Sales shall be calculated by multiplying ***.

(c) If, on a country-by-country basis, the other products or services in the Bundled Product are sold separately in finished form in such country but the Marketed Products are not sold separately in finished form in such country, Net Sales shall be calculated by multiplying ***.

(d) If, on a country-by-country basis, neither the Marketed Products nor the other products or services of the Bundled Product are sold separately in finished form in such country, Net Sales of the Bundled Product shall be determined by the Parties in good faith based on ***.

1.4 “First Commercial Sale” of any applicable Marketed Product means, following Regulatory Approval for each such Marketed Product in the applicable country, the first sale to a Third Party for use or consumption by patients of such Marketed Product but excluding distribution to a Third Party of Marketed Products for research, manufacturing or quality testing, clinical trials, compassionate or humanitarian purposes including expanded access programs (which provide access to therapies for no monetary consideration) or charitable donations.

1.5 “Major Non-U.S. Territory” means any of the following: (a) ***; (b) ***; and (c) ***.

1.6 “Net Sales” means, with respect to the applicable Marketed Product (i.e., Buphenyl or Ammonul, as the case may be) and subject to any Bundled Product Adjustment, the gross amounts invoiced for sales of such Marketed Product by Hyperion, its Affiliates or their respective (sub)licensees to Third Parties, less the Net Sales Adjustments, all in accordance with standard allocation procedures, allowance methodologies and accounting methods consistently applied, which procedures and methodologies shall be in accordance with GAAP. For the avoidance of doubt, the transfer of any Marketed Product between or among Hyperion, its Affiliates, and any

(sub)licensees of Hyperion shall not be considered a sale; in such cases, Net Sales shall be determined based on the gross invoiced sales made by Hyperion, its Affiliate, or its (sub)licensee (as applicable) to a Third Party, less the Net Sales Adjustments. Net Sales shall not include distribution to a Third Party of Marketed Products for research, manufacturing or quality testing, clinical trials, compassionate or humanitarian purposes including expanded access programs (which provide access to therapies for no monetary consideration) or charitable donations.

1.7 “Net Sales Adjustments” means the following items as applicable to each such Marketed Product to the extent such items are customary under industry practices (for clarity, to the extent that there is overlap in the items listed below, the item only may be deducted once):

(a) ***;

(b) ***;

(c) ***;

(d) ***;

(e) ***; and

(f) ***.

1.8 “Other Indication(s)” means an indication for which labeling is approved by the FDA other than UCD or HE.

1.9 “Reporting Period” means the applicable period for which payment is due by one Party to the other Party under this Schedule 7.2.

2. Milestone Payments by Hyperion. As further consideration for the rights and licenses granted to Hyperion under the Agreement, Hyperion shall make the following non-refundable payments to Ucyclyd. All such payments due pursuant to Section 2.1 shall be paid within *** following the achievement of the applicable milestone by or on behalf of Hyperion corresponding to the payment amount set forth below. Hyperion shall notify Ucyclyd in writing within *** following the achievement of any such milestone.

2.1 Regulatory Milestones. The payment obligations under this Section shall continue until there are no further payments due under this Section.

REGULATORY MILESTONES	PAYMENT
Ammonul in HE (if not retained by Ucyclyd)
***		$***
***		$***
***		$***
***		$***

Ammonul in Other Indications (if not retained by Ucyclyd)
***	$	*	**
***	$	*	**
***	$	*	**
***	$	*	**

2.2 Net Sales Milestones. As set forth in more detail in the APA, if Hyperion exercises the Marketed Products Option and Ucyclyd does not exercise the Ammonul Option, then sales of Ammonul will be included when determining whether certain Net Sales milestones payments are due pursuant to the APA.

3. Other Ongoing Payment Obligations of Hyperion.

3.1 Ammonul. If Hyperion exercises the Marketed Products Option and Ucyclyd does not exercise the Ammonul Option, then Hyperion shall make the following payments to Ucyclyd based on total annual global Net Sales for Ammonul during the applicable Annual Period during the Term:

ANNUAL NET SALES	% OF NET SALES
Ammonul in all indications (if not retained by Ucyclyd)
***		*	**%
***		*	**%

3.2 Buphenyl. If Hyperion exercises the Marketed Products Option, then following the FDA approval and commercial launch of HPN-100, Hyperion shall pay Ucyclyd a royalty on Net Sales of Buphenyl (or any other product for UCD that is promoted, distributed, marketed or sold, directly or indirectly by Hyperion in lieu of Buphenyl) for the treatment of UCD in patients in the United States in the age range that is outside the age range of the FDA-approved labeling for HPN-100. The royalty rate on such Net Sales shall be the same royalty rate for HPN-100 that is in effect at the time of calculation of the applicable royalty payment.

3.3 Payment Terms. Hyperion shall pay the ongoing payments due to Ucyclyd within *** following the end of each calendar quarter other than year end, and within *** of calendar year end.

3.4 Duration of Ongoing Payment Obligations.

(a) The royalty payment obligations with respect to Ammonul for use in any indication shall become effective upon the First Commercial Sale of Ammonul anywhere in the world by Hyperion, its Affiliates or their respective (sub)licensees for use in any indication other than UCD and shall remain in effect until ***.

(b) The royalty payment obligations with respect to Buphenyl shall be ***.

4. Reports.

(a) Any payments due to Ucyclyd under this Schedule 7.2 will be accompanied by a report from Hyperion for the term that such payments are due. Such report shall contain the following information with respect to the applicable Marketed Product:

(i) the gross sales of the applicable Marketed Products during the applicable Reporting Period in each country or region in which such sale occurred (separately stated for each approved sublicensee and each country or region);

(ii) the computation of the Net Sales of the applicable Marketed Products during the applicable Reporting Period based on the dollar value determined in (i) above, including an accounting of any allowed deductions from gross sales to arrive at Net Sales, and the exchange rates used for converting foreign currency to U.S. dollars in accordance with Section 7.5 of the Agreement; and

(iii) the computation of ongoing payments by Hyperion with respect to the Marketed Products during the applicable Reporting Period.

(b) If no payments are due for a particular Reporting Period, Hyperion shall so report.

(c) On or before the date that is *** following the end of the last Reporting Period in which Hyperion has payment obligations under the Agreement, Hyperion shall provide to Ucyclyd a final written report that complies in all respects with this Section 4.

(d) The Chief Financial Officer or Vice President of Finance of Hyperion shall certify to best of his or her knowledge in writing the correctness and completeness of each report prepared by Hyperion under this Section 4.

SCHEDULE 7.10

AUDIT AND RECORD-KEEPING REQUIREMENTS

1. Financial Audits.

(a) Each Party (the “Audited Party”) shall permit an independent accounting firm selected by the other Party (the “Verifying Party”) and reasonably acceptable to the Audited Party, which acceptance shall not be unreasonably withheld or delayed, to have access at mutually agreeable dates and during normal business hours of the Audited Party to such records as may be reasonably necessary to verify the accuracy of the Audited Party’s payment obligations as set forth in the Agreement. All such verifications shall be conducted at the expense of the Verifying Party and not more than *** in each calendar year. The Audited Party shall be provided with at least *** (***) days advance notice of such audit.

(b) In the event such audit concludes that adjustments should be made in the Verifying Party’s favor, then any appropriate payments (plus accrued interest at a rate announced by the Bank of America (or any successor) as its prime rate in effect on the date that such payment was first due plus *** percent (***%)) shall be paid by the Audited Party within *** Business Days of the date the Audited Party receives the Verifying Party’s accounting firm’s written report so concluding, unless the Audited Party shall have a good faith dispute as to the conclusions set forth in such written report, in which case the Audited Party shall provide written notice to the Verifying Party within such *** Business Day period of the nature of its disagreement with such written report. Any undisputed amounts shall be paid within the *** Business Day period set forth above.

(c) The Parties shall thereafter attempt in good faith to resolve such dispute with respect to disputed amounts. Any disputes that the Parties are unable to resolve through good faith efforts shall be resolved in accordance with Article 14 of the Agreement. The Audited Party shall be required to make the payment (plus interest) pursuant to subsection (b) above only if the dispute is resolved in favor of the Verifying Party.

(d) The fees charged by such accounting firm engaged in any audit shall be paid by the Verifying Party unless such audit discloses that adjustments in favor of the Verifying Party for the period are greater than (i) $*** and (ii) an amount equal to *** percent (***%) or more of the aggregate amount paid or payable by the Audited Party to the Verifying Party during the audited period, in which case the Audited Party shall pay the reasonable documented fees and expenses charged by such accounting firm, after receipt of the bill/invoice for such audit.

(e) The Parties agree that, except for information that belongs to the Verifying Party, all information disclosed by the Audited Party to the Verifying Party in the course of such audit is Confidential Information of the Audited Party, and that the Verifying Party shall cause its accounting firm to retain all such information subject to the confidentiality restrictions of Article 12 of the Agreement.

2. Records.

(a) Each Party shall keep, and shall cause its Affiliates and Third Party subcontractors to keep, full and accurate records and books of account containing all particulars that may

be necessary for the purpose of calculating payments to be received or borne by the Parties pursuant to the Agreement, including inventory, purchase and invoice records, manufacturing records, sales analysis, general ledgers, financial statements and tax returns, as applicable.

(b) During the Term and for *** years thereafter (or longer if otherwise required by applicable Legal Requirements) (“Record Retention Period”), each Party shall maintain all documents and records relating to the records and books subject to the other Party’s audit rights under this Schedule 7.10.

3. Audit Cooperation. The Parties agree to cooperate with each other and their respective outside auditors in good faith to the extent required to meet any necessary compliance, disclosure or financial reporting obligations under Section 404 of the Sarbanes-Oxley Act of 2002 and any requirements of the Securities and Exchange Commission or the Financial Accounting Standards Board.

SCHEDULE 10.2

UCYCLYD DISCLOSURE SCHEDULE

This Schedule 10.2 (the “Disclosure Schedule”) is made with reference to Section 10.2 of that certain Amended and Restated Collaboration Agreement dated as of March 22, 2012 (the “Agreement”) by and between Ucyclyd and Hyperion.

The Disclosure Schedule has been arranged, for purposes of convenience only, as separate sections corresponding to the numbered and lettered paragraphs contained in Section 10.2 of the Agreement, and the disclosure in any such numbered and lettered section of this Disclosure Schedule shall qualify only the corresponding subsection in Section 10.2 of the Agreement (except to the extent disclosure in any numbered and lettered section of this Disclosure Schedule is explicitly cross-referenced in another numbered and lettered section of this Disclosure Schedule), provided that, any information disclosed in the Disclosure Schedule will be deemed to be disclosed and incorporated into any other section or subsection of the Disclosure Schedule where the relevance of such disclosure would be reasonably apparent on its face. No reference to or disclosure of any item or other matter in this Disclosure Schedule shall be construed as an admission or indication that such item or other matter is material (nor shall it establish a standard of materiality for any purpose whatsoever) or that such item or other matter is required to be referred to or disclosed in this Disclosure Schedule. The information set forth in this Disclosure Schedule is disclosed solely for the purposes of the Agreement, and no information set forth herein shall be deemed to be an admission by any party to the Agreement to any Third Party of any matter whatsoever, including of any violation of law or breach of any agreement. This Disclosure Schedule and the information and disclosures contained herein are intended only to qualify and limit the representations, warranties and covenants of Seller (and, as applicable, Medicis) contained in the Agreement. Nothing in this Disclosure Schedule is intended to broaden the scope of any representation or warranty contained in the Agreement or create any covenant. Matters reflected in this Disclosure Schedule are not necessarily limited to matters required by the Agreement to be reflected in this Disclosure Schedule. Such additional matters are set forth for informational purposes and do not necessarily include other matters of a similar nature.

***

SCHEDULE 10.2 TO UCYCLYD / HYPERION COLLABORATION AGREEMENT

PAGE 1 of 1

EXECUTION COPY

EXHIBIT 1

PROMISSORY NOTE

[DOCUMENT CONSISTING OF FIVE (5) PAGES ATTACHED HERETO]

EXECUTION COPY

PROMISSORY NOTE

$                                 , 20     

FOR VALUE RECEIVED, HYPERION THERAPEUTICS, INC., a Delaware corporation (“Borrower”), promises to pay to the order of UCYCLYD PHARMA, INC. (“Lender”), at its office at 7720 North Dobson Road, Scottsdale, Arizona 85256, or such other place as the holder hereof may from time to time appoint in writing, in lawful money of the United States of America via wire transfer to an account designated by Lender or as Lender shall otherwise direct Borrower, the principal sum equal to the Marketed Products Purchase Price, or such lesser principal amount as may be outstanding hereunder, together with interest on the principal balance at the rate of nine percent (9%) per annum (the “Loan Rate”) until maturity. From and after the occurrence and during the continuance of an Event of Default (as hereinafter defined), the outstanding principal amount hereof shall bear interest at the Loan Rate, plus *** percent (***%) per annum. Interest will be computed on the daily principal balance outstanding during the period from the last payment date to the current payment date. Interest shall be the product resulting when multiplying the rate of interest by the principal balance outstanding, dividing by 360, and then multiplying by the actual number of days interest has accrued.

This Promissory Note (this “Note”) is delivered in connection with that certain Amended and Restated Collaboration Agreement, dated as of March 22, 2012, between the Borrower and the Lender (the “Collaboration Agreement”). Capitalized terms used but not otherwise defined herein shall have the meaning given to them in the Collaboration Agreement.

The principal and accrued and unpaid interest, if any, on the indebtedness evidenced by this Note shall be payable as follows: (i) the principal shall be payable in eight (8) equal consecutive quarterly installments of $                    on the first Business Day of each calendar quarter commencing with the first calendar quarter immediately following the Marketed Products Closing Date, and (ii) accrued interest shall be payable in arrears on the same dates as the principal installments due under (i) above.

The Borrower may prepay the outstanding principal amount of this Note in whole or in part at any time, without prepayment penalties.

If a Change in Control of Borrower occurs, the outstanding indebtedness evidenced by this Note and all other amounts then due and owing under this Note immediately shall be due and payable in full without the necessity of any notice or demand.

This Note is secured by a Security Agreement, dated the date hereof, between Borrower and Lender (the “Security Agreement”), which encumbers certain collateral described therein (hereinafter referred to as the “Collateral”). This Note, the Security Agreement, the Collaboration Agreement (as amended) and any and all other agreements presently existing or hereafter entered into in connection with this Note shall hereinafter be collectively referred to as the “Transaction Documents”.

Borrower shall remain liable for the payment of this Note, including any interest, notwithstanding any extensions of time of payment or any indulgence of any kind or nature that Lender may grant to Borrower or any subsequent owner of the Collateral, whether with or without notice to Borrower, and Borrower hereby expressly waives such notice. No release of any or all of

the security given for this obligation shall release any other maker, co-maker, surety, guarantor, or other party hereto in any capacity. Lender shall not be required to look first to the Collateral for payment of this Note, but may proceed against Borrower in such manner as it deems desirable.

The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an “Event of Default” hereunder:

(a) Borrower shall fail to make any payment of principal of, or interest on, this Note when due and payable or declared due and payable, and shall fail to cure such failure (along with the payment of any interest), within *** calendar days of receipt of written notice of such failure.

(b) Borrower shall fail or neglect to perform, keep or observe any other provision of this Note and the Security Agreement and the same shall remain unremedied for a period of *** calendar days after notice is given to Borrower by Lender.

(c) Borrower shall take action or shall fail to take action, in either case that results in Lender no longer having an enforceable first priority lien on and security interest in the Collateral as required under Section 2 of the Security Agreement.

(d) Borrower files a bankruptcy petition, a bankruptcy petition is filed against Borrower which remains undismissed or unstayed for *** consecutive days, or Borrower makes a general assignment for the benefit of creditors.

Upon the occurrence of any Event of Default, Lender may (i) declare all indebtedness evidenced by this Note to be immediately due and payable, whereupon all such indebtedness shall become due and payable, without presentment, demand, protest or further notice of any kind, all of which are expressly waived by Borrower, and (ii) exercise all rights and remedies available under the Security Agreement, the other Transaction Documents and applicable law.

In the event that Lender institutes legal proceedings to enforce the Transaction Documents, Borrower agrees to pay to Lender, in addition to any indebtedness due and unpaid, all costs and expenses of such proceedings, including reasonable attorneys’ fees.

Lender shall not by any act of omission or commission be deemed to waive any of its rights or remedies hereunder unless such waiver be in writing and signed by an authorized officer of Lender and then only to the extent specifically set forth therein. A waiver on one occasion shall not be construed as continuing or as a bar to or waiver of such right or remedy on any other occasion. All remedies conferred upon Lender by the Transaction Documents shall be cumulative and none is exclusive, and such remedies may be exercised concurrently or consecutively at Lender’s option.

Except as expressly provided for in this Note or any other Transaction Document, every person at any time liable for the payment of the debt evidenced hereby waives presentment for payment, demand, notice of nonpayment of this Note, protest and notice of protest, all exemptions and homestead laws and all rights thereunder and consents that Lender may extend the time of payment of any part or the whole of the debt, or grant any other modifications or indulgence pertaining to payment of this Note at any time, at the request of any other person liable for said debt.

2

This Note is hereby expressly limited so that in no contingency or event whatsoever, whether by acceleration of maturity of the indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to be paid to Lender for the use, forbearance or detention of the money advanced or to be advanced hereunder exceed the highest lawful rate permissible under the laws of the State of Delaware as applicable to Borrower. If, from any circumstances whatsoever, fulfillment of any provision of this Note or of any of the other Transaction Documents shall, at the time performance of such provisions shall be due, involve the payment of interest in excess of that authorized by law, the obligation to be fulfilled shall be reduced to the limit so authorized by law, and if, from any circumstances, Lender shall never receive as interest an amount which would exceed the highest lawful rate applicable to Borrower, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance of the indebtedness evidenced hereby and not to the payment of interest.

All covenants, agreements, representations and warranties made herein and in the other Transaction Documents are deemed to have been relied upon by Lender, notwithstanding any investigation by Lender.

Should this Note be signed by more than one person, firm or corporation or combination thereof, all of the obligations herein contained shall be considered joint and several obligations of each signer hereof. In such case, the liability of each such signer shall be absolute, unconditional and without regard to the liability of any other party hereto.

This Note is given and accepted as evidence of indebtedness only and not in payment or satisfaction of any indebtedness or obligation.

