UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q/A(Amendment No. 1)

|[MARK ONE]                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended September 30, 2007            
|OR                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to

Commission File No. 000-30123

SCIELE PHARMA, INC.(Exact name of registrant as specified in its charter)

|Delaware(State of incorporation)                                                             |  | 58-2004779(I.R.S. Employer Identification Number)
|-------------------------------------------------------------------------------------------- |  | -------------------------------------------------
|Five Concourse Parkway, Suite 1800,
Atlanta, Georgia(Address of principal executive offices) |  | 30328(Zip code)                                  
|(770) 442-9707(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 ý    No o

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

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

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

As of October 24, 2007, there were 35,648,529 shares of the Registrant's Common Stock outstanding.



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Explanatory Note

This Amendment No. 1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, is being filed in order to restate the
Company's financial statements to reflect a change in the Company's accounting treatment for its investment in Addrenex Pharmaceuticals, Inc.

On
February 26, 2008, the Company was informed by its independent registered public accounting firm, BDO Seidman, LLP ("BDO Seidman"),
that due primarily to the ownership of approximately 20% of the voting stock of Addrenex, the Company's appointment of one director to Addrenex's three person board of directors, as well as the
magnitude of the Company's cash investment ($6 million) relative to Addrenex's equity after the investment, the Company is deemed to have significant influence over Addrenex. As a result, in
accordance with Accounting Principles Board Opinion No. 18,The Equity Method of Accounting for Investments in Common Stock("APB No. 18"), the Company's Addrenex investment should be accounted for using the equity method as opposed to the cost method as previously
reflected in the Company's September 30, 2007 Form 10-Q.

As
a result of the required change in accounting treatment for the Company's investment in Addrenex, the Company recorded a charge to acquired in-process R&D in connection with our
equity investment and a corresponding reduction of $4.8 million to its investment in Addrenex which is reported in other long term assets on the Company's balance sheet. The effect on net
income after tax adjustments for the quarter ended September 30, 2007 was a reduction in net income of $3.2 million, or $0.09 per diluted share.

After
discussions with BDO Seidman and its own investigation and analysis, management has determined that a deficiency relating to the review and analysis of the Company's minority
investments in other companies that led to this restatement constituted a material weakness in our disclosure controls and internal controls over financial reporting. Specifically, with respect to the
Addrenex investment, the Company's accounting determination was not performed with sufficient application of APB No. 18. After investigation with respect to other Company transactions,
management has determined the control deficiency has not resulted in other incidences of the misapplication of APB No. 18. To improve controls over financial reporting for investments in third
parties, management has taken steps to remediate this deficiency by establishing an internal policy to seek outside professional advice with respect to its accounting treatment of significant
investments in third-parties.

Except
for the amended and restated information described above, the 10-Q has not been updated since the date of its original filing. Any such updates will be addressed in future reports
to be filed with the SEC.

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The
following table sets forth the impact of the additional expenses relating to the equity method of accounting for the Addrenex investment on the Consolidated Balance Sheet for
September 30, 2007:

SCIELE PHARMA, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share data)