The form and essential validity of this Note shall be governed by the laws of the State of Delaware. If any provision of this Note is prohibited by, or is unlawful or unenforceable under, any applicable law of any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such prohibition without invalidating the remaining provisions hereof; provided that where the provisions of any such applicable law may be waived, they hereby are waived by Borrower to the full extent permitted by law in order that this Note shall be deemed to be a valid and binding promissory note in accordance with its terms.

Time is of the essence with respect to all Borrower’s obligations and agreements under this Note.

This Note and all the provisions, conditions, promises and covenants hereof shall inure to the benefit of Lender, its successors and assigns, and shall be binding in accordance with the terms hereof upon Borrower, its successors and assigns, provided nothing herein shall be deemed consent to any assignment restricted or prohibited by the terms of the Transaction Documents.

All notices required under this Note will be in writing and will be transmitted by personal delivery, first class mail, overnight courier or facsimile to the addresses or facsimile numbers appearing on the signature page to this Note, or to such other addresses or facsimile numbers as Borrower and Lender may specify from time to time in writing. Every notice shall be deemed to have been duly given or served on the date on which personally delivered, in person or by overnight courier service, or the date of facsimile transmission or five days after the same shall have been deposited in the United States mail. Failure or delay in delivering copies of any notice shall in no way adversely affect the effectiveness of such notice.

3

To induce Lender to extend to Borrower the loan evidenced by this Note, Borrower irrevocably agrees that, subject to Lender’s sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY ARISING OUT OF OR RELATED TO THIS NOTE OR ANY TRANSACTION DOCUMENT WILL BE LITIGATED IN COURTS HAVING SITUS IN DELAWARE. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY COURT LOCATED WITHIN DELAWARE, WAIVES PERSONAL SERVICE OF PROCESS UPON BORROWER, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE WILL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT.

BORROWER AND LENDER EACH WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS NOTE OR ANY DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THIS NOTE AND AGREES THAT ANY SUCH ACTION OR PROCEEDING WILL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. BORROWER AGREES THAT BORROWER WILL NOT ASSERT ANY CLAIM AGAINST LENDER ON ANY THEORY OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES.

4

IN WITNESS WHEREOF, the undersigned has caused its duly authorized officers to execute this Note on its behalf as of the date and year first set forth above.

HYPERION THERAPEUTICS, INC.,

a Delaware corporation

By:                                                                                                  

Name:                                                                                            

Title:                                                                                              

Address:

601 Gateway Boulevard, Suite 200

South San Francisco, California 94080

Fax No: (650) 745-3568

Address for Notices to Lender:

7720 North Dobson Road

Scottsdale, Arizona 85256

Fax No: (480) 291-5175

With a copy to:

Medicis Pharmaceutical Corporation

Attn: General Counsel

7720 North Dobson Road

Scottsdale, Arizona 85256

Fax No: (480) 291-8508

5

EXECUTION COPY

EXHIBIT 2

SECURITY AGREEMENT

[DOCUMENT CONSISTING OF EIGHT (8) PAGES ATTACHED HERETO]

SECURITY AGREEMENT

This SECURITY AGREEMENT (this “Agreement”), made this               day of             , 20      , by and between HYPERION THERAPEUTICS, INC., a Delaware corporation (“Borrower”), and UCYCLYD PHARMA, INC., a Maryland corporation (“Lender”).

1. Borrower and Lender are parties to that certain Amended and Restated Collaboration Agreement, dated as of March 22, 2012, (the “Collaboration Agreement”). Capitalized terms used but not otherwise defined herein shall have the meaning given to them in the Collaboration Agreement.

2. In consideration of a loan(s) made by Lender to Borrower evidenced by Borrower’s Promissory Note, dated                     , 20    (the “Note”), issued to Lender in the original principal amount equal to the Marketed Products Purchase Price, and as security therefor, and for the payment of any and all liabilities and obligations of Borrower to Lender arising under the Note, whether now or hereafter existing, whether now due or to become due, whether direct or indirect, or absolute or contingent, and whether several, joint or joint and several, which together comprise the liabilities and obligations of Borrower evidenced by the Note (all of which liabilities and obligations are hereinafter called the “Obligations”), Borrower does hereby pledge, assign, transfer and deliver to Lender and does hereby grant to Lender a continuing and unconditional first priority security interest, to the extent such a security interest may be created under applicable Uniform Commercial Code or other applicable law, in and to the following described property of the Borrower, whether now existing or hereafter acquired, and wherever now or hereafter located, and the products and proceeds therefrom:

(a) the Assets;

(b) all Accounts arising from the sale of Marketed Products to third parties and all Accounts constituting royalty payment receivable arising from the sale of Marketed Products by Borrower’s sublicensees, in each case net of any royalty payments owing by Borrower in connection with such sales;

(c) all books and records of Borrower pertaining to any of the foregoing; and

(d) all Proceeds of any of the foregoing.

All the aforesaid property and the products and proceeds therefrom are herein individually and collectively called the “Collateral.” The terms “Account”, “Account Debtor” and “Proceeds” shall have the respective meanings assigned to such terms as of the date hereof in the Uniform Commercial Code of the State of Delaware.

3. Borrower authorizes Lender to file such financing statements and continuation statements as Lender shall require to evidence the security interest in the Collateral granted hereunder. Borrower shall, at Lender’s request, at any time and from time to time, execute and deliver to Lender such other documents and instruments and do such acts as Lender may deem necessary or desirable in order to establish and maintain valid, attached and perfected security interests in the

Collateral in favor of Lender, free and clear of all liens, claims and rights of third parties whatsoever. Borrower hereby irrevocably appoints any officer of Lender (designated by Lender for such purpose) its attorney-in-fact, in Borrower’s name, place and stead, to execute such financing statements and other documents and to do such other acts as Lender may require to perfect and preserve Lender’s security interest in, and to enforce such interests in the Collateral, solely to the extent required to further such security interest and only to the extent Lender was unable to secure performance from Buyer with respect to such execution or other acts, hereby ratifying and confirming all that said attorney-in-fact may do or cause to be done by virtue hereof. Upon satisfaction of the Obligations, Lender covenants and agrees that it will promptly execute and deliver such releases and other documents reasonably requested by Borrower to evidence the termination of this Security Agreement and the release of all liens or security interests created hereunder. Borrower shall pay all reasonable, out-of-pocket costs and expenses incurred by Lender in connection therewith.

4. Borrower shall keep the Collateral in good order, and shall have sole responsibility for taking such steps as may be necessary, from time to time, to preserve all rights of Borrower and Lender in the Collateral against third parties. Borrower, at its place of business, shall keep accurate and complete books and records related to the Collateral in accordance with sound and generally accepted accounting principles applied on a basis consistent with prior years. Lender shall have the right, upon reasonable advance notice and no more than once per year (except in the event of default), to inspect said books and records during business hours and make extracts therefrom.

5. Borrower covenants with and warrants to Lender that: (a) Borrower is the sole owner of the Collateral free from any lien, security interest or encumbrance of any kind; (b) Borrower will not sell, lease or grant any further security interest in the Collateral or any part thereof, and will not part with possession of the same, except in the usual and ordinary course of Borrower’s business; (c) Borrower will not use or permit the Collateral to be used in any material violation of any law or ordinance; (d) Borrower will not change its jurisdiction of incorporation without the Lender’s prior written consent (such consent will not be unreasonably withheld); (e) Borrower will not change its legal name or transact business under any other trade name without first giving 30 days’ prior written notice of its intent to do so to the Lender; and (f) Borrower will maintain any of its existing insurance that covers the Collateral for the full duration of this Agreement against reasonable risks of loss, damage and destruction (to the extent the Collateral is reasonably insurable), and, if requested by Lender, shall deliver to Lender within ten (10) days from the date hereof, a fully paid policy or certificate of insurance containing a Lender’s Loss Payable clause in form and content acceptable to, and in favor of, Lender. In the event Borrower, at any time or times hereafter, shall fail to maintain any of such policies of insurance, or to pay any premium in whole or in part relating thereto, then Lender, without waiving or releasing any obligation or default by Borrower hereunder, may at any time or times thereafter, (but shall be under no obligation to do so) maintain such policies of insurance and pay such premiums and take any other action with respect thereto, which Lender deems advisable. All sums so disbursed by Lender, including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be additional Obligations secured hereunder and shall be payable on demand by Borrower to Lender. Borrower covenants, warrants and represents to Lender that all representations and warranties of Borrower contained in this Agreement (whether appearing in this Paragraph 5 or

elsewhere) shall be true at the time of Borrower’s execution of this Agreement, shall survive the execution, delivery and acceptance thereof by the parties hereto and the closing of the transactions described herein or related hereto and shall be true during the duration thereof.

6. Lender may, but is not required to, take such action, from time to time, as it deems appropriate to maintain or protect the Collateral, and in particular may at any time following the occurrence and during the continuance of an Event of Default: (a) transfer the whole or any part of the Collateral into the name of itself or its nominee; (b) collect any amounts due on the Collateral directly from persons obligated thereof; (c) take control of any proceeds and products of the Collateral; (d) sue or make any compromise or settlement with respect to any of the Collateral; or (e) make an election with respect to the Collateral under §1111 of the U.S. Bankruptcy Code, or take any action under Section 364 or any other section of the U.S. Bankruptcy Code now existing or hereafter amended; provided, however, that any such action of Lender set forth in this Paragraph 6 shall not, in any manner whatsoever, impair or affect any liability hereunder, nor prejudice or waive nor be construed to impair, affect, prejudice or waive Lender’s rights and remedies at law, in equity or by statute, nor release or discharge, nor be construed to release or discharge, Borrower or any guarantor or other person, firm or corporation liable to Lender for the Obligations, whether now existing or hereafter created or arising, howsoever evidenced.

7. None of the following shall affect the Obligations of Borrower to Lender under this Agreement or Lender’s rights with respect to the Collateral:

(i) Acceptance or retention by Lender of other property or interests in property as security for the Obligations;

(ii) Release of all or any part of the Collateral;

(iii) Release, extension, renewal, modification or compromise of the liability of any guarantor of the Obligations; or

(iv) Failure by Lender to resort to other security or pursue Borrower or any other obligor liable for any of the Obligations before resorting to the Collateral.

8. The occurrence of an “Event of Default” under the Note shall constitute an Event of Default under this Agreement. Upon the occurrence of an Event of Default: (a) all Obligations may, at the option of Lender, and without demand, notice or legal process of any kind, be declared, and immediately shall become due and payable, and Lender may exercise, from time to time, any rights and remedies available to it under the Uniform Commercial Code and any other applicable law in addition to, and not in lieu of, any rights and remedies expressly granted in this Agreement or in any other agreements with Lender; (b) Lender shall have the right to notify the Account Debtors under Borrower’s Accounts of the security interest of Lender, and/or of the assignment to Lender of, the Accounts upon which respective Account Debtors are liable to Borrower, and to notify such Account Debtors to make payment of such Account or Accounts directly to Lender; (c) Lender shall have the

right to take control of the cash and other proceeds of any of Borrower’s Accounts; (d) Lender may, at any time, enforce collection of any of the Accounts by suit or otherwise, and surrender or release all or any part thereof, or compromise, extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced by such Account; (e) Borrower hereby irrevocably appoints any officer of Lender (designated by Lender for such purpose) its attorney-in-fact, in Borrower’s name, place and stead, and hereby authorizes said attorney-in-fact to execute change of address forms with the Postmaster of the U.S. Post Office serving the address(es) of Borrower, to change the address of Borrower to that of Lender, to open all envelopes addressed to Borrower and apply any payments therein contained to the Obligations, all of which the Lender may do at its option; (f) without notice, demand or legal process of any kind, Lender may take possession of any or all of the Collateral (in addition to Collateral of which it already has possession), wherever it may be found, and for that purpose may pursue the same wherever it may be found, and may enter into any of Borrower’s premises where any of the Collateral may be or be supposed to be, and search for, take possession of, remove, keep and store any of the Collateral until the same shall be sold or otherwise disposed of, and Lender shall have the right to store the same in any of Borrower’s premises without cost to Lender; (g) at Lender’s request, Borrower will, at Borrower’s expense, to the extent applicable assemble the Collateral and make it available to Lender at a place or places to be designated by Lender which is reasonably convenient to Lender and Borrower; and (h) without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Borrower or any other person, Lender may forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give an option or options to purchase or sell or otherwise dispose of and deliver the Collateral (or contract to do so), or any part thereof, in one or more parcels at public or private sales, at any exchange or brokers board or at any of Lender’s offices or elsewhere at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk.

Lender shall have the right upon any public sale or sales, and, to the extent permitted by law, upon any private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption, which equity of redemption Borrower hereby releases.

Any notification of intended disposition of all or any of the Collateral required by law shall be deemed reasonably and properly given if given at least ten (10) days before such disposition.

Borrower agrees that in the event Borrower fails to perform, observe or discharge any of its Obligations or liabilities under this Agreement, no remedy of law will provide adequate relief to Lender, and further agrees that Lender shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

Borrower agrees to pay all expenses of collection, and all legal expenses and attorneys’ fees of every kind, paid or incurred by Lender in enforcing its rights and remedies hereunder, or in defending against any claim, cause of action, defense, counterclaim, setoff or crossclaim based on any act of commission or omission by Lender with respect to the Obligations or Collateral, or both, promptly on demand of Lender.

The proceeds of any sale, disposition or other realization upon all or any part of the Collateral shall be applied as follows: first, to the reasonable costs, expenses and attorneys’ fees incurred by Lender for collection, acquisition, completion, protection, removal, storage, sale and delivery of the Collateral; second, to any accrued and unpaid interest; third, to unpaid principal; fourth, to any Obligations remaining unpaid; and fifth, upon payment in full of the Obligations, to Borrower or as a court of competent jurisdiction may direct. Borrower shall remain liable for any deficiency after such application.

9. Borrower waives the benefit of any law that would otherwise restrict or limit Lender in the exercise of its right, which is hereby acknowledged, to appropriate at any time hereafter any indebtedness owing from Lender to Borrower and to set-off such amounts against the Obligations.

10. BORROWER WAIVES EVERY DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH BORROWER MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY LENDER IN ENFORCING THIS AGREEMENT OR THE COLLATERAL AND RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO PURSUANT TO THE TERMS HEREOF AND WITH RESPECT TO THE COLLATERAL.

11. Except as otherwise provided herein, Borrower waives all notices and demands in connection with the enforcement of Lender’s rights hereunder, and hereby consents to, and waives notice of the release with or without consideration of any Borrower hereunder or of any Collateral. Any failure of Lender to exercise any right available hereunder or otherwise shall not be construed as a waiver of the right to exercise the same or any other right at any other time.

12. Lender may at any time assign the Obligations, or any part thereof, and transfer Lender’s rights in any or all of the Collateral, and Lender thereafter shall be relieved from all liability with respect to such Collateral. Borrower may not sell or assign this Agreement, or any other agreement with Lender or any portion thereof, either voluntarily or by operation of law.

13. This Agreement has been made and delivered at the main office of Lender and shall be governed and construed in accordance with the laws of the State of Delaware. This Agreement shall be binding upon Borrower and its successors and assigns. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be severable and be ineffective to the extent of such prohibition or invalidity, without invalidating the remaining provisions of this Agreement.

14. All references herein to Borrower shall be deemed to include any successor or successors, whether immediate or remote, to such corporation, partnership or limited liability company.

15. Any notice or other communication to be given hereunder shall be given as provided in the Note.

16. This Agreement, the Collaboration Agreement and the Note contain the entire agreement between Borrower and Lender and the final expression of their intentions with respect to the subject matter hereto, and supersedes all negotiations, representations, warranties, commitments, offers, contracts (of any kind or nature, whether oral or written) to or contemporaneous with the execution hereof. No prior or contemporaneous representations, warranties, understandings, offers or agreements of any kind or nature, whether oral or written, have been made by Lender or Borrower or relied upon by Borrower or Lender in connection with the execution hereof.

17. Neither this Agreement, nor any term hereof may be changed, discharged, terminated or waived, except by an instrument in writing, signed by the party against which enforcement of the change, discharge, termination or waiver is sought.

18. Borrower represents and warrants to Lender that the execution and delivery of this Agreement has been duly authorized by resolutions heretofore adopted by its Board of Directors in accordance with law and its bylaws, that said resolutions have not been amended nor rescinded, are in full force and effect, that the officers executing and delivering this Agreement for and on behalf of Borrower, are duly authorized so to act. Lender, in executing this Agreement, is expressly relying upon the aforesaid representations and warranties.

19. TO INDUCE LENDER TO EXTEND TO BORROWER THE LOAN EVIDENCED BY THE NOTE, BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY ARISING OUT OF OR RELATED TO THE NOTE OR THIS AGREEMENT WILL BE LITIGATED IN COURTS HAVING SITUS IN Delaware. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY COURT LOCATED WITHIN Delaware, WAIVES PERSONAL SERVICE OF PROCESS UPON BORROWER, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE WILL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT.

20. BORROWER AND LENDER EACH WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THE NOTE OR THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE NOTE OR THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING WILL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. BORROWER AGREES THAT BORROWER WILL NOT ASSERT ANY CLAIM AGAINST LENDER ON ANY THEORY OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES.

21. Time is of the essence in making payments of all amounts due Lender under this Agreement and in the performance and observance by Borrower of each covenant, agreement, provision and/or term of this Agreement.

22. As used herein, all provisions shall include the masculine, feminine, neuter, singular and plural thereof, wherever the context and facts require such construction and in particular the word “Borrower” shall be so construed.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date above set forth.

HYPERION THERAPEUTICS, INC.,

a Delaware corporation

By:

Name:

Title:

Address:

601 Gateway Boulevard, Suite 200

South San Francisco, California 94080

UCYCLYD PHARMA, INC.,

a Maryland corporation

By:

Name:

Title:

Address:

7720 North Dobson Road

Scottsdale, Arizona 85256

EXHIBIT 3

AMENDMENT TO CLINICAL SUPPLY AGREEMENT

This AMENDMENT TO CLINICAL SUPPLY AGREEMENT (“Amendment”) is entered into this 22nd day of March 2012 (the “Amendment Effective Date”), by and between UCYCLYD PHARMA, INC., a Maryland corporation, with its principal place of business at 7720 N. Dobson Road, Scottsdale, Arizona, 85256 (“Ucyclyd”) and HYPERION THERAPEUTICS, INC., a Delaware corporation, with its principal place of business at 601 Gateway Blvd., Suite 200, South San Francisco, CA 94080 (“Hyperion”). Ucyclyd and Hyperion are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

WHEREAS, the Parties are parties to that certain Clinical Supply Agreement, effective as of *** (the “Original Supply Agreement”); and

WHEREAS, the Parties desire to amend the Original Supply Agreement as set forth below.

NOW, THEREFORE, in consideration of the foregoing and the covenants and promises contained in this Amendment, Hyperion and Ucyclyd hereby agree as follows:

1. The recitals of the Original Supply Agreement are hereby deleted and replaced with the following:

WHEREAS, the Parties have entered into that certain Amended and Restated Collaboration Agreement, dated as of March 22, 2012 (the “Agreement”); and

WHEREAS, Ucyclyd *** under this Supply Agreement solely for the purposes described herein and pursuant to the terms and conditions as set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the covenants and promises contained in this Supply Agreement, Hyperion and Ucyclyd hereby agree as follows:

2. Section 1.2 of the Original Supply Agreement is hereby deleted and replaced with the following:

1.2***

3. Section 4.3 of the Original Supply Agreement is hereby deleted and replaced with the following:

***

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDMENT TO CLINICAL SUPPLY AGREEMENT

Page 1 of 4

EXECUTION COPY

4. In Section 5.3 of the Original Supply Agreement, the reference to “Section 7.12” is hereby replaced by “Section 7.8”.

5. Section 6.1 of the Original Supply Agreement is hereby deleted and replaced with the following:

***

6. Article 7 of the Original Supply Agreement is hereby deleted and replaced with the following:

***

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDMENT TO CLINICAL SUPPLY AGREEMENT

Page 2 of 4

EXECUTION COPY

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to Supply Agreement to be executed as of the Amendment Effective Date by their respective duly authorized officers.

UCYCLYD PHARMA, INC.		HYPERION THERAPEUTICS, INC.
By:		By:
	Richard D. Peterson Executive Vice President, Chief Financial Officer and Treasurer		Donald J. Santel President and Chief Executive Officer

UCYCLYD / HYPERION ASSET PURCHASE AGREEMENT

AMENDMENT TO CLINICAL SUPPLY AGREEMENT

Page 3 of 4

EXECUTION COPY

EXHIBIT 4

BILL OF SALE

[DOCUMENT CONSISTING OF TWO (2) PAGES ATTACHED HERETO]

BILL OF SALE

This Bill of Sale is made as of the Marketed Products Closing Date, by Hyperion Therapeutics, Inc., a Delaware corporation (“Hyperion”) and Ucyclyd Pharma, Inc., a Maryland corporation (“Ucyclyd”). Capitalized terms used but not defined in this Bill of Sale shall have the meanings given to them in the Collaboration Agreement (as defined below).

RECITALS

WHEREAS, Hyperion and Ucyclyd have entered into that certain Amended and Restated Collaboration Agreement, dated as of March 22, 2012 (the “Collaboration Agreement”), which provides for the sale of certain assets of Ucyclyd to Hyperion, for consideration in the amount and on the terms and conditions set forth in the Collaboration Agreement.

WHEREAS, by this instrument Ucyclyd is vesting in Hyperion all right, title and interest in, to and under the Assets.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Ucyclyd hereby sells, assigns, transfers, conveys and delivers to Hyperion all right, title and interest in, to and under the Assets.

Nothing contained in this Bill of Sale is intended to provide any rights to Hyperion or Ucyclyd beyond those rights expressly provided to Hyperion and Ucyclyd in the Collaboration Agreement. Nothing contained in this Bill of Sale is intended to impose any obligations or liabilities on Hyperion or Ucyclyd beyond those obligations and liabilities expressly imposed on Hyperion or Ucyclyd in the Collaboration Agreement. Nothing contained in this Bill of Sale is intended to limit any of the rights or remedies available to Hyperion or Ucyclyd under the Collaboration Agreement.

Nothing contained in this Bill of Sale shall be deemed to alter or amend the terms and provisions of the Collaboration Agreement, and in the event of any conflict between the terms and provisions of this Bill of Sale and the Collaboration Agreement, the terms and provisions of the Collaboration Agreement shall be deemed to govern and be controlling.

Nothing contained in this Bill of Sale is intended to provide any right or remedy to any person or entity, other than Hyperion.

This Bill of Sale shall be construed in accordance with, and governed in all respects by, the internal laws of the State of Delaware (without giving effect to principles of conflicts of laws).

[Signature page follows]

UCYCLYD / HYPERION AMENDED AND RESTATATED COLLABORATION AGREEMENT

BILL OF SALE

Page 1 of 2

IN WITNESS WHEREOF, Ucyclyd has caused this Bill of Sale to be executed and delivered as of the date first written above.

HYPERION THERAPEUTICS, INC.

By

Name

Title

UCYCLYD PHARMA, INC.

By

Name

Title

UCYCLYD / HYPERION AMENDED AND RESTATATED COLLABORATION AGREEMENT

BILL OF SALE

Page 2 of 2

EXHIBIT 5

TECHNOLOGY ASSIGNMENT AGREEMENT

[DOCUMENT CONSISTING OF FOUR (4) PAGES ATTACHED HERETO]

TECHNOLOGY ASSIGNMENT AGREEMENT

THIS TECHNOLOGY ASSIGNMENT AGREEMENT (“Assignment”) is entered into as of the Marketed Products Closing Date by and between UCYCLYD PHARMA, INC., a Maryland corporation with its principal place of business at 7720 N. Dobson Road, Scottsdale, Arizona, 85256 (hereinafter referred to as “Ucyclyd”), and HYPERION THERAPEUTICS, INC., a Delaware corporation, with its principal place of business at 601 Gateway Blvd., Suite 200, South San Francisco, CA 94080 (hereinafter referred to as “Hyperion”). Ucyclyd and Hyperion are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Ucyclyd and Hyperion are party to that certain Amended and Restated Collaboration Agreement, dated March 22, 2012 (“Agreement”); and

WHEREAS, Ucyclyd desires to transfer and assign to Hyperion the Marketed Products Technology (as defined in the Agreement).

NOW, THEREFORE, in consideration of the covenants, conditions, and undertakings hereinafter set forth, it is agreed by and among the Parties as follows:

1. Interpretation. Capitalized terms used herein shall have the meaning ascribed to each of them below or within the body of this Assignment, or if not defined herein or therein, shall have the meaning ascribed to them in the Agreement.

2. Assignment. For the good and valuable consideration of ***, to it in hand paid by Hyperion, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Ucyclyd, Ucyclyd does hereby sell, assign, transfer and convey to Hyperion all of Ucyclyd’s right, title and interest in, to and under the Marketed Products Technology including the Marketed Products Patents set forth on Attachment 1, together with all past, present, or future claims arising out of any infringement thereof, and all rights to claim priority on the basis of the Marketed Products Technology which may hereafter be filed for these or the inventions covered thereby in any foreign country and all letters patent which may be granted on these or the inventions covered thereby in any foreign country, and all divisionals, continuations-in-part (if any), continuations thereof (if any), extensions, refiles, renewals, substitutions, reexaminations and reissues thereof, all such rights to be held and enjoyed by Hyperion, for its own use and benefit and for the use and benefit of its successors, assigns or other legal representatives as fully and entirely as the same would have been held and enjoyed by Ucyclyd if this Assignment had not been made.

3. No Other Assignments. Hyperion does hereby assume all obligations with respect to the Marketed Products Technology including Marketed Products Patents on and following the Marketed Products Closing Date. Except for the foregoing, the rights specifically assigned herein and those obligations assumed under the Agreement, Hyperion does not assume hereunder any other liabilities or obligations of Ucyclyd. Nothing contained herein shall be construed to limit, modify, expand or amend the rights and obligations of Ucyclyd or Hyperion under the Agreement.

4. Representation. Each of the Parties hereto hereby represents and warrants that it has full power and authority to enter into this Assignment.

UCYCLYD / HYPERION AMENDED AND RESTATED COLLABORATION AGREEMENT

TECHNOLOGY ASSIGNMENT AGREEMENT

Page 1 of 3

5. Governing Law. This Assignment shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without giving effect to principles of conflict of law thereof.

6. Waivers and Amendments. This Assignment may be amended, modified or supplemented, and any terms hereof may be waived, only by a written instrument executed by the Parties hereto.

7. Counterparts. This Assignment may be executed in counterparts, each of which shall be deemed an original but all of which together shall be considered one and the same agreement. Execution hereof may also be made by facsimile transmission.

8. Headings. The headings of the sections and the subsections of this Assignment are inserted for convenience of reference only and shall not constitute a part hereof.

9. Miscellaneous. The Parties agree, on behalf of themselves and their successors and assigns, both before and after the Marketed Products Closing, to duly execute and deliver, or to cause to be executed and delivered, all such further documents, acts, transfers, assignments, novations, and conveyances, powers of attorney, and assurances, as the other party may reasonably request to prepare, execute and deliver such further instruments of conveyance, sale, assignment or transfer, and to take or cause to be taken such further action, as reasonably required in order to consummate the transactions contemplated herein.

10. Entire Agreement. Each Party acknowledges that this Assignment and the Agreement constitute the entire agreement of the parties with respect to the subject matter of this Assignment. This Amendment is intended only to affect the assignment of certain assets in accordance with the Agreement and shall be governed entirely in accordance with the terms and conditions of the Agreement. In the event of any conflict or ambiguity between the terms hereof and the terms of the Agreement, the terms of the Agreement shall govern and be controlling.

UCYCLYD / HYPERION AMENDED AND RESTATED COLLABORATION AGREEMENT

TECHNOLOGY ASSIGNMENT AGREEMENT

Page 2 of 3

IN TESTIMONY WHEREOF, each party has executed this Assignment by its proper officers thereunto duly authorized.

UCYCLYD PHARMA, INC.

Name:

Title:

Date:

State of	)
	)	ss.
County of	)

On this             day of             , 20            before me personally appeared the foregoing individual, who executed the foregoing instrument and who acknowledged to me that he/she executed the same of his/her own free will for the purposes therein set forth.

Notary Public,

(seal) County, State of

My Commission Expires:

HYPERION THERAPEUTICS, INC.

Name:

Title:

Date:

State of	)
	)	ss.
County of	)

On this             day of             , 20            before me personally appeared the foregoing individual, who executed the foregoing instrument and who acknowledged to me that he/she executed the same of his/her own free will for the purposes therein set forth.

Notary Public,

(seal) County, State of

My Commission Expires:

UCYCLYD / HYPERION AMENDED AND RESTATED COLLABORATION AGREEMENT

TECHNOLOGY ASSIGNMENT AGREEMENT

Page 3 of 3

ATTACHMENT 1

MARKETED PRODUCTS PATENTS

[TO BE DEVELOPED AT CLOSING]

UCYCLYD / HYPERION AMENDED AND RESTATED COLLABORATION AGREEMENT

ATTACHMENT 1 TO TECHNOLOGY ASSIGNMENT AGREEMENT

Page 1 of 1

EXECUTION COPY

EXHIBIT 6

ASSIGNMENT AND ASSUMPTION AGREEMENT

[DOCUMENT CONSISTING OF FOUR (4) PAGES ATTACHED HERETO]

ASSIGNMENT AND ASSUMPTION AGREEMENT

This ASSIGNMENT AND ASSUMPTION AGREEMENT (“Assignment”) is made and entered into as of the Marketed Products Closing Date by and between UCYCLYD PHARMA, INC., a Maryland corporation with its principal place of business at 7720 N. Dobson Road, Scottsdale, Arizona, 85256 (hereinafter referred to as “Assignor”) and HYPERION THERAPEUTICS, INC., a Delaware corporation, with its principal place of business at 601 Gateway Blvd., Suite 200, South San Francisco, CA 94080 (hereinafter referred to as “Assignee”).

RECITALS

WHEREAS, Assignor and Assignee are parties to that certain Amended and Restated Collaboration Agreement, dated March 22, 2012 (“Agreement”); and

WHEREAS, pursuant to and as defined in the Agreement, upon the Marketed Products Closing Date, Assignor desires to assign, transfer, convey and deliver to Assignee, and Assignee desires to assume from Assignor, the agreements set forth as Attachment 1 to this Assignment (“Assigned Agreements”).

NOW, THEREFORE, in consideration of the foregoing premises, the covenants and agreements contained herein, and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Interpretation. Capitalized terms used herein shall have the meaning ascribed to each of them below or within the body of this Assignment, or if not defined herein or therein, shall have the meaning ascribed to them in the Agreement.

2. Assignment of Assumed Agreements. Assignor hereby assigns, transfers and sets over to Assignee all of its rights, title, interest and benefits in, to and under the Assigned Agreements from and after the date hereof.

3. Assumption of Assigned Agreements. Assignee hereby assumes and agrees with Assignor to discharge when due all obligations and liabilities of Assignor to be paid or performed solely after the date hereof which accrue under the Assigned Agreements from and after the date hereof.

4. No Other Liabilities or Obligations Assumed. Except for the liabilities and obligations specifically assumed herein or in the Agreement, Assignee does not assume hereunder any other liabilities or obligations of Assignor. Nothing contained herein shall be construed to limit, modify, expand or amend the rights and obligations of Assignor or Assignee under the Agreement.

5. Representation. Each of the parties hereto hereby represents and warrants that it has full power and authority to enter into this Assignment.

6. Governing Law. This Assignment shall be gove-rned by and construed and enforced in accordance with the laws of the State of Delaware without giving effect to principles of conflict of law thereof.

UCYCLYD / HYPERION AMENDED AND RESTATED COLLABORATION AGREEMENT

ASSIGNMENT AND ASSUMPTION AGREEMENT

Page 1 of 3

7. Waivers and Amendments. This Assignment may be amended, modified or supplemented, and any terms hereof may be waived, only by a written instrument executed by the parties hereto.

8. Counterparts. This Assignment may be executed in counterparts, each of which shall be deemed an original but all of which together shall be considered one and the same agreement. Execution hereof may also be made by facsimile transmission.

9. Successors and Assigns. This Assignment shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and assigns.

10. Headings. The headings of the sections and the subsections of this Assignment are inserted for convenience of reference only and shall not constitute a part hereof.

11. Consents. To the extent that the assignment of any right or agreement to Assignee hereunder requires the consent of any other party and such consent is not obtained, this Assignment shall not constitute or be deemed an assignment thereof if an attempted assignment thereof without such consent would constitute a breach thereof or create in any party a right to cancel, terminate or accelerate any provisions of such agreement. In such case, Assignor will cooperate with Assignee in any reasonable arrangement requested by Assignee to enable performance of such right or agreement and to provide to Assignee the benefit of Assignor’s rights under such rights or agreement and Assignee will undertake to satisfy or perform any corresponding liabilities for the enjoyment of such benefits to the extent Assignee would have been responsible therefor hereunder if such consent or approval had been obtained.

12. Recitals. The recitals set forth above are incorporated into and made part of this Assignment.

13. Miscellaneous. The parties agree, on behalf of themselves and their successors and assigns, both before and after the Marketed Products Closing, to duly execute and deliver, or to cause to be executed and delivered, all such further documents, acts, transfers, assignments, novations, and conveyances, powers of attorney, and assurances, as the other party may reasonably request to prepare, execute and deliver such further instruments of conveyance, sale, assignment or transfer, and to take or cause to be taken such further action, as reasonably required in order to consummate the transactions contemplated herein.

14. Entire Agreement. Each party acknowledges that this Assignment constitutes the entire agreement of the parties with respect to the subject matter of this Assignment.

UCYCLYD / HYPERION AMENDED AND RESTATED COLLABORATION AGREEMENT

ASSIGNMENT AND ASSUMPTION AGREEMENT

Page 2 of 3

IN WITNESS WHEREOF, the undersigned have caused this Assignment to be duly executed as of the date first above written.

ASSIGNOR:

UCYCLYD PHARMA, INC.,

a Maryland corporation,

By:

Name

Title:

ASSIGNEE:

HYPERION THERAPEUTICS, INC.

a Delaware corporation,

By:

Name

Title:

UCYCLYD / HYPERION AMENDED AND RESTATED COLLABORATION AGREEMENT

ASSIGNMENT AND ASSUMPTION AGREEMENT

Page 3 of 3

ATTACHMENT 1

ASSIGNED AGREEMENTS

[TO BE PREPARED PRIOR TO CLOSING

SHOULD BE DUPLICATE OF SCHEDULE 1.16 AND SCHEDULE 1.43 (EXCEPT IN THE CASE OF SCHEDULE 1.43, ANY SUCH AGREEMENTS TO WHICH *** IS A PARTY)]]

UCYCLYD / HYPERION AMENDED AND RESTATED COLLABORATION AGREEMENT

ATTACHMENT 1 TO ASSIGNMENT AND ASSUMPTION AGREEMENT

Page 1 of 1

EXHIBIT 7

HYPERION THERAPEUTICS ACQUIRES RAVICTI™ (GLYCEROL PHENYLBUTYRATE) FROM UCYCLD PHARMA, INC.

—NDA for Adjunctive Therapy in the Chronic Management of Urea Cycle Disorders (UCD) in Patients ³ 6 Years of Age Currently Under Review by FDA—

SOUTH SAN FRANCISCO, California, March 22, 2012—Hyperion Therapeutics, Inc. today announced that it has acquired worldwide rights to the investigational drug Ravicti™ (glycerol phenylbutyrate) from Ucyclyd Pharma, Inc., a wholly owned subsidiary of Medicis Pharmaceutical Corporation (NYSE: MRX). Terms of the deal were not disclosed. In connection with the acquisition announced today, Hyperion also entered into an amended and restated collaboration agreement with Ucyclyd pursuant to which Hyperion retains an option to acquire, in the first half of 2013 for a pre-negotiated price, worldwide rights for BUPHENYL^® and, subject to certain conditions, AMMONUL^®.

Under terms of a previous collaboration agreement with Ucyclyd Pharma, Hyperion has been developing Ravicti for two orphan diseases: urea cycle disorders and episodic hepatic encephalopathy. A New Drug Application (NDA) for the use of Ravicti as adjunctive therapy for the chronic management of urea cycle disorders in patients six years of age and older was recently accepted for filing by the FDA and is currently under review. The FDA action date under the Prescription Drug User Fee Act (PDUFA) is October 23, 2012. Hyperion has completed enrollment in a phase II study in patients with cirrhosis and episodic hepatic encephalopathy. Results from that study are expected to be available late in the second quarter of this year.