|                                           |                                                                                                                                                          | September 30, 2007         |        
|------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | -------
|
|ASSETS                                     |                                                                                                                                                          |                            |        
|Current Assets:                            |                                                                                                                                                          |                            |        
|                                           | Cash and cash equivalents                                                                                                                                |                            | $      
|                                           | Marketable securities                                                                                                                                    |                            |        
|                                           | Accounts receivable, net of allowances of $2,853 and $2,010 at September 30, 2007 and December 31, 2006, respectively                                    |                            |        
|                                           | Inventories                                                                                                                                              |                            |        
|                                           | Income tax receivable                                                                                                                                    |                            |        
|                                           | Current deferred tax assets                                                                                                                              |                            |        
|                                           | Other current assets                                                                                                                                     |                            |        
|                                           |                                                                                                                                                          |                            |        
|                                           |                                                                                                                                                          | Total current assets       |        
|                                           |                                                                                                                                                          |                            |        
|Property and equipment, net                |                                                                                                                                                          |                            | 19,235 
|Other assets:                              |                                                                                                                                                          |                            |        
|                                           | Intangibles, net                                                                                                                                         |                            |        
|                                           | Long term deferred tax assets                                                                                                                            |                            |        
|                                           | Other                                                                                                                                                    |                            |        
|                                           |                                                                                                                                                          |                            |        
|                                           |                                                                                                                                                          | Total other assets         |        
|                                           |                                                                                                                                                          |                            |        
|Total assets                               |                                                                                                                                                          | $                          | 824,142
|                                           |                                                                                                                                                          |                            |        
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                                                                                          |                            |        
|Current liabilities:                       |                                                                                                                                                          |                            |        
|                                           | Accounts payable                                                                                                                                         |                            | $      
|                                           | Accrued expenses                                                                                                                                         |                            |        
|                                           |                                                                                                                                                          |                            |        
|                                           |                                                                                                                                                          | Total current liabilities  |        
|Long-term liabilities:                     |                                                                                                                                                          |                            |        
|                                           | Convertible debt                                                                                                                                         |                            |        
|                                           | Deferred tax liabilities                                                                                                                                 |                            |        
|                                           | Other long-term liabilities                                                                                                                              |                            |        
|                                           |                                                                                                                                                          |                            |        
|                                           |                                                                                                                                                          | Total liabilities          |        
|                                           |                                                                                                                                                          |                            |        
|Stockholders' equity:                      |                                                                                                                                                          |                            |        
|                                           | Preferred stock, 1,000,000 shares authorized and none outstanding                                                                                        |                            |        
|                                           | Common stock, $0.001 par value; 100,000,000 shares authorized; 36,396,573 and 35,873,121 issued at September 30, 2007 and December 31, 2006 respectively |                            |        
|                                           | Additional paid-in capital                                                                                                                               |                            |        
|                                           | Retained earnings (See Note 13)                                                                                                                          |                            |        
|                                           | Accumulated other comprehensive loss                                                                                                                     |                            |        
|                                           |                                                                                                                                                          |                            |        
|                                           |                                                                                                                                                          |                            | 441,839
|                                           | Less: Treasury stock at cost, common stock, 754,919 and 800,000 shares at September 30, 2007 and December 31, 2006, respectively                         |                            |        
|                                           |                                                                                                                                                          | Total stockholders' equity |        
|                                           |                                                                                                                                                          |                            |        
|Total liabilities and stockholders' equity |                                                                                                                                                          | $                          | 824,142
|                                           |                                                                                                                                                          |                            |        

---



The following table sets forth the impact of the additional expenses relating to the equity method of accounting for the Addrenex investment on
the Consolidated Statement of Operations for the three and nine months ended September 30, 2007:

SCIELE PHARMA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)

|                                            |                                                                             | For the Three Months
Ended September 30, 2007 |        | For the Nine Months
Ended September 30, 2007 |       
|------------------------------------------- | --------------------------------------------------------------------------- | --------------------------------------------- | ------ | -------------------------------------------- | ------
|
|Net revenues                                |                                                                             | $                                             | 99,372 |                                              | $     
|Operating costs and expenses:               |                                                                             |                                               |        |                                              |       
|                                            | Cost of revenues (excluding depreciation and amortization)                  |                                               |        | 13,304                                       |       
|                                            | Selling, general and administrative expense                                 |                                               |        | 47,061                                       |       
|                                            | Depreciation and amortization                                               |                                               |        | 7,587                                        |       
|                                            | Research and development expenses                                           |                                               |        | 9,262                                        |       
|                                            |                                                                             |                                               |        |                                              |       
|                                            |                                                                             | Total operating costs and expenses            |        |                                              | 77,214
|                                            |                                                                             |                                               |        |                                              |       
|Operating income                            |                                                                             |                                               | 22,158 |                                              |       
|                                            |                                                                             |                                               |        |                                              |       
|Other income (expense)                      |                                                                             |                                               |        |                                              |       
|                                            | Interest expense                                                            |                                               |        | (2,964                                       | )     
|                                            | Interest income                                                             |                                               |        | 2,321                                        |       
|                                            | Other                                                                       |                                               |        |                                             |       
|                                            | In-process research and development in connection with an equity investment |                                               |        |                                             |       
|                                            |                                                                             |                                               |        |                                              |       
|                                            |                                                                             | Total other income (expense)                  |        |                                              | (643  
|Income before provision for income taxes    |                                                                             |                                               | 21,515 |                                              |       
|Provision for income taxes                  |                                                                             |                                               | 7,666  |                                              |       
|                                            |                                                                             |                                               |        |                                              |       
|Net income                                  |                                                                             | $                                             | 13,849 |                                              | $     
|Other comprehensive gain (loss)             |                                                                             |                                               | 361    |                                              |       
|Comprehensive income                        |                                                                             | $                                             | 14,210 |                                              | $     
|                                            |                                                                             |                                               |        |                                              |       
|Net income per common share:                |                                                                             |                                               |        |                                              |       
|                                            | Basic earnings per common share                                             |                                               | $      | 0.39                                         |       
|                                            |                                                                             |                                               |        |                                              |       
|                                            | Diluted earnings per common share                                           |                                               | $      | 0.38                                         |       
|                                            |                                                                             |                                               |        |                                              |       
|Weighted average common shares outstanding: |                                                                             |                                               |        |                                              |       
|                                            | Basic                                                                       |                                               |        | 35,752                                       |       
|                                            |                                                                             |                                               |        |                                              |       
|                                            | Diluted                                                                     |                                               |        | 36,466                                       |       
|                                            |                                                                             |                                               |        |                                              |       