Ravicti™ (Glycerol Phenylbutyrate) UCD Development Program

The Ravicti NDA includes results from a single Phase III study which included a long term safety extension and two Phase II supporting studies. The Phase III multi-center, randomized, double-blind, placebo-controlled, cross-over study evaluated the non-inferiority of Ravicti as compared to sodium phenylbutyrate (BUPHENYL^®) in controlling blood ammonia in adults aged 18 years and above with UCD. The study was conducted in accordance with a Special Protocol Assessment (SPA) with the FDA.

About Ravicti

Ravicti™ (glycerol phenylbutyrate), an investigational drug formerly known as HPN-100, is a pre-pro-drug of phenylacetic acid, the active moiety of BUPHENYL^®, the only branded therapy currently FDA-approved as adjunctive therapy for the chronic management of patients with urea cycle disorders due to deficiencies in carbamylphosphate synthetase (CPS), ornithine transcarbamylase (OTC), and argininosuccinic acid synthetase (AS). Ravicti holds orphan product designations in the US and Europe for the maintenance treatment of patients with urea cycle disorders and in the US for the intermittent or chronic treatment of patients with cirrhosis and any grade of hepatic encephalopathy.

About Urea Cycle Disorders

Urea cycle disorders are inherited, inborn errors of metabolism present in an estimated 1 in 10,000 births in the United States. Patients with urea cycle disorders are deficient in one of the key enzymes that comprise the urea cycle, the body’s primary vehicle for removing ammonia, a potent neurotoxin, from the bloodstream. Onset may occur at any age depending on the severity of the disorder. If left untreated, urea cycle disorders can cause dangerously heightened levels of ammonia in the bloodstream (hyperammonemia) resulting in brain damage, coma, and/or death.

About Hepatic Encephalopathy

Hepatic encephalopathy (HE) is a serious but potentially reversible neurological disorder that can occur in patients with cirrhosis of any etiology or acute liver failure. HE comprises a spectrum of neurological signs and symptoms ranging from mild (e.g. minimal disorientation) to severe (e.g. coma, death) and is believed to occur when the brain is exposed to gut-derived toxins such as ammonia that are normally removed from the blood by a healthy liver. Based on the current epidemiological literature, Hyperion estimates that there are approximately one million^1,2 patients in the US with cirrhosis, of whom approximately 140,000 have overt HE.

About Hyperion Therapeutics

Hyperion Therapeutics is a biopharmaceutical company focused on the development and commercialization of novel therapeutics to treat disorders in the areas of orphan diseases and hepatology. Hyperion is developing Ravicti™ (glycerol phenylbutyrate) for two orphan indications: urea cycle disorders (UCD) and hepatic encephalopathy. Hyperion is headquartered in South San Francisco, CA.

BUPHENYL^® is a registered trademark of Ucyclyd Pharma, Inc.

AMMONUL^® is a registered trademark of Ucyclyd Pharma, Inc.

Ravicti™ is a trademark of Hyperion Therapeutics, Inc.

Full Prescribing Information for BUPHENYL^® is available at www.Buphenyl.com or by contacting Ucyclyd Pharma, Inc.

Full Prescribing Information for AMMONUL^® is available at www.Ammonul.com or by contacting Ucyclyd Pharma, Inc.

¹ Bell BP, Manos MM, Zaman A, et al. The epidemiology of newly diagnosed chronic liver disease in gastroenterology practices in the United States: results from population-based surveillance. Am J Gastroenterol 2008; 103:2727-2735.

² Dufour MC. Chronic liver disease and cirrhosis. In digestive diseases in the United States: epidemiology and impact. JE Everhart, Editor, 1994; NIH publication No. 94-1447:615-646.

Press contact:

Christine Nash

Hyperion Therapeutics, Inc.

650-745-7844

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: May 8, 2012

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: May 8, 2012

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 March 31, 2012, 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

May 8, 2012

/s/ RICHARD D. PETERSON

Richard D. Peterson

Executive Vice President, Chief Financial Officer

and Treasurer

May 8, 2012

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

INVESTMENTS (DETAILS) (USD $)	3 Months Ended
	Mar. 31, 2012	Dec. 31, 2011
Available For Sale Securities Balance Sheet Reported Amounts Abstract
Available For Sale Securities Current	$ 246,000,000
Available For Sale Securities Noncurrent	20,200,000
Schedule Of Available For Sale Securities [Line Items]
Available For Sale Debt Securities Amortized Cost Basis	270,404,000	290,573,000
Available For Sale Securities Gross Unrealized Gains	531,000	382,000
Available For Sale Securities Gross Unrealized Losses	(4,708,000)	(5,188,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities	0	0
Available For Sale Securities Fair Value Disclosure	266,227,000	285,767,000
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	75,721,000
Available For Sale Securities Continuous Unrealized Loss Position Twelve Months Or Longer Fair Value	12,754,000
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	(112,000)
Available For Sale Securities Continuous Unrealized Loss Position 12 Months Or Longer Aggregate Losses	(4,596,000)
Available For Sale Securities Gross Realized Gain Loss Abstract
Available For Sale Securities Gross Realized Gains	100,000
Other Comprehensive Income Available For Sale Securities Adjustment Before Tax Period Increase Decrease	400,000
Available For Sale Securities Debt Maturities Amortized Cost Abstract
Available For Sale Securities Debt Maturities Within One Year Amortized Cost	106,675,000
Available For Sale Securities Debt Maturities After One Through Five Years Amortized Cost	146,379,000
Available For Sale Securities Debt Maturities After Ten Years Amortized Cost	17,350,000
Available For Sale Securities Debt Maturities Fair Value Abstract
Available For Sale Securities Debt Maturities Within One Year Fair Value	106,868,000
Available For Sale Securities Debt Maturities After One Through Five Years Fair Value	146,605,000
Available For Sale Securities Debt Maturities After Ten Years Fair Value	12,754,000
Corporate Debt Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Available For Sale Debt Securities Amortized Cost Basis	132,516,000	138,554,000
Available For Sale Securities Gross Unrealized Gains	299,000	161,000
Available For Sale Securities Gross Unrealized Losses	(89,000)	(549,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities	0	0
Available For Sale Securities Fair Value Disclosure	132,726,000	138,166,000
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	39,286,000
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	(89,000)
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	111,391,000	125,092,000
Available For Sale Securities Gross Unrealized Gains	220,000	221,000
Available For Sale Securities Gross Unrealized Losses	(23,000)	(24,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities	0	0
Available For Sale Securities Fair Value Disclosure	111,588,000	125,289,000
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	36,435,000
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	(23,000)
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	17,350,000	17,400,000
Available For Sale Securities Gross Unrealized Gains	0	0
Available For Sale Securities Gross Unrealized Losses	(4,596,000)	(4,607,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities	0	0
Available For Sale Securities Fair Value Disclosure	12,754,000	12,793,000
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	12,754,000
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	(4,596,000)
Asset Backed Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Available For Sale Debt Securities Amortized Cost Basis	9,147,000	9,527,000
Available For Sale Securities Gross Unrealized Gains	12,000	0
Available For Sale Securities Gross Unrealized Losses	0	(8,000)
Other Than Temporary Impairment Losses Investments Available For Sale Securities	0	0
Available For Sale Securities Fair Value Disclosure	9,159,000	9,519,000
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	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

XML

DIVIDENDS (DETAILS) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Notes To Consolidated Financial Statement Abstract
Cash dividend declared per common share	$ 0.10	$ 0.08
Dividends Payable Current	$ 6.0

XML

CONVERTIBLE NOTES (DETAILS) (USD $)			3 Months Ended
	Mar. 31, 2012	Dec. 31, 2011	Mar. 31, 2012 Convertible Senior Notes Due 2032 Member	Mar. 31, 2012 Convertible Senior Notes Due 2033 Member
Debt Instrument [Line Items]
Debt Instrument Principal Amount			$ 169,100,000	$ 181,000
Stated Interest Rate			2.50%	1.50%
Stated Contingent Interest Rate			0.50%	0.50%
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.	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 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 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 New 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			12,600,000	5,100,000
Deferred Tax Liability Convertible Debt			65,100,000
Convertible Debt Fair Value Disclosures	$ 220,500,000	$ 202,500,000

XML

INVENTORIES (TABLES)

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

Schedule Of Inventory Current Table Text Block

	March 31, 2012		December 31, 2011
Raw materials	$	11,168	$	9,100
Work-in-process		3,029		5,495
Finished goods		30,125		29,250
Valuation reserve		(7,623)		(9,326)
Total inventories	$	36,699	$	34,519

XML

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Mar. 31, 2012

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 adopted ASU No. 2011-04 as of January 1, 2012 and the revised guidance, which relates to disclosure,did notimpact 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. The Company adopted ASU No. 2011-05 as of January 1, 2012, and the adoption of this amendment only impacted the presentation of comprehensive income within the Company's condensed consolidated financial statements. Comprehensive income is now presented in the condensed consolidated statements of comprehensive income that are now included as part of the Company's condensed consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The updated guidance permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying value before applying the two-step goodwill impairment model that is currently in place. If it is determined through the qualitative assessment that a reporting unit's fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing companies to go directly to the quantitative assessment. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed in annual reporting periods beginning after December 15, 2011, with early adoption permitted. The Company adopted ASU 2011-08 as of January 1, 2012, and the revised guidance did notimpact its results of operations and financial condition.

XML

STOCK REPURCHASES (DETAILS) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 31, 2011
Notes To Consolidated Financial Statement Abstract
Stock Repurchase Program Authorized Amount	$ 200
Treasury Stock Acquired Number Of Shares		4,438,233
Treasury Stock Acquired Average Cost Per Share		$ 33.82
Stock Repurchase Program Remaining Authorized Repurchase Amount	$ 49.9

XML

STRATEGIC COLLABORATIONS (DETAILS) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012 Research And Development Arrangement Anacor [Member]	Mar. 31, 2011 Research And Development Arrangement Anacor [Member]	Mar. 31, 2012 Research And Development Arrangement Lupin [Member]	Sep. 30, 2011 Research And Development Arrangement Lupin [Member]	Mar. 31, 2012 Research And Development Arrangement Specialty Pharmaceutical Company [Member]	Mar. 31, 2012 Strategic Collaboration Arrangement Hyperion [Member]	Mar. 31, 2012 Research And Development Arrangement 3 M [Member]
Long Term Purchase Commitment [Line Items]
Long Term Purchase Commitment Description	Research and Development Agreement with 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.		Joint Development Agreement with Lupin On July 21, 2011, the Company entered into a Joint Development Agreement (the “Original Agreement”) with Lupin Limited, on behalf of itself and its affiliates (hereinafter collectively referred to as “Lupin”), whereby the Company and Lupin will collaborate to develop multiple novel proprietary therapeutic products. Pursuant to the Original Agreement, subject to the terms and conditions contained therein, the Company made an up-front $20.0 million payment to Lupin and was to make additional payments to Lupin upon the achievement of certain research, development, regulatory and other milestones, as well as royalty payments on sales of the products covered under the Original Agreement. In addition, the Company was to receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Original Agreement. On March 30, 2012, the Company entered into an Amended and Restated Joint Development Agreement, with Lupin (the “Amended and Restated Joint Development Agreement”), which modified the list of products being developed. The Company made a $2.5 million payment to Lupin in April 2012 in connection with the execution of the Amended and Restated Joint Development Agreement, and will make additional payments to Lupin of up to $35.5 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 Amended and Restated Joint Development Agreement, which supersedes the additional payments the Company would have made under the Original Agreement. In addition, the Company will receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Amended and Restated Joint Development Agreement. The $20.0 million up-front payment related to the Original Agreement was recognized as research and development expense during the three months ended September 30, 2011. The $2.5 million payment related to the Amended and Restated Joint Development Agreement was recognized as research and development expense during the three months ended March 31, 2012 and is included in accounts payable in the accompanying condensed consolidated balance sheets as of March 31, 2012.		Development and License Agreement with a specialty pharmaceutical company On March 30, 2012, the Company entered into a Development and License Agreement with a specialty pharmaceutical company pursuant to which the Company obtained exclusive worldwide rights for the development and commercialization of an investigational drug targeted at certain topical skin applications. Under the terms of the agreement, the Company agreed to pay an up-front payment of $25.0 million in connection with the execution of the agreement, and will pay up to an additional $80.0 million upon the achievement of certain research, development and regulatory milestones and up to an additional $120.0 million upon the achievement of certain commercial milestones, as well as royalties on future sales. The initial $25.0 million up-front payment, paid in April 2012, was recognized as research and development expense during the three months ended March 31, 2012 and is included in accounts payable in the accompanying condensed consolidated balance sheets as of March 31, 2012.	Amended and Restated Collaboration Agreement and Asset Purchase Agreement with Hyperion On March 22, 2012, Ucyclyd Pharma, Inc. (“Ucyclyd “), a wholly-owned subsidiary of the Company, and Hyperion Therapeutics, Inc. (“Hyperion”) entered into an Amended and Restated Collaboration Agreement (the “Amended Collaboration Agreement”), which amended and restated their existing Collaboration Agreement, dated August 23, 2007, as previously amended on or about November 24, 2008, June 29, 2009 and October 12, 2009 (the “Prior Collaboration Agreement”). Pursuant to the terms of the Prior Collaboration Agreement, Ucyclyd granted rights to Hyperion, exercisable in the future, to purchase certain worldwide rights to Ucyclyd’s existing on-market products AMMONUL® and BUPHENYL® under certain conditions, as well as to develop and commercialize Ravicti™, a compound referred to as HPN-100 (and also previously referred to as GT4P in the Prior Collaboration Agreement), for the treatment of urea cycle disorder, hepatic encephalopathies and other indications. The parties agreed to supersede the Prior Collaboration Agreement with the Amended Collaboration Agreement, under which Hyperion will continue to have the right, exercisable no earlier than January 1, 2013, to purchase certain worldwide rights to AMMONUL® and BUPHENYL®, subject to Ucyclyd’s right to elect to retain such rights to AMMONUL®, and an Asset Purchase Agreement of even date (the “APA”), under which Hyperion agreed to purchase Ucyclyd’s rights to Ravicti™ on the terms set forth therein. The parties completed the sale of Ravicti™ under the APA on March 22, 2012, for which Hyperion paid Ucyclyd $6.0 million. If Ravicti™ is not approved by the FDA by January 1, 2013, Ucyclyd will pay Hyperion $0.5 million per month until June 30, 2013, or until Ravicti™ is approved, whichever comes first, subject to a maximum of $3.0 million in aggregate payments. Pursuant to the APA, Hyperion will pay Ucyclyd certain royalties and regulatory and sales milestones relating to Ravicti™ and, pursuant to the terms of the Amended Collaboration Agreement, following exercise of its purchase rights, Hyperion will pay Ucyclyd certain royalties and regulatory and sales milestones relating to AMMONUL® (but only if Ucyclyd does not elect to retain rights to AMMUNOL®) and BUPHENYL®. Ucyclyd will continue to be entitled to all revenue from the sales of AMMONUL® and BUPHENYL® until the exercise of the purchase rights by Hyperion. If Hyperion elects to purchase AMMONUL® and BUPHENYL®, but Ucyclyd elects to retain AMMONUL®, then AMMONUL® will remain an asset of Ucyclyd and Ucyclyd will continue to be entitled to all revenue from the sales of AMMONUL®. A net gain of $3.0 million on the sale of Ravicti™ to Hyperion was recognized in other income during the three months ended March 31, 2012. This consisted of the $6.0 million payment Ucyclyd received from Hyperion, partially offset by the $3.0 million in total potential contingent payments that Ucyclyd could pay to Hyperion during the first six months of 2013, based upon the timing of the approval of Ravicti™ by the FDA. The $3.0 million contingent liability is included in the Company’s condensed consolidated balance sheets as of March 31, 2012, with $1.5 million included in other current liabilities and $1.5 million included in other liabilities.	License Agreement with 3M On February 24, 2012, the Company entered into a License Agreement with 3M Company and 3M Innovative Properties Company (collectively, “3M”) for worldwide rights to a number of leading molecules in 3M’s platform of immune response modifiers, for all topical dermatology indications and options for all human uses associated with the licensed molecules, excluding vaccine adjuvant. Under the terms of the agreement, the Company made an up-front payment of $7.5 million to 3M in connection with the execution of the agreement, and will pay up to an additional $25.6 million of contingent license and option fees. The Company may also pay up to an additional $25.0 million upon the achievement of certain research, development and regulatory milestones, as well as royalties on future sales. The initial $7.5 million payment was recognized as research and development expense during the three months ended March 31, 2012.
Long Term Purchase Commitment Milestone Payments Made		$ 7.0	$ 2.5	$ 20.0	$ 25.0		$ 7.5
Long Term Purchase Commitment Future Potential Development Milestone Payments					80.0		25.0
Long Term Purchase Commitment Future Potential Commercial Milestone Payments					120.0
Long Term Purchase Commitment Future Potential License And Option Milestone Payments							25.6
Long Term Purchase Commitment Future Potential Total Milestone Payments		$ 153.0	$ 35.5

XML

SHARE BASED COMPENSATION (DETAILS) (USD $)	1 Months Ended	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2012	Mar. 31, 2011
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share Based Compensation Expense		$ 9,097,000	$ 6,689,000
Share Based Compensation Employee Stock Purchase Plan Activity Abstract
Stock Options Outstanding Weighted Average Exercise Price Beginning of Period		$ 31.31
Stock Options Granted Weighted Average Exercise Price	$ 34.94	$ 34.94
Stock Options Exercised Weighted Average Exercise Price	$ 26.47	$ 26.47
Stock Options Cancelled Weighted Average Exercise Price	$ 38.45	$ 38.45
Stock Options Outstanding Weighted Average Exercise Price End of Period	$ 31.45	$ 31.45
Stock Options Outstanding Number Beginning Balance		4,101,505
Stock Options Granted Shares		34,617
Stock Options Exercised Shares		(105,250)
Stock Options Cancelled Shares		(6,000)
Stock Options Outstanding Number Ending Balance	4,024,872	4,024,872
Stock Options Outstanding Remaining Contractual Term	2.3	2.3
Stock Options Outstanding Aggregate Intrinsic Value	26,122,252	26,122,252
Share Based Payment Award Fair Value Assumptions And Methodology Abstract
Grant Date Fair Value Of Options		$ 9.94
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	1,100,000	1,100,000
Compensation Cost Recognition Period		3.4
Share Based Compensation Expense		195,000	250,000
Share Based Compensation Employee Stock Purchase Plan Activity Abstract
Total Intrinsic Value Of Options Excercised		1,000,000
Options Excercisable Shares	3,857,472	3,857,472
Options Excercisable Weighted Average Exercise Price	$ 31.57	$ 31.57
Options Exercisable Weighted Average Remaining Contractual Term		2.1
Options Excercisable Aggregate Intrinsic Value	24,600,000	24,600,000
Options Outstanding Vested And Expected To Vest Shares	3,759,158	3,759,158
Options Outstanding Vested And Expected To Vest Weighted Average Exercise Price	$ 31.69	$ 31.69
Options Outstanding Vested And expected To Vest Aggregate Intrinsic Value	23,511,900	23,511,900
Options Outstanding Vested And Expected To Vest Weighted Average Remaining Contractual Term		2.2
Options Exercisable Vested And Expected To Vest Shares	3,634,703	3,634,703
Options Exercisable Vested And Expected To Vest Weighted Average Exercise Price	$ 31.74	$ 31.74
Options Exercisable Vested And Expected To Vest Weighted Average Remaining Contractual Term		2.1
Options Exercisable Vested And Expected To Vest Aggregate Intrinsic Value	22,609,550	22,609,550
Share Based Payment Award Fair Value Assumptions And Methodology Abstract
Fair Value Assumptions Expected Volatility Rate		0.32%	0.33%
Fair Value Assumptions Expected Life		6.0	7.0
Fair Value Assumptions Risk Free Interest Rate		1.13%	2.81%
Fair Value Assumptions Risk Expected Dividend Yield		1.14%	0.77%
Grant Date Fair Value Of Options			$ 11.45
Restricted Stock Units RSU [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Compensation Cost Not Yet Recognized	51,000,000	51,000,000
Compensation Cost Recognition Period		3.7
Share Based Compensation Expense		3,619,000	2,602,000
Share Based Compensation Equity Instruments Other Than Options Plan Activity Abstract
Restricted Stock Nonvested Number Beginning Balance		1,919,462
Restricted Stock Granted Shares		686,502
Units Vested		(525,551)
Forfeited Units		(12,200)
Restricted Stock Nonvested Number Ending Balance	2,068,213	2,068,213
Restricted Stock Nonvested Weighted Average Grant Date Fair Value Beginning of Period		$ 22.61
Restricted Stock Granted Weighted Average Grant Date Fair Value		$ 34.94
Awards Vested Weighted Average Grant Date Fair Value		$ 20.06
Units Cancelled Weighted Average Grant Date Fair Value	$ 28.20	$ 28.20
Restricted Stock Nonvested Weighted Average Grant Date Fair Value End of Period	$ 27.31	$ 27.31
Fair Value Of Awards Vested		10,500,000	7,100,000
Stock Appreciation Rights SARS [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Compensation Cost Not Yet Recognized	24,400,000	24,400,000
Compensation Cost Recognition Period		2.5
Share Based Compensation Expense		5,283,000	3,837,000
Share Based Payment Award Fair Value Assumptions And Methodology Abstract
Fair Value Assumptions Expected Volatility Rate	0.31%		0.32%
Fair Value Assumptions Expected Life			7.0
Fair Value Assumptions Expected Life Minimum	2.9
Fair Value Assumptions Expected Life Maximum	4.9
Fair Value Assumptions Risk Free Interest Rate			3.12%
Fair Value Assumptions Risk Free Interest Rate Minimum	0.51%
Fair Value Assumptions Risk Free Interest Rate Maximum	1.04%
Fair Value Assumptions Risk Expected Dividend Yield	1.06%		0.87%
Share Based Compensation Equity Instruments Other Than Options Plan Activity Abstract
Grant Date Fair Value of Stock Appreciation Rights			$ 9.90
Remeasurement Date Fair Value Of Stock Appreciation Rights		$ 20.21
Share Based Compensation Stock Appreciation Rights Plan Activity Abstract
Stock Appreciation Rights Outstanding Weighted Average Exercise Price Beginning of Period		$ 17.52
Stock Appreciation Rights Granted Weighted Average Exercise Price	$ 0	$ 0
Stock Appreciation Rights Exercised Weighted Average Exercise Price	$ 14.68	$ 14.68
Stock Appreciation Rights Cancelled Weighted Average Exercise Price	$ 17.87	$ 17.87
Stock Appreciation Rights Outstanding Weighted Average Exercise Price End of Period	$ 17.65	$ 17.65
Stock Appreciation Rights Outstanding Number Beginning Balance		2,323,060
Stock Appreciation Rights Granted Number	0	0
Stock Appreciation Rights Exercised Number	(102,751)	(102,751)
Stock Appreciation Rights Cancelled Number	(51,451)	(51,451)
Stock Appreciation Rights Outstanding Number Ending Balance	2,168,858	2,168,858
Stock Appreciation Rights Outstanding Weighted Average Remaining Contractual Term		4.5
Stock Appreciation Rights Outstanding Aggregate Intrinsic Value	43,256,447	43,256,447
Total Intrinsic Value Of Stock Appreciation Rights Excercised		2,100,000
Stock Appreciation Rights Exercisable Number	364,451	364,451
Stock Appreciation Rights Exercisable Weighted Average Exercise Price	$ 15.52	$ 15.52
Stock Appreciation Rights Exercisable Weighted Average Remaining Contractual Term		4.3
Stock Appreciation Rights Exercisable Aggregate Intrinsic Value	$ 8,000,000	$ 8,000,000

XML

INCOME TAXES (DETAILS) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2011
Tax Credit Carryforward [Line Items]
Income Taxes Paid Net	$ 11,300,000	$ 6,000,000
Income Tax Uncertainties Abstract
Unrecognized Tax Benefits Beginning Balance	8,600,000
Unrecognized Tax Benefits Ending Balance	9,300,000
Unrecognized Tax Benefits That Would Impact Effective Tax Rate	6,000,000		5,600,000
Significant Change In Unrecognized Tax Benefits Is Reasonably Possible Amount Of Unrecorded Benefit	300,000
Unrecognized Tax Benefits Income Tax Penalties And Interest Accrued	300,000
Option To Acquire Revance Or License Product Under Development [Member]
Tax Credit Carryforward [Line Items]
Tax Credit Carryforward Amount	21,000,000
Tax Credit Carryforward Valuation Allowance	7,600,000
Tax Credit Carryforward Deferred Tax Asset	0
Option To Acquire Privately Held US Biotechnology Company [Member]
Tax Credit Carryforward [Line Items]
Tax Credit Carryforward Amount	21,900,000
Tax Credit Carryforward Valuation Allowance	7,900,000
Tax Credit Carryforward Deferred Tax Asset	$ 0

XML

DISCONTINUED OPERATIONS

3 Months Ended

Mar. 31, 2012

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 existing regulatory and commercial capital equipment environment, the Company would explore strategic alternatives for its LipoSonix business including, but not limited to, the sale of the stand-alone business. As a result of this decision, the Company classified the LipoSonix business as a discontinued operation for financial statement reporting purposes. On November1, 2011, the Company sold LipoSonix to Solta Medical, Inc.

The following is a summary of loss from discontinued operations, net of income tax benefit, for the three months ended March 31, 2011 (in thousands):

	Three Months Ended
	March 31,
	2011
Net revenues	$	156
Cost of revenues		2,375
Gross profit		(2,219)
Operating expenses:
Selling, general and administrative		5,863
Research and development		3,346
Loss from discontinued operations
before income tax benefit		(11,428)
Income tax benefit		(4,103)
Loss from discontinued operations,
net of income tax benefit	$	(7,325)

The Company included 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 were allocated to the LipoSonix discontinued operations. Included in cost of revenues for the three months ended March 31, 2011 was a $1.9 million charge related to an increase in the valuation reserve for LipoSonix inventory that was not expected to be sold.

The following is a summary of net cash used in operating activities from discontinued operations for the three months ended March 31, 2011 (in thousands):

	Three Months Ended
	March 31,
	2011
Loss from discontinued operations, net of income tax benefit	$	(7,325)
Share-based compensation expense		728
Decrease in assets held for sale from discontinued operations		3,073
Decrease in liabilities held for sale from discontinued operations		(1,934)
Net cash used in operating activities from
discontinued operations	$	(5,458)

XML

SEGMENTS (DETAILS) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Segment Reporting Disclosure Of Entitys Reportable Segments Abstract
Entity Wide Disclosure On Geographic Areas Description Of Revenue From External Customers	During the three months ended March 31, 2012, approximately 4.9% of the Company’s net revenues were generated in Canada. No country or region outside of the U.S. generated more than 5%, individually or in the aggregate, of the Company’s net revenues during the three months ended March 31, 2012.	During the three months ended March 31, 2011, less than 5% of the Company’s net revenues were generated outside of the U.S.
Segment Reporting Revenue Reconciling Item [Line Items]
Net Revenues	$ 201,743	$ 164,913
Net Revenues Total	201,743	164,913
Net Revenues Percent	100.00%	100.00%
Acne And Acne Related Dermatological Products [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Net Revenues	108,501	103,462
Net Revenues Total	108,501	103,462
Net Revenues Percent	54.00%	63.00%
Non Acne Dermatological Products [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Net Revenues	73,998	52,221
Net Revenues Total	73,998	52,221
Net Revenues Percent	37.00%	32.00%
Non Dermatological Products [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Net Revenues	19,244	9,230
Net Revenues Total	$ 19,244	$ 9,230
Net Revenues Percent	9.00%	5.00%

XML

INVESTMENTS (TABLES)

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

Schedule Of Available For Sale Securities Reconciliation Table Text Block

	March 31, 2012
							Other-Than-
			Gross		Gross		Temporary
			Unrealized		Unrealized		Impairment		Fair
	Cost		Gains		Losses		Losses		Value
Corporate notes and bonds	$	132,516	$	299	$	(89)	$	-	$	132,726
Federal agency notes and bonds		111,391		220		(23)		-		111,588
Auction rate floating securities		17,350		-		(4,596)		-		12,754
Asset-backed securities		9,147		12		-		-		9,159
Total securities	$	270,404	$	531	$	(4,708)	$	-	$	266,227
	December 31, 2011
							Other-Than-
			Gross		Gross		Temporary
			Unrealized		Unrealized		Impairment		Fair
	Cost		Gains		Losses		Losses		Value
Corporate notes and bonds	$	138,554	$	161	$	(549)	$	-	$	138,166
Federal agency notes and bonds		125,092		221		(24)		-		125,289
Auction rate floating securities		17,400		-		(4,607)		-		12,793
Asset-backed securities		9,527		-		(8)		-		9,519
Total securities	$	290,573	$	382	$	(5,188)	$	-	$	285,767

Investments Classified By Contractual Maturity Date Table Text Block

	March 31, 2012
			Estimated
	Cost		Fair Value
Available-for-sale
Due in one year or less	$	106,675	$	106,868
Due after one year through five years		146,379		146,605
Due after 10 years		17,350		12,754
	$	270,404	$	266,227

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	$	39,286	$	(89)	$	-	$	-
Federal agency notes and bonds		36,435		(23)		-		-
Auction rate floating securities		-		-		12,754		(4,596)
Asset-backed securities		-		-		-		-
Total securities	$	75,721	$	(112)	$	12,754	$	(4,596)

XML

SHARE BASED COMPENSATION (TABLES)

3 Months Ended

Mar. 31, 2012

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, 2011	4,101,505	$	31.31
Granted	34,617	$	34.94
Exercised	(105,250)	$	26.47
Terminated/expired	(6,000)	$	38.45
Balance at March 31, 2012	4,024,872	$	31.45	2.3	$	26,122,252

Schedule of Share Based Compensation Arrangement by Share Based Payment Award, Options, Vested and Expected to Vest, Outstanding Table Text Block

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Term	Value
Outstanding, net of expected forfeitures	3,759,158	$	31.69	2.2	$	23,511,900
Exercisable, net of expected forfeitures	3,634,703	$	31.74	2.1	$	22,609,550

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

	Three Months Ended
	March 31, 2012	March 31, 2011
Expected dividend yield	1.14%	0.77%
Expected stock price volatility	0.32	0.33
Risk-free interest rate	1.13%	2.81%
Expected life of options	6.0 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, 2011	1,919,462	$	22.61
Granted	686,502	$	34.94
Vested	(525,551)	$	20.06
Forfeited	(12,200)	$	28.20
Nonvested at March 31, 2012	2,068,213	$	27.31

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

	Remeasurement	SARs Granted During the
	as of	Three Months Ended
	March 31, 2012	March 31, 2011
Expected dividend yield	1.06%	0.87%
Expected stock price volatility	0.31	0.32
Risk-free interest rate	0.51% to 1.04%	3.12%
Expected life of SARs	2.9 to 4.9 Years	7.0 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, 2011	2,323,060	$	17.52
Granted	-	$	-
Exercised	(102,751)	$	14.68
Terminated/expired	(51,451)	$	17.87
Balance at March 31, 2012	2,168,858	$	17.65	4.5	$	43,256,447

Schedule Of Compensation Cost For Share Based Payment Arrangements Allocation Of Share Based Compensation Costs By Plan Table Text Block

	Three Months Ended
	March 31, 2012		March 31, 2011
Stock options	$	195	$	250
Restricted stock awards		3,619		2,602
Stock appreciation rights		5,283		3,837
Total share-based compensation expense	$	9,097	$	6,689

XML

INVENTORIES (DETAILS) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Inventory Net Abstract
Inventory Raw Materials	$ 11,168	$ 9,100
Inventory Work In Process	3,029	5,495
Inventory Finished Goods	30,125	29,250
Inventory Valuation Reserves	(7,623)	(9,326)
Inventories, net	$ 36,699	$ 34,519

XML

FAIR VALUE (TABLES)

3 Months Ended

Mar. 31, 2012

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
	Mar. 31, 2012		(Level 1)		(Level 2)		(Level 3)
Corporate notes and bonds	$	132,726	$	-	$	132,726	$	-
Federal agency notes and bonds		111,588		-		111,588		-
Auction rate floating securities		12,754		-		-		12,754
Asset-backed securities		9,159		-		9,159		-
Total assets measured at fair value	$	266,227	$	-	$	253,473	$	12,754
			Fair Value Measurement at Reporting Date Using
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
			Markets		Inputs		Inputs
	Dec. 31, 2011		(Level 1)		(Level 2)		(Level 3)
Corporate notes and bonds	$	138,166	$	-	$	138,166	$	-
Federal agency notes and bonds		125,289		-		125,289		-
Auction rate floating securities		12,793		-		-		12,793
Asset-backed securities		9,519		-		9,519		-
Total assets measured at fair value	$	285,767	$	-	$	272,974	$	12,793

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 December 31, 2011	$	12,793
Transfers to (from) Level 3		-
Total gains (losses) included in other
(income) expense, net		-
Total gains included in other
comprehensive income		11
Purchases		-
Settlements		(50)
Balance at March 31, 2012	$	12,754

XML

RESEARCH & DEVELOPMENT (TABLES)

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

Research And Development Expense Detail Table Text Block

	Three Months Ended
	March 31,		March 31,
	2012		2011
Ongoing research and development costs	$	12,127	$	6,868
Payments related to strategic collaborations		39,006		7,000
Share-based compensation expense		697		405
Total research and development	$	51,830	$	14,273

XML

NATURE OF BUSINESS

3 Months Ended

Mar. 31, 2012

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 helping patients attain a healthy and youthful appearance and self-image through the development and marketing in the United States (“U.S.”) and Canada of products for the treatment of dermatological and aesthetic conditions.

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, actinic keratosis, bronchospasms, external genital and perianal warts/condyloma acuminate, seborrheic dermatitis and cosmesis (improvement in the texture and appearance of skin). Medicis currently offers 28 branded products. Its primary brands are DYSPORT®, PERLANE®, RESTYLANE®, SOLODYN®, VANOS®, ZIANA® and ZYCLARA®.

The condensed 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 condensed 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, 2011. 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, 2011.

XML

SEGMENTS (TABLES)

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

Reconciliation Of Revenue From Segments To Consolidated Text Block

	Three Months Ended
	March 31,		March 31,
	2012		2011
Acne and acne-related dermatological products	$	108,501	$	103,462
Non-acne dermatological products		73,998		52,221
Non-dermatological products		19,244		9,230
Total net revenues	$	201,743	$	164,913
		Three Months Ended
		March 31,		March 31,
		2012		2011
Acne and acne-related dermatological products		54	%	63	%
Non-acne dermatological products		37		32
Non-dermatological products		9		5
Total net revenues		100	%	100	%

XML

FAIR VALUE (DETAILS) (USD $) In Thousands, unless otherwise specified			3 Months Ended
	Mar. 31, 2012	Dec. 31, 2011	Mar. 31, 2012 Auction Rate Securities [Member]	Mar. 31, 2012 Fair Value Inputs Level 1 [Member]	Dec. 31, 2011 Fair Value Inputs Level 1 [Member]	Mar. 31, 2012 Fair Value Inputs Level 2 [Member]	Dec. 31, 2011 Fair Value Inputs Level 2 [Member]	Mar. 31, 2012 Fair Value Inputs Level 3 [Member]	Dec. 31, 2011 Fair Value Inputs Level 3 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Corporate Debt Securities Fair Value Disclosure	$ 132,726	$ 138,166		$ 0	$ 0	$ 132,726	$ 138,166	$ 0	$ 0
US Treasury And Government Fair Value Disclosure	111,588	125,289		0	0	111,588	125,289	0	0
Auction Rate Securities Fair Value Disclosure	12,754	12,793		0	0	0	0	12,754	12,793
Asset Backed Securities Fair Value Disclosure	9,159	9,519		0	0	9,159	9,519	0	0
Total Assets Measured At Fair Value	266,227	285,767		0	0	253,473	272,974	12,754	12,793
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			12,793
Transfers To (From) Level 3			0
Total Gains (Losses) Included In Other (Income) Expense, Net			0
Total Gains Included In Other Comprehensive Income			11
Purchases			0
Settlements			(50)
Fair Value, Measurement With Unobservable Inputs Reconciliation, Recurring Basis, Asset Value, Ending Balance			$ 12,754

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 96,298	$ 42,823
Short Term Investments	245,984	245,497
Accounts receivable, net	199,506	193,009
Inventories, net	36,699	34,519
Deferred tax assets, net	13,781	12,720
Other current assets	24,803	22,586
Total current assets	617,071	551,154
Property and equipment, net	28,282	25,081
Net intangible assets	486,848	502,492
Goodwill	202,703	202,627
Deferred tax assets, net	127,421	114,555
Long-term investments	20,243	40,270
Other assets	16,163	15,780
Total Assets	1,498,731	1,451,959
Current liabilities
Accounts payable	94,438	54,094
Current portion contingent convertible senior notes	169,145	169,145
Reserve for sales returns	63,562	60,024
Accrued Consumer Rebates And Loyalty Programs	116,171	139,948
Managed Care And Medicaid Reserves	97,035	72,801
Income taxes payable	4,626	0
Other current liabilities	71,705	78,785
Total current liabilities	616,682	574,797
Long-term liabilities
Contingent convertible senior notes	181	181
Other liabilities	48,202	44,998
Stockholders' Equity
Preferred stock	0	0
Additional paid-in capital	804,906	796,979
Accumulated other comprehensive (loss) income	(20,481)	(21,315)
Accumulated earnings	567,009	567,581
Less: Treasury stock	518,798	512,290
Total stockholders' equity	833,666	831,983
Total liabilities and stockholders' equity	1,498,731	1,451,959
Class A
Stockholders' Equity
Common stock	1,030	1,028
Class B
Stockholders' Equity
Common stock	$ 0	$ 0

XML

OTHER CURRENT LIABILITIES (DETAILS) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Accrued Liabilities Current Abstract
Accrued Incentives Including SARs Liability	$ 31,406	$ 41,516
Deferred Revenue Current	13,630	13,703
Other Accrued Liabilities Current	26,669	23,566
Total Other Current Liabilities	71,705	78,785
Deferred Revenue Abstract
Deferred Revenue Aesthetics Products Net Of Cost Of Revenue	7,285	13,349
Deferred Revenue Sales Into Distribution Channel In Excess Of Eight Weeks Of Projected Demand	6,204	212
Other Deferred Revenue	141	142
Deferred Revenue Current	$ 13,630	$ 13,703

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Statement Of Income And Comprehensive Income Abstract
Net income (loss)	$ 5,349	$ 19,360
Other Comprehensive Income Amortization Of Defined Benefit Plan Net Prior Service Cost Recognized In Net Periodic Pension Cost Net Of Tax	775	0
Defined Benefit Plan Accumulated Other Comprehensive Income Net Prior Service Cost Credit After Tax	531	0
Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During Period Net Of Tax	403	52
Other Comprehensive Income Foreign Currency Transaction And Translation Adjustment Net Of Tax Period Increase Decrease	186	148
Total Comprehensive Income (Loss)	833	200
Comprehensive Income Net Of Tax Including Portion Attributable To Noncontrolling Interest	$ 6,182	$ 19,560

XML

EARNINGS PER SHARE (TABLES)

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

Schedule Of Earnings Per Share Basic And Diluted Table Text Block

	Three Months Ended
	March 31, 2012							March 31, 2011
	Continuing			Discontinued		Net		Continuing		Discontinued		Net
	Operations			Operations		Income		Operations		Operations		Income
BASIC
Net income (loss)	$	5,349	$	-	$	5,349	$	26,685	$	(7,325)	$	19,360
Less: income (loss) allocated to
participating securities		-		-		-		799		-		562
Net income (loss) available to
common stockholders		5,349		-		5,349		25,886		(7,325)		18,798
Weighted average number of common
shares outstanding		57,109		-		57,109		59,124		59,124		59,124
Basic net income (loss) per
common share	$	0.09	$	-	$	0.09	$	0.44	$	(0.12)	$	0.32
DILUTED
Net income (loss)	$	5,349	$	-	$	5,349	$	26,685	$	(7,325)	$	19,360
Less: income (loss) allocated to
participating securities		-		-		-		799		-		562
Net income (loss) available to
common stockholders		5,349		-		5,349		25,886		(7,325)		18,798
Less:
Undistributed earnings allocated to
unvested stockholders		-		-		-		(687)		-		(457)
Add:
Undistributed earnings re-allocated to
unvested stockholders		-		-		-		683		-		454
Add:
Tax-effected interest expense
related to Old Notes		-		-		-		666		-		666
Net income (loss) assuming dilution	$	5,349	$	-	$	5,349	$	26,548	$	(7,325)	$	19,461
Weighted average number of common
shares outstanding		57,109		-		57,109		59,124		59,124		59,124
Effect of dilutive securities:
Old Notes		-		-		-		5,823		-		5,823
New Notes		-		-		-		4		-		4
Stock options		1,410		-		1,410		430		-		430
Weighted average number of common
shares assuming dilution		58,519		-		58,519		65,381		59,124		65,381
Diluted net income (loss) per
common share	$	0.09	$	-	$	0.09	$	0.41	$	(0.12)	$	0.30

XML

STOCK REPURCHASES

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

Treasury Stock Text Block

15.       STOCK REPURCHASE

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 SEC's Rule 10b-18 if applicable, and may be made in the open market or in privately negotiated transactions, including the entry into derivatives transactions.

The number of shares to be repurchased and the timing of repurchases will depend on a variety of factors, including, but not limited to, stock price, economic and market conditions and corporate and regulatory requirements. It is intended that any repurchases will be funded by existing general corporate funds. 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.

As part of its stock repurchase program, the Company may from time to time enter into structured share repurchase agreements with financial institutions. These agreements generally require the Company to make one or more cash payments in exchange for the right to receive shares of its common stock and/or cash at the expiration of the agreement and/or at various times during the term of the agreement, generally based on the market price of the Company's common stock during the relevant valuation period or periods, but the Company may enter into structured share repurchase agreements with different features.

No shares were repurchased during the three months ended March 31, 2012. Total shares repurchased from the inception of the plan through March 31, 2012 in the open market and through structured share repurchase arrangements was 4,438,233 shares at a weighted average cost of $33.82 per share.

As of March 31, 2012, the remaining authorized amount under the plan is approximately $49.9 million.

XML

DISCONTINUED OPERATIONS (DETAILS) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Disposal Group Including Discontinued Operation Income Statement Disclosures [Abstract]
Net Revenues Discontinued Operations		$ 156,000
Cost Of Revenues Discontinued Operations		2,375,000
Gross Profit Discontinued Operations		(2,219,000)
Selling General And Administrative Expense Discontinued Operations		5,863,000
Depreciation And Amortization Expense Discontinued Operations		3,346,000
Discontinued Operation Income Loss From Discontinued Operation Before Income Tax		(11,428,000)
Income Tax Benefit Discontinued Operation		(4,103,000)
Loss from discontinued operations, net of income tax benefit	0	(7,325,000)
Increase In Inventory Valuation Reserve Discontinued Operations		1,900,000
Net Cash Provided By Used In Discontinued Operations Abstract
Income Loss From Discontinued Operations Net Of Tax	0	(7,325,000)
Share Based Compensation Discontinued Operations		728,000
Increase Decrease In Assets Of Disposal Group Including Discontinued Operation Current		3,073,000
Increase Decrease In Liabilities Of Disposal Group Including Discontinued Operation Current		(1,934,000)
Cash Provided By Used In Operating Activities Discontinued Operations	0	(5,458,000)
Cash Provided By Used In Investing Activities Discontinued Operations	$ 0	$ 0

XML

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2012

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 with the plaintiffs' representatives to memorialize an agreement in principle to settle the pending action. On September 21, 2011, the parties filed with the Court a motion for preliminary approval of a Settlement Stipulation (the “Class Action Stipulation”) setting forth the terms of the settlement. The Court granted the motion for preliminary approval on November 2, 2011, ordered that notice be given to class participants and set a hearing for final approval for February 23, 2012. At the hearing on February 23, 2012, the Court stated that it was granting final approval of the Class Action Stipulation. A written order by the Court was entered on February 28, 2012 dismissing the action with prejudice. Under the terms of the Class Action Stipulation, the Company's portion of the settlement will be paid entirely by insurance. The Company's outside auditors will contribute to the settlement. The Company itself is not required to make any payments to fund the settlement, and the Class Action Stipulation contains no admission of liability by the Company or the named individuals in the action, the allegations of which are expressly denied therein.

Hyperion Arbitration

On June 23, 2011, Hyperion Therapeutics, Inc. (“Hyperion”) filed a demand for arbitration before the American Arbitration Association for a determination 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 on or about November 24, 2008, June 29, 2009 and October 12, 2009 (as amended, the “Prior Collaboration Agreement”). Pursuant to the terms of the Prior Collaboration Agreement, Ucyclyd granted rights to Hyperion, exercisable in the future, to purchase certain worldwide rights to Ucyclyd's existing on-market products, AMMONUL® and BUPHENYL® under certain conditions, as well as to develop and commercialize RavictiTM, a compound referred to as HPN-100 (and as previously referred to as GT4P in the Prior Collaboration Agreement) for the treatment of urea cycle disorder, hepatic encephalopathies and other indications. In its demand for arbitration, Hyperion requested a judgment regarding the rights of the parties in connection with the development activities relating to RavictiTM, including relating to the submission of a NDA to the FDA for RavictiTM for the treatment of urea cycle disorder. Ucyclyd responded to the demand for arbitration on July 28, 2011 denying the allegations and bringing counterclaims against Hyperion. Following additional responses and counterclaims made by the parties, and negotiations between them, on March 22, 2012, Ucyclyd and Hyperion entered into an Amended and Restated Collaboration Agreement (the “Amended Collaboration Agreement”), which amended and restated the Prior Collaboration Agreement with the Amended Collaboration Agreement, under which Hyperion will continue to have the right, exercisable no earlier than January 1, 2013, to purchase certain worldwide rights to AMMONUL® and BUPHENYL®, subject to Ucyclyd's right to elect to retain such rights to AMMONUL®, and an Asset Purchase Agreement of even date (the “APA”), under which Hyperion agreed to purchase Ucyclyd's rights to RavictiTM on the terms set forth therein. No payments were required by the parties under the Amended Collaboration Agreement upon signing of the same. The parties completed the sale of RavictiTM under the APA on March 22, 2012. Pursuant to the APA, Hyperion will pay Ucyclyd certain royalties and regulatory and sales milestones relating to RavictiTM and, pursuant to the terms of the Amended Collaboration Agreement, following exercise of its purchase rights, Hyperion will pay Ucyclyd certain royalties and regulatory and sales milestones relating to AMMUNOL® (but only if Ucyclyd does not elect to retain rights to AMMUNOL®) and BUPHENYL®. Ucyclyd will continue to be entitled to all revenue from the sale of AMMONUL® and BUPHENYL® until the exercise of the purchase rights by Hyperion. If Hyperion elects to purchase AMMONUL® and BUPHENYL®, but Ucyclyd elects to retain AMMONUL®, then AMMONUL® will remain an asset of Ucyclyd and Ucyclyd will continue to be entitled to all revenue from the sales of AMMONUL®.

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Operating Activities:
Net income (loss)	$ 5,349	$ 19,360
Loss from discontinued operations, net of income tax benefit	0	7,325
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	18,081	7,324
Defined Benefit Plan Amortization Of Prior Service Cost Credit	1,210	0
Gain on sale of product rights	(3,000)	0
Gain on sale of available-for-sale investments and supplemental executive retirement plan invetsments, net	(70)	7
Share-based compensation expense	9,097	6,689
Deferred income tax benefit	(14,290)	(5,124)
Tax expense from exercise of stock options and vesting of restricted stock awards	1,329	658
Excess tax benefits from share-based payment arrangements	(3,967)	(618)
Increase Decrease Provision For Sales Discounts And Chargebacks	355	(509)
Accretion (amortization) of premium/(discount) on investments	371	1,121
Income from continuing operations	5,349	26,685
Changes in operating assets and liabilities:
Accounts receivable	(6,852)	31,547
Inventories	(2,180)	878
Other current assets	(2,208)	(2,882)
Accounts payable	37,243	4,330
Reserve for sales returns	3,538	13,110
Income taxes payable	4,626	10,460
Other current liabilities	(15,101)	(12,847)
Other liabilities	874	(124)
Accrued consumer rebate and loyalty programs	(23,776)	20,026
Managed care and Medicaid reserves	24,234	(219)
Net cash provided by operating activities from continuing operations	34,863	100,512
Net Cash Used In Operating Activities From Discontinued Operations	0	(5,458)
Net cash provided by operating activities	34,863	95,054
Investing Activities:
Purchase of property and equipment	(2,442)	(1,449)
Payments for purchase of product rights	(171)	(12,702)
Proceeds from sale of product rights	6,000	0
Purchase of investments for supplemental executive retirement plan	(388)	0
Purchase of available-for-sale investments	(66,627)	(109,176)
Sale of available-for-sale investments	53,904	11,794
Maturity of available-for-sale investments	32,589	102,090
Net cash provided by (used in) investing activities from continuing operations	22,865	(9,443)
Net cash used in investing activities from discontinued operations	0	0
Net cash provided by (used in) investing activities	22,865	(9,443)
Financing Activities
Payment of dividends	(4,683)	(3,622)
Withholding of common shares for tax obligations on vested restricted stock awards	(6,508)	(3,822)
Excess tax benefits from share based payment arrangements	3,967	618
Proceeds from exercise of stock options	2,785	9,515
Net cash provided by (used in) financing activities	(4,439)	2,689
Effect Of Exchange Rate On Cash And Cash Equivalents	186	147
Net increase (decrease) in cash and cash equivalents	53,475	88,447
Cash and cash equivalents at beginning of period	42,823	218,362
Cash and cash equivalents at end of period	$ 96,298	$ 306,809

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Mar. 31, 2012	Dec. 31, 2011
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	17,933,925	17,745,039
Class A
Balance Sheet Parentheticals [Line Items]
Common Stock Shares Issued and Outstanding	75,371,125	74,740,324
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

INVENTORIES

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

INVENTORIES

10.       INVENTORIES

The Company 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 March 31, 2012 and December 31, 2011, there wereno costs capitalized into inventory for products that had not yet received regulatory approval.

Inventories are as follows (in thousands):

	March 31, 2012		December 31, 2011
Raw materials	$	11,168	$	9,100
Work-in-process		3,029		5,495
Finished goods		30,125		29,250
Valuation reserve		(7,623)		(9,326)
Total inventories	$	36,699	$	34,519

XML

DOCUMENT AND ENTITY INFORMATION (USD $)	3 Months Ended
	Mar. 31, 2012	Jun. 30, 2011	May 03, 2012 Class A	May 03, 2012 Class B
Document And Entity Information [Line Items]
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
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			59,493,016	0
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1

XML

OTHER CURRENT LIABILITIES

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

OTHER CURRENT LIABILITIES

11.       OTHER CURRENT LIABILITIES

Other current liabilities are as follows (in thousands):

	March 31, 2012		December 31, 2011
Accrued incentives, including SARs liability	$	31,406	$	41,516
Deferred revenue		13,630		13,703
Other accrued expenses		26,669		23,566
	$	71,705	$	78,785

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

	March 31, 2012		December 31, 2011
Deferred revenue - aesthetics products, net
of cost of revenue	$	7,285	$	13,349
Deferred revenue - sales into distribution
channel in excess of eight weeks of
projected demand		6,204		212
Other deferred revenue		141		142
	$	13,630	$	13,703

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. 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.

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Sales
Net product revenues	$ 200,046	$ 163,896
Net contract revenues	1,697	1,017
Net Revenues Total	201,743	164,913
Cost of product revenues (1)	20,933	14,331
Gross profit	180,810	150,582
Operating Expenses:
Selling, general and administrative (2)	103,437	84,630
Research And Development Expense	51,830	14,273
Depreciation and amortization	18,081	7,324
Operating income (loss)	7,462	44,355
Interest and investment income	(612)	(1,274)
Interest Expense	1,058	1,058
Other (income) expense, net	(3,000)	0
Income from continuing operations before income tax expense	10,016	44,571
Income tax expense	4,667	17,886
Income from continuing operations	5,349	26,685
Loss from discontinued operations, net of income tax benefit	0	7,325
Net income (loss)	$ 5,349	$ 19,360
Basic net income (loss) per share - continuing operations	$ 0.09	$ 0.44
Basic net income (loss) per share - discontinued operations	$ 0	$ (0.12)
Basic net income (loss) per share	$ 0.09	$ 0.32
Diluted net income (loss) per share - continuing operations	$ 0.09	$ 0.41
Diluted net income (loss) per shares - discontinued operations	$ 0	$ (0.12)
Diluted net income (loss) per share	$ 0.09	$ 0.30
Cash dividend declared per common share	$ 0.10	$ 0.08
Common shares used in calculating:
Basic net income per share	57,109	59,124
Weighted Average Number Of Diluted Shares Outstanding	58,519	65,381

XML

SHORT-TERM AND LONG-TERM INVESTMENTS

3 Months Ended

Mar. 31, 2012

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. Except for impairments related to the illiquidity of the Company's auction rate floating securities, other-than-temporary impairmentsare 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 March 31, 2012, the Company has recorded the estimated fair value of available-for-sale securities in short-term and long-term investments of approximately $246.0million and $20.2million, respectively.

Available-for-sale securities consist of the following at March 31, 2012 (in thousands):

	March 31, 2012
							Other-Than-
			Gross		Gross		Temporary
			Unrealized		Unrealized		Impairment		Fair
	Cost		Gains		Losses		Losses		Value
Corporate notes and bonds	$	132,516	$	299	$	(89)	$	-	$	132,726
Federal agency notes and bonds		111,391		220		(23)		-		111,588
Auction rate floating securities		17,350		-		(4,596)		-		12,754
Asset-backed securities		9,147		12		-		-		9,159
Total securities	$	270,404	$	531	$	(4,708)	$	-	$	266,227
	December 31, 2011
							Other-Than-
			Gross		Gross		Temporary
			Unrealized		Unrealized		Impairment		Fair
	Cost		Gains		Losses		Losses		Value
Corporate notes and bonds	$	138,554	$	161	$	(549)	$	-	$	138,166
Federal agency notes and bonds		125,092		221		(24)		-		125,289
Auction rate floating securities		17,400		-		(4,607)		-		12,793
Asset-backed securities		9,527		-		(8)		-		9,519
Total securities	$	290,573	$	382	$	(5,188)	$	-	$	285,767

During the three months ended March 31, 2012, gross realized gains on sales of available-for-sale securities totaled approximately $0.1 million. During the three months ended March 31, 2012, there were no significant gross realized losses on sales of available-for-sale securities. During the three months ended March 31, 2011, there were no significant gross realized gains or 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 three months ended March 31, 2012, on available-for-sale securities included in stockholders' equity totaled approximately $0.4 million.The amortized cost and estimated fair value of the available-for-sale securities at March 31, 2012, by maturity,are shown below (in thousands):

	March 31, 2012
			Estimated
	Cost		Fair Value
Available-for-sale
Due in one year or less	$	106,675	$	106,868
Due after one year through five years		146,379		146,605
Due after 10 years		17,350		12,754
	$	270,404	$	266,227

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 March 31, 2012, approximately $20.2 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 March 31, 2012, the Company's investments included auction rate floating securities with a fair value of $12.8 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 three months of 2012have 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.

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 March 31, 2012 (in thousands):

	Less Than 12 Months				Greater Than 12 Months
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss
Corporate notes and bonds	$	39,286	$	(89)	$	-	$	-
Federal agency notes and bonds		36,435		(23)		-		-
Auction rate floating securities		-		-		12,754		(4,596)
Asset-backed securities		-		-		-		-
Total securities	$	75,721	$	(112)	$	12,754	$	(4,596)

As of March 31, 2012, 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.

XML

SERP

3 Months Ended

Mar. 31, 2012

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 Corporation Supplemental Executive Retirement Plan, as amended on October 3, 2011 (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 became effective as of June 1, 2011. Retirement benefits are calculated based on a percentage of a SERP participant's average earnings, which ranges from 1.25% to 10% of the participant's 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.The percentage of average earnings is multiplied by the participant's years of service up to a specified cap on service ranging from five to twenty years. In no event will an executive officer's retirement benefit exceed 50% of his or her average earnings, and for those participants who are not executive officers, their retirement benefits will not exceed 25% of average earnings. The SERP retirement benefit is intended to be paid to participants who reach the “normal retirement date,” which is age 65, or age 59 ½ with twenty years of service, subject to certain exceptions.

A SERP participant vests in 1/6th of his or her retirement benefit per plan year, (which runs from June 1 to May 31), 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.

Participants in the SERP received credit for prior service with the Company. The prior service accrued benefit of approximately $33.8 million was recorded during the three months ended June 30, 2011 as other comprehensive income within stockholders' equity, and is amortized as compensation expense over the remaining service years of each participant. The Company also established a deferred tax asset of approximately $12.0 million, the benefit of which was also recorded in other comprehensive income. During the three months ended March 31, 2012, an additional participant was added to the plan, and a prior service accrued benefit of approximately $0.8 million was recorded as other comprehensive income within stockholders' equity, and is being amortized over the remaining service years of the participant. Total amortization of prior service costs recognized as compensation expense during the three months ended March 31, 2012, was approximately $1.2 million.

Compensation expense recognized during the three months ended March 31, 2012 related to current service costs was approximately $0.2 million. Interest cost accrued related to prior and current service costs during the three months ended March 31, 2012 was approximately $0.4 million. The total present value of accrued benefits for the SERP as of March 31, 2012 was approximately $36.5 million, which is included in other long-term liabilities in the Company's condensed consolidated balance sheets as of March 31, 2012.

The Company maintains a rabbi trust to fund the SERP benefit. During the three months ended September 30, 2011, the Company purchased life insurance policy investments of approximately $9.8 million to fund the SERP. The life insurance policies cover the SERP participants. The Company intends to make similar annual purchases during each of the next four years. During the three months ended March 31, 2012, the Company made an additional life insurance policy investment purchase of approximately $0.4 million related to the new participant added to the SERP during the three months ended March 31, 2012. No material net gains on the investments were recognized during the three months ended March 31, 2012. The Company's expected return on the plan assets is 4%. The total investment related to the SERP of $10.3 million is included in other assets in the Company's condensed consolidated balance sheets as of March 31, 2012, and is the cash surrender value of the life insurance policies, representing the fair value of the plan assets.

XML

NET INCOME PER COMMON SHARE

3 Months Ended

Mar. 31, 2012

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
	March 31, 2012							March 31, 2011
	Continuing			Discontinued		Net		Continuing		Discontinued		Net
	Operations			Operations		Income		Operations		Operations		Income
BASIC
Net income (loss)	$	5,349	$	-	$	5,349	$	26,685	$	(7,325)	$	19,360
Less: income (loss) allocated to
participating securities		-		-		-		799		-		562
Net income (loss) available to
common stockholders		5,349		-		5,349		25,886		(7,325)		18,798
Weighted average number of common
shares outstanding		57,109		-		57,109		59,124		59,124		59,124
Basic net income (loss) per
common share	$	0.09	$	-	$	0.09	$	0.44	$	(0.12)	$	0.32
DILUTED
Net income (loss)	$	5,349	$	-	$	5,349	$	26,685	$	(7,325)	$	19,360
Less: income (loss) allocated to
participating securities		-		-		-		799		-		562
Net income (loss) available to
common stockholders		5,349		-		5,349		25,886		(7,325)		18,798
Less:
Undistributed earnings allocated to
unvested stockholders		-		-		-		(687)		-		(457)
Add:
Undistributed earnings re-allocated to
unvested stockholders		-		-		-		683		-		454
Add:
Tax-effected interest expense
related to Old Notes		-		-		-		666		-		666
Net income (loss) assuming dilution	$	5,349	$	-	$	5,349	$	26,548	$	(7,325)	$	19,461
Weighted average number of common
shares outstanding		57,109		-		57,109		59,124		59,124		59,124
Effect of dilutive securities:
Old Notes		-		-		-		5,823		-		5,823
New Notes		-		-		-		4		-		4
Stock options		1,410		-		1,410		430		-		430
Weighted average number of common
shares assuming dilution		58,519		-		58,519		65,381		59,124		65,381
Diluted net income (loss) per
common share	$	0.09	$	-	$	0.09	$	0.41	$	(0.12)	$	0.30

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 ended March 31, 2012 excludes 2,363,691 shares of stock that represented outstanding stock options whose impact would be anti-dilutive. The diluted net income per common share computation for the three months ended March 31, 2012 also excludes 5,822,551 and 4,685 shares of common stock, issuable upon conversion of the Old Notes and New Notes, respectively, whose impact would be anti-dilutive. The two-class method for computing diluted net income per common share for the three months ended March 31, 2012 is also not presented, as its impact would be anti-dilutive.

The diluted net income per common share computation for the three months ended March 31, 2011 excludes 5,032,879 shares of stock that represented outstanding stock options whose impact would be anti-dilutive.

Due to the net loss from discontinued operations during the three months ended March 31, 2011, 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.

XML

CONTINGENT CONVERTIBLE SENIOR NOTES

3 Months Ended

Mar. 31, 2012

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. No contingent interest related to the Old Notes was payable at March 31, 2012 or December 31, 2011. 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 March 31, 2012, $169.1 million of the Old Notes and $65.1 million of deferred tax liabilities were classified as current liabilities in the Company's condensed consolidated balance sheets. The $65.1 million of deferred tax liabilities were included within current deferred tax assets, net.

On May 3, 2012, the Company filed with the Securities and Exchange Commission (the “SEC”) a Tender Offer Statement on Schedule TO and a notice (the “Company Notice”) to the holders of the Old Notes related to the option of the holders to require the Company to repurchase all or a portion of their Old Notes on June 4, 2012. In addition, such Company Notice was made available through The Depository Trust Company and Deutsche Bank Trust Company Americas, the paying agent.

The Company Notice specifies the terms, conditions and procedures for surrendering and withdrawing the Old Notes for purchase. Specifically, the Company Notice provides that the opportunity to surrender the Old Notes for purchase will commence on May 3, 2012, and will terminate at 5:00 p.m., Eastern Time, on Friday, June 1, 2012, and also that the holders of the Old Notes may withdraw any Old Notes previously surrendered for purchase at any time prior to 5:00 p.m., Eastern Time, on June 1, 2012.

The Company Notice also states that validly surrendered and not withdrawn Old Notes will be purchased by the Company for $1,000 in cash per $1,000 principal amount at maturity of the Old Notes (the “Purchase Price”) and that accrued and unpaid interest on the Old Notes to, but not including, June 4, 2012 (an interest payment date under the terms of the Old Notes), will be paid to the holder of record at the close of business on May 19, 2012, prior to the payment of the Purchase Price as provided by the indenture. Accordingly, the Company expects that there will be no accrued and unpaid interest due as part of the Purchase Price. Additionally, the Company Notice states that holders that do not surrender their Old Notes for purchase will maintain the right to convert their Old Notes into shares of the Company's Class A common stock, as further described below.

The Company Notice also makes clear that none of the Company, its board of directors or employees have made or are making any representation or recommendation as to whether or not any holder should surrender any of the Old Notes.

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 to purchase the Old Notes. 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 March 31, 2012 or December 31, 2011. The New Notes will 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 March 31, 2012 and December 31, 2011.

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 New 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, through June 11, 2008, above $0.025 per share would result in at least a one percent (1%) increase in the conversion price. This threshold was not reached and no adjustment to the conversion price has been made.

During the quarters ended December 31, 2011 and March 31, 2012, 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 quarters ended December 31, 2011 and March 31, 2012.During the quarter ended March 31, 2012, no holders of Old Notes converted their Old Notes into shares of the Company's Class A common stock. The holders of Old Notes have this conversion right only until June 30, 2012.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 March 31, 2012, the New Notes did not meet the criteria for the right of conversion.

XML

STRATEGIC COLLABORATIONS

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

Strategic Collaborations Disclosure Textblock

8.       STRATEGIC COLLABORATIONS

Development and License Agreement witha specialty pharmaceutical company

On March 30, 2012, the Company entered into a Development and License Agreement with a specialty pharmaceutical company pursuant to which the Company obtained exclusive worldwide rights for the development and commercialization of an investigational drug targeted at certain topical skin applications. Under the terms of the agreement, the Company agreed to pay an up-front payment of $25.0 million in connection with the execution of the agreement, and will pay up to an additional $80.0 million upon the achievement of certain research, development and regulatory milestones and up to an additional $120.0 million upon the achievement of certain commercial milestones, as well as royalties on future sales. The initial $25.0 million up-front payment, paid in April 2012, was recognized as research and development expense during the three months ended March 31, 2012 and is included in accounts payable in the accompanying condensed consolidated balance sheets as of March 31, 2012.

License Agreement with 3M

On February 24, 2012, the Company entered into a License Agreement with 3M Company and 3M Innovative PropertiesCompany (collectively, “3M”) for worldwide rights to a number of leading molecules in 3M's platform of immune response modifiers, for all topical dermatology indications and options for all human uses associated with the licensed molecules, excluding vaccine adjuvant. Under the terms of the agreement, the Company made an up-front payment of $7.5 million to 3M in connection with the execution of the agreement, and will pay up to an additional $25.6 million of contingent license and option fees. The Company may also pay up to an additional $25.0 million upon the achievement of certain research, development and regulatory milestones, as well as royalties on future sales. The initial $7.5 million payment was recognized as research and development expense during the three months ended March 31, 2012.

Joint Development Agreement with Lupin

On July 21, 2011, the Company entered into a Joint Development Agreement (the “Original Agreement”) with Lupin Limited, on behalf of itself and its affiliates (hereinafter collectively referred to as “Lupin”), whereby the Company and Lupin will collaborate to develop multiple novel proprietary therapeutic products. Pursuant to the Original Agreement, subject to the terms and conditions contained therein, the Company made an up-front $20.0 million payment to Lupin and wasto make additional payments to Lupin upon the achievement of certain research, development, regulatory and other milestones, as well as royalty payments on sales of the products covered under the Original Agreement. In addition, the Company was to receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Original Agreement.

On March 30, 2012, the Company entered into an Amended and Restated Joint Development Agreement, with Lupin (the “Amended and Restated Joint Development Agreement”), which modified the list of products being developed. The Company made a $2.5 million payment to Lupin in April 2012 in connection with the execution of the Amended and Restated Joint Development Agreement,and will make additional payments to Lupin of up to $35.5 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 Amended and Restated Joint Development Agreement, which supersedes the additional payments the Company would have made under the Original Agreement. In addition, the Company will receive an exclusive, worldwide (excluding India) license on the sale of the products covered under the Amended and Restated Joint Development Agreement.

The $20.0 million up-front payment related to the Original Agreement was recognized as research and development expense during the three months ended September 30, 2011. The $2.5 million payment related to the Amended and Restated Joint Development Agreement was recognized as research and development expense during the three months ended March 31, 2012 and is included in accounts payable in the accompanying condensed consolidated balance sheets as of March 31, 2012.

Amended and Restated Collaboration Agreement and Asset Purchase Agreement with Hyperion

On March 22, 2012, Ucyclyd Pharma, Inc. (“Ucyclyd “), a wholly-owned subsidiary of the Company, and Hyperion Therapeutics, Inc. (“Hyperion”) entered into an Amended and Restated Collaboration Agreement (the “Amended Collaboration Agreement”), which amended and restated their existing Collaboration Agreement, dated August 23, 2007, as previously amended on or about November 24, 2008, June 29, 2009 and October 12, 2009 (the “Prior Collaboration Agreement”).

Pursuant to the terms of the Prior Collaboration Agreement, Ucyclyd granted rights to Hyperion, exercisable in the future, to purchase certain worldwide rights to Ucyclyd's existing on-market products AMMONUL® and BUPHENYL® under certain conditions, as well as to develop and commercialize Ravicti™, a compound referred to as HPN-100 (and also previously referred to as GT4P in the Prior Collaboration Agreement), for the treatment of urea cycle disorder, hepatic encephalopathies and other indications. The parties agreed to supersede the Prior Collaboration Agreement with the Amended Collaboration Agreement, under which Hyperion will continue to have the right, exercisable no earlier than January 1, 2013, to purchase certain worldwide rights to AMMONUL® and BUPHENYL®, subject to Ucyclyd's right to elect to retain such rights to AMMONUL®, and an Asset Purchase Agreement of even date (the “APA”), under which Hyperion agreed to purchase Ucyclyd's rights to Ravicti™ on the terms set forth therein. The parties completed the sale of Ravicti™ under the APA on March 22, 2012, for which Hyperion paid Ucyclyd $6.0 million. If Ravicti™ is not approved by the FDA by January 1, 2013, Ucyclyd will pay Hyperion $0.5 million per month until June 30, 2013, or until Ravicti™ is approved, whichever comes first, subject to a maximum of $3.0 million in aggregate payments. Pursuant to the APA, Hyperion will pay Ucyclyd certain royalties and regulatory and sales milestones relating to Ravicti™ and, pursuant to the terms of the Amended Collaboration Agreement, following exercise of its purchase rights, Hyperion will pay Ucyclyd certain royalties and regulatory and sales milestones relating to AMMONUL®(but only if Ucyclyd does not elect to retain rights to AMMUNOL®)and BUPHENYL®. Ucyclyd will continue to be entitled to all revenue from the sales of AMMONUL® and BUPHENYL® until the exercise of the purchase rights by Hyperion. If Hyperion elects to purchase AMMONUL® and BUPHENYL®, but Ucyclyd elects to retain AMMONUL®, then AMMONUL® will remain an asset of Ucyclyd and Ucyclyd will continue to be entitled to all revenue from the sales of AMMONUL®.A net gain of$3.0 million on the sale of Ravicti™ to Hyperion was recognized in other income during the three months ended March 31, 2012. This consisted of the $6.0 million payment Ucyclyd received from Hyperion, partially offset by the $3.0 million in total potential contingent payments that Ucyclyd could pay to Hyperion during the first six months of 2013, based upon the timing of the approval of Ravicti™ by the FDA.The $3.0 million contingent liability is included in the Company's condensed consolidated balance sheets as of March 31, 2012, with $1.5 million included in other current liabilities and $1.5 million included in other liabilities.

Research and Development Agreement with 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.

XML

FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

FAIR VALUE MEASUREMENTS

6.       FAIR VALUE MEASUREMENTS

As of March 31, 2012, 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 March 31, 2012.  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 March 31, 2012, were as follows (in thousands):

			Fair Value Measurement at Reporting Date Using
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
			Markets		Inputs		Inputs
	Mar. 31, 2012		(Level 1)		(Level 2)		(Level 3)
Corporate notes and bonds	$	132,726	$	-	$	132,726	$	-
Federal agency notes and bonds		111,588		-		111,588		-
Auction rate floating securities		12,754		-		-		12,754
Asset-backed securities		9,159		-		9,159		-
Total assets measured at fair value	$	266,227	$	-	$	253,473	$	12,754
			Fair Value Measurement at Reporting Date Using
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
			Markets		Inputs		Inputs
	Dec. 31, 2011		(Level 1)		(Level 2)		(Level 3)
Corporate notes and bonds	$	138,166	$	-	$	138,166	$	-
Federal agency notes and bonds		125,289		-		125,289		-
Auction rate floating securities		12,793		-		-		12,793
Asset-backed securities		9,519		-		9,519		-
Total assets measured at fair value	$	285,767	$	-	$	272,974	$	12,793

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 months ended March 31, 2012 (in thousands):

	Fair Value
	Measurements Using
	Significant
	Unobservable
	Inputs (Level 3)
	Auction Rate
	Floating
	Securities
Balance at December 31, 2011	$	12,793
Transfers to (from) Level 3		-
Total gains (losses) included in other
(income) expense, net		-
Total gains included in other
comprehensive income		11
Purchases		-
Settlements		(50)
Balance at March 31, 2012	$	12,754

The following is a description of the valuation techniques used for the assets measured at fair value classified within Level 2 or Level 3 of the fair value hierarchy:

Available-for-sale securities classified within Level 2 of the fair value hierarchy are valued utilizing reports from third-party asset managers that hold the Company's investments, showing closing prices on the last business day of the period presented. These asset managers utilize an independent pricing source to obtain quotes for most fixed income securities, and utilize internal procedures to validate the prices obtained. In addition, the Company uses an independent third-party to perform price testing, comparing a sample of quoted prices listed in the asset managers' reports to quotes listed through a public quotation service.

Available-for-sale securities classified within Level 3 of the fair value hierarchy (auction rate floating securities) are valued utilizing a discounted cash flow model. Key variables that are included in the Company's calculation of the fair value of its auction rate floating securities utilizing a discounted cash flow model are weighted average cost of capital (“WACC”), liquidity horizon and estimated coupon rate. The liquidity horizon is an estimation of how long the liquidity issue of the auction rate floating securities will continue to exist. As part of its calculation of the fair value of its auction rate floating securities as of March 31, 2012, the Company used a WACC of 5.0%, a liquidity horizon of nine years, and an estimated coupon rate of a 12-month historical average for the indexes. The 12-month historical averages for 1-Month LIBOR and 90-Day T-Bills were 0.23% and 0.03%, respectively. As part of its assessment of these variables used in calculating the fair value of its auction rate floating securities, the Company performs a sensitivity analysis to understand the potential impact of using different amounts for these variables. As of March 31, 2012 and December 31, 2011, the sensitivity analysis did not produce calculated fair values that were significantly different from those calculated using the variables described above.

XML

RESEARCH AND DEVELOPMENT

3 Months Ended

Mar. 31, 2012

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 and the related stage of the research and development project.

       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.

Research and development expense for the three months endedMarch 31, 2012 and 2011 are as follows (in thousands):

	Three Months Ended
	March 31,		March 31,
	2012		2011
Ongoing research and development costs	$	12,127	$	6,868
Payments related to strategic collaborations		39,006		7,000
Share-based compensation expense		697		405
Total research and development	$	51,830	$	14,273

XML

SEGMENT AND PRODUCT INFORMATION

3 Months Ended

Mar. 31, 2012

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 disorder,contract revenue, and beginning on December 2, 2011, upon the Company's acquisition of the assets of Graceway Pharmaceuticals, LLC (“Graceway”), products in the respiratory and women's health specialties. 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®, VANOS®and ZYCLARA®. ZYCLARA® was acquired by the Company as part of the acquisition of the assets of Graceway on December 2, 2011. The non-dermatological product lines include AMMONUL®and BUPHENYL®.The non-dermatological field also includes contract revenues associated with licensing agreements and authorized generic agreements.

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. ZIANA® and SOLODYN® are also promoted to pediatricians whose prescribing habits closely resemble those of dermatologists. 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
	March 31,		March 31,
	2012		2011
Acne and acne-related dermatological products	$	108,501	$	103,462
Non-acne dermatological products		73,998		52,221
Non-dermatological products		19,244		9,230
Total net revenues	$	201,743	$	164,913
		Three Months Ended
		March 31,		March 31,
		2012		2011
Acne and acne-related dermatological products		54	%	63	%
Non-acne dermatological products		37		32
Non-dermatological products		9		5
Total net revenues		100	%	100	%

During the three months ended March 31, 2012, approximately 4.9% of the Company's net revenues were generated in Canada. No country or region outside of the U.S. generated more than 5%, individually or in the aggregate, of the Company's net revenues during the three months ended March 31, 2012. During the three months ended March 31, 2011, less than 5% of the Company's net revenues were generated outside of the U.S.

XML

OTHER CURRENT LIABILITIES (TABLES)

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

Schedule Of Other Current Liabilities Table Text Block

	March 31, 2012		December 31, 2011
Accrued incentives, including SARs liability	$	31,406	$	41,516
Deferred revenue		13,630		13,703
Other accrued expenses		26,669		23,566
	$	71,705	$	78,785

Schedule Of Other Deferred Revenue Table Text Block

	March 31, 2012		December 31, 2011
Deferred revenue - aesthetics products, net
of cost of revenue	$	7,285	$	13,349
Deferred revenue - sales into distribution
channel in excess of eight weeks of
projected demand		6,204		212
Other deferred revenue		141		142
	$	13,630	$	13,703

XML

EARNINGS PER SHARE (DETAILS) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Earnings Per Share Basic Two Class Method Abstract
Net income (loss)	$ 5,349	$ 19,360
Undistributed Earnings Allocated To Participating Securities	0	562
Net Income Loss Available To Common Stockholders Basic	5,349	18,798
Weighted average number of shares outstanding basic	57,109,000	59,124,000
Earnings Per Share Basic Undistributed	$ 0.09	$ 0.32
Earnings Per Share Diluted Two Class Method Abstract
Undistributed Earnings Allocated To Unvested Stockholders	0	(457)
Undistributed Earnings Reallocated To Unvested Stockholders	0	454
Interest On Old Notes Net Of Tax	0	666
Net Income Loss Available To Common Stockholders Diluted	5,349	19,461
Weighted Average Number Diluted Shares Outstanding Adjustment Abstract
Incremental Common Shares Attributable To Conversion Of Debt Securities Old Notes	0	5,823,000
Incremental Common Shares Attributable To Conversion Of Debt Securities New Notes	0	4,000
Incremental Common Shares Attributable To Share Based Payment Arrangements	1,410,000	430,000
Weighted Average Number Of Diluted Shares Outstanding	58,519,000	65,381,000
Earnings per share diluted	$ 0.09	$ 0.30
Stock Options [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount	2,363,691	5,032,879
Convertible Debt Securities Old Notes [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount	5,822,551
Convertible Debt Securities New Notes [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount	4,685
Segment Continuing Operations [Member]
Earnings Per Share Basic Two Class Method Abstract
Income Loss From Continuing Operations	5,349	26,685
Undistributed Earnings Allocated To Participating Securities	0	799
Net Income Loss Available To Common Stockholders Basic	5,349	25,886
Weighted average number of shares outstanding basic	57,109,000	59,124,000
Earnings Per Share Basic Undistributed	$ 0.09	$ 0.44
Earnings Per Share Diluted Two Class Method Abstract
Undistributed Earnings Allocated To Unvested Stockholders	0	(687)
Undistributed Earnings Reallocated To Unvested Stockholders	0	683
Interest On Old Notes Net Of Tax	0	666
Net Income Loss Available To Common Stockholders Diluted	5,349	26,548
Weighted Average Number Diluted Shares Outstanding Adjustment Abstract
Incremental Common Shares Attributable To Conversion Of Debt Securities Old Notes	0	5,823,000
Incremental Common Shares Attributable To Conversion Of Debt Securities New Notes	0	4,000
Incremental Common Shares Attributable To Share Based Payment Arrangements	1,410,000	430,000
Weighted Average Number Of Diluted Shares Outstanding	58,519,000	65,381,000
Earnings per share diluted	$ 0.09	$ 0.41
Segment Discontinued Operations [Member]
Earnings Per Share Basic Two Class Method Abstract
Income Loss From Discontinued Operations	0	(7,325)
Undistributed Earnings Allocated To Participating Securities	0	0
Net Income Loss Available To Common Stockholders Basic	0	(7,325)
Weighted average number of shares outstanding basic	0	59,124,000
Earnings Per Share Basic Undistributed	$ 0	$ (0.12)
Earnings Per Share Diluted Two Class Method Abstract
Undistributed Earnings Allocated To Unvested Stockholders	0	0
Undistributed Earnings Reallocated To Unvested Stockholders	0	0
Interest On Old Notes Net Of Tax	0	0
Net Income Loss Available To Common Stockholders Diluted	$ 0	$ (7,325)
Weighted Average Number Diluted Shares Outstanding Adjustment Abstract
Incremental Common Shares Attributable To Conversion Of Debt Securities Old Notes	0	0
Incremental Common Shares Attributable To Conversion Of Debt Securities New Notes	0	0
Incremental Common Shares Attributable To Share Based Payment Arrangements	0	0
Weighted Average Number Of Diluted Shares Outstanding	0	59,124,000
Earnings per share diluted	$ 0	$ (0.12)

XML

DIVIDENDS DECLARED ON COMMON STOCK

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

DIVIDENDS DECLARED ON COMMON STOCK

14.       DIVIDENDS DECLARED ON COMMON STOCK

On February27, 2012, the Company announced that its Board of Directors had declared a cash dividend of $0.10 per issued and outstanding share of the Company's Class A common stock,which was paid onApril30, 2012, to stockholders of record at the close of business on April 2, 2012. The $6.0 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 March 31, 2012. The Company has not adopted a dividend policy.

XML

SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

SUBSEQUENT EVENTS

19.       SUBSEQUENT EVENTS

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

XML

COMPREHENSIVE INCOME (DETAILS) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Other Comprehensive Income Loss Net Of Tax Period Increase Decrease Abstract
Total Comprehensive Income (Loss)	$ 833	$ 200

XML

RESEARCH & DEVELOPMENT (DETAILS) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Research And Development Expense Abstract
Ongoing Research And Development Costs	$ 12,127	$ 6,868
Research And Development Expense Payments Related To Strategic Collaborations	39,006	7,000
Research And Development Expense	51,830	14,273
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Share Based Compensation Expense	9,097	6,689
Research And Development Expense [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Share Based Compensation Expense	$ 697	$ 405

XML

CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Parentheticals (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Income Statement Parentheticals [Line Items]
Amounts include share-based compensation expense	$ 9,097	$ 6,689
Cost of product revenues
Income Statement Parentheticals [Line Items]
Amounts exclude amortization of intangible assets related to acquired products	15,676	5,452
Selling, general and administrative
Income Statement Parentheticals [Line Items]
Amounts include share-based compensation expense	8,400	6,284
Research and Development
Income Statement Parentheticals [Line Items]
Amounts include share-based compensation expense	$ 697	$ 405

XML

SHARE BASED COMPENSATION

3 Months Ended

Mar. 31, 2012

Notes To Consolidated Financial Statement Abstract

SHARE-BASED COMPENSATION

3.       SHARE-BASED COMPENSATION

At March 31, 2012, 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 March 31, 2012, total unrecognized compensation cost related to stock option awards, to be recognized as expense subsequent to March 31, 2012, was approximately $1.1million and the related weightedaverage period over which it is expected to be recognized is approximately 3.4years.

A summary of stock option activity within the Company's stock-based compensation plans and changes for the three months endedMarch 31, 2012, is as follows:

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Term	Value
Balance at December 31, 2011	4,101,505	$	31.31
Granted	34,617	$	34.94
Exercised	(105,250)	$	26.47
Terminated/expired	(6,000)	$	38.45
Balance at March 31, 2012	4,024,872	$	31.45	2.3	$	26,122,252

The intrinsic value of options exercised during the three months ended March 31, 2012 was approximately $1.0 million. Options exercisable under the Company's share-based compensation plans at March 31, 2012 were 3,857,472, with a weighted average exercise price of $31.57, a weighted average remaining contractual term of 2.1 years, and an aggregate intrinsic value of approximately $24.6 million.

A summary of outstanding and exercisable stock options that are fully vested and are expected to vest, based on historical forfeiture rates, as of March 31, 2012, is as follows:

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Term	Value
Outstanding, net of expected forfeitures	3,759,158	$	31.69	2.2	$	23,511,900
Exercisable, net of expected forfeitures	3,634,703	$	31.74	2.1	$	22,609,550

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:

	Three Months Ended
	March 31, 2012	March 31, 2011
Expected dividend yield	1.14%	0.77%
Expected stock price volatility	0.32	0.33
Risk-free interest rate	1.13%	2.81%
Expected life of options	6.0 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 three months ended March 31, 2012 and 2011, was $9.94 and $11.45, 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 March 31, 2012, the total amount of unrecognized compensation cost related to nonvested restricted stock awards, to be recognized as expense subsequent to March 31, 2012, was approximately $51.0 million, and the related weighted average period over which it is expected to be recognized is approximately 3.7 years.

A summary of restricted stock activity within the Company's share-based compensation plans and changes for the three months ended March 31, 2012, is as follows:

		Weighted
		Average
		Grant-Date
Nonvested Shares	Shares	Fair Value
Nonvested at December 31, 2011	1,919,462	$	22.61
Granted	686,502	$	34.94
Vested	(525,551)	$	20.06
Forfeited	(12,200)	$	28.20
Nonvested at March 31, 2012	2,068,213	$	27.31

The total fair value of restricted shares vested during the three months ended March 31, 2012 and 2011 was approximately $10.5 million and $7.1 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 during each reporting period based on the new fair value. As of March 31, 2012, the total measured amount of unrecognized compensation cost related to outstanding SARs, to be recognized as expense subsequent to March 31, 2012, based on the remeasurement at March 31, 2012, was approximately $24.4 million, and the related weighted average period over which it is expected to be recognized is approximately2.5years.

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:

	Remeasurement	SARs Granted During the
	as of	Three Months Ended
	March 31, 2012	March 31, 2011
Expected dividend yield	1.06%	0.87%
Expected stock price volatility	0.31	0.32
Risk-free interest rate	0.51% to 1.04%	3.12%
Expected life of SARs	2.9 to 4.9 Years	7.0 Years

No SARs were granted during the three months ended March 31, 2012. The weighted average fair value of SARs granted during the three months endedMarch 31, 2011, as of the grant date, was $9.90. The weighted average fair value of all SARs outstanding as of the remeasurement date of March 31, 2012 was $20.21.

A summary of SARs activity for the three months ended March 31, 2012 is as follows:

				Weighted
		Weighted			Average
		Average			Remaining	Aggregate
	Number	Exercise			Contractual	Intrinsic
	of SARs	Price			Term	Value
Balance at December 31, 2011	2,323,060	$	17.52
Granted	-	$	-
Exercised	(102,751)	$	14.68
Terminated/expired	(51,451)	$	17.87
Balance at March 31, 2012	2,168,858	$	17.65	4.5	$	43,256,447

The intrinsic value of SARs exercised during the three months ended March 31, 2012 was approximately $2.1 million.

As of March 31, 2012, 364,451 SARs were exercisable, with a weighted average exercise price of $15.52, a weighted average remaining contractual term of4.3years, and an aggregate intrinsic value of approximately $8.0 million.       

Total share-based compensation expense related to continuing operations recognized during the three months ended March 31, 2012 and 2011 was as follows (in thousands):

	Three Months Ended
	March 31, 2012		March 31, 2011
Stock options	$	195	$	250
Restricted stock awards		3,619		2,602
Stock appreciation rights		5,283		3,837
Total share-based compensation expense	$	9,097	$	6,689

XML

DISCONTINUED OPERATIONS (TABLES)

3 Months Ended

Mar. 31, 2012

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
	March 31,
	2011
Net revenues	$	156
Cost of revenues		2,375
Gross profit		(2,219)
Operating expenses:
Selling, general and administrative		5,863
Research and development		3,346
Loss from discontinued operations
before income tax benefit		(11,428)
Income tax benefit		(4,103)
Loss from discontinued operations,
net of income tax benefit	$	(7,325)

	Three Months Ended
	March 31,
	2011
Loss from discontinued operations, net of income tax benefit	$	(7,325)
Share-based compensation expense		728
Decrease in assets held for sale from discontinued operations		3,073
Decrease in liabilities held for sale from discontinued operations		(1,934)
Net cash used in operating activities from
discontinued operations	$	(5,458)

XML

SERP (DETAILS) (USD $)	3 Months Ended
	Mar. 31, 2012	Jun. 30, 2011	Mar. 31, 2011
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 Corporation Supplemental Executive Retirement Plan, as amended on October 3, 2011 (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 became effective as of June 1, 2011. Retirement benefits are calculated based on a percentage of a SERP participant’s average earnings, which ranges from 1.25% to 10% of the participant’s 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. The percentage of average earnings is multiplied by the participant’s years of service up to a specified cap on service ranging from five to twenty years. In no event will an executive officer’s retirement benefit exceed 50% of his or her average earnings, and for those participants who are not executive officers, their retirement benefits will not exceed 25% of average earnings. The SERP retirement benefit is intended to be paid to participants who reach the “normal retirement date,” which is age 65, or age 59 ½ with twenty years of service, subject to certain exceptions. A SERP participant vests in 1/6th of his or her retirement benefit per plan year, (which runs from June 1 to May 31), 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.
Other Comprehensive Income Defined Benefit Plan Net Prior Service Cost Credit Arising During Period Before Tax	$ 800,000	$ 33,800,000
Defined Benefit Plan Amortization Of Prior Service Cost Credit	1,210,000		0
Deferred Tax Assets Tax Deferred Expense Compensation And Benefits Postretirement Benefits		12,000,000
Defined Benefit Plan Service Cost	200,000
Defined Benefit Plan Interest Cost	400,000
Defined Benefit Plan Assets For Plan Benefits Noncurrent	10,300,000
Pension And Other Postretirement Defined Benefit Plans Liabilities Noncurrent	36,500,000
Defined Benefit Plan Purchases Sales And Settlements	$ 400,000	$ 9,800,000

XML

INCOME TAXES

3 Months Ended

Mar. 31, 2012

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 the reserve for uncertain tax positions, 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.

On November 1, 2011, the Company closed its sale of all issued and outstanding shares of common stock of LipoSonix to Solta. The transaction resulted in a $30.5 million capital loss for income tax purposes, of which $26.2 million can be carried back and used to offset capital gains generated in prior tax years. Accordingly, an income tax benefit of $9.4 million was recognized and is included in the gain from discontinued operations for the year ended December 31, 2011. A deferred tax asset was recorded on the portion of the capital loss ($4.3 million) that could not be carried back to prior years. As a capital loss can only be utilized to offset capital gains, the Company has recorded a valuation allowance of $1.5 million against the deferred tax asset 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.

The sales price used to calculate the above capital loss consisted of $15.5 million of cash received at closing, $20.0 million of cash received on November 18, 2011 and $29.3 million of value from future additional contingent cash and milestone payments. A deferred tax asset was recorded on the $29.3 million as it was not recognized as additional selling price for financial reporting purposes. The Company has recorded a valuation allowance of $10.5 million against this deferred tax asset in order to reduce the carrying value of this deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

At March 31, 2012, 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 March 31, 2012, 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 March 31, 2012, 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 March 31, 2012, 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 endedMarch 31, 2012 and March 31, 2011, the Company made net tax payments of $11.3 million and $6.0 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 2007. The state of California is currently conducting an 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 March 31, 2012 and December 31, 2011, the Company had unrecognized tax benefitsof $9.3 million and $8.6 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 $6.0 million and $5.6 million as of March 31, 2012 and December 31, 2011, respectively.The Company estimates that it is reasonably possible that the amount of unrecognized tax benefits will decrease by $0.3 million in the next twelve months due to audit settlements.

The Company recognizes accrued interest and penalties, if applicable, related to unrecognized tax benefits in income tax expense. The Company had approximately $0.3million for the payment of interest and penalties accrued (net of tax benefit) at March 31, 2012 and December 31, 2011.