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The
following table sets forth the impact of the additional expenses relating to the equity method of accounting for the Addrenex investment on the Consolidated Statement
of Cash Flows for the three and nine months ended September 30, 2007:

SCIELE PHARMA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands, except per share data)

|                                                                                  |                                                                            | For the Nine Months Ended September 30, 2007 |                                                    
|--------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | -------------------------------------------- | ---------------------------------------------------
|
|Cash flows from operating activities:                                             |                                                                            |                                              |                                                    
|Net income                                                                        |                                                                            | $                                            | 37,485                                             
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                                            |                                              |                                                    
|                                                                                  | Depreciation and amortization                                              |                                              |                                                    
|                                                                                  | In-process research and development in connection with equity investment   |                                              |                                                    
|                                                                                  | Loss on sales of securities                                                |                                              |                                                    
|                                                                                  | Loss on disposal of property and equipment                                 |                                              |                                                    
|                                                                                  | Non-cash compensation expense                                              |                                              |                                                    
|                                                                                  | Non-cash interest expense                                                  |                                              |                                                    
|                                                                                  | Deferred income tax expense                                                |                                              |                                                    
|                                                                                  | Loss on extinguishment of debt                                             |                                              |                                                    
|                                                                                  | Changes in assets and liabilities, net of acquired assets and liabilities: |                                              |                                                    
|                                                                                  |                                                                            | Accounts receivable                          |                                                    
|                                                                                  |                                                                            | Inventories                                  |                                                    
|                                                                                  |                                                                            | Other current assets and other assets        |                                                    
|                                                                                  |                                                                            | Income taxes receivable                      |                                                    
|                                                                                  |                                                                            | Accrued expenses and other                   |                                                    
|                                                                                  |                                                                            | Accounts payable                             |                                                    
|                                                                                  |                                                                            |                                              |                                                    
|                                                                                  |                                                                            |                                              | Net cash provided by operating activities          
|Cash flows from investing activities:                                             |                                                                            |                                              |                                                    
|                                                                                  | Purchases and advanced payments for products and licenses                  |                                              |                                                    
|                                                                                  | Purchase of property and equipment                                         |                                              |                                                    
|                                                                                  | Proceeds from sale of property and equipment                               |                                              |                                                    
|                                                                                  | Acquisition of business, net of cash acquired                              |                                              |                                                    
|                                                                                  | Proceeds from sale of marketable securities                                |                                              |                                                    
|                                                                                  | Purchase of equity investments                                             |                                              |                                                    
|                                                                                  | Purchase of securities                                                     |                                              |                                                    
|                                                                                  |                                                                            |                                              |                                                    
|                                                                                  |                                                                            |                                              | Net cash used in investing activities              
|Cash flows from financig activities:                                              |                                                                            |                                              |                                                    
|                                                                                  | Repurchase of common stock                                                 |                                              |                                                    
|                                                                                  | Financing debt costs                                                       |                                              |                                                    
|                                                                                  | Reduction in taxes payablestock option exercises                          |                                              |                                                    
|                                                                                  | Net proceeds from issuance of common stock                                 |                                              |                                                    
|                                                                                  | Proceeds from long-term debt                                               |                                              |                                                    
|                                                                                  | Payments on long-term debt                                                 |                                              |                                                    
|                                                                                  |                                                                            |                                              |                                                    
|                                                                                  |                                                                            |                                              | Net cash provided by (used in) financing activities
|Effect of foreign exchange rates on cash                                          |                                                                            |                                              | (700                                               
|Net increase in cash and cash equivalents                                         |                                                                            |                                              | 111,012                                            
|Cash and cash equivalents, beginning of period                                    |                                                                            |                                              | 45,261                                             
|                                                                                  |                                                                            |                                              |                                                    
|Cash and cash equivalents, end of period                                          |                                                                            | $                                            | 156,273                                            
|                                                                                  |                                                                            |                                              |                                                    
|Non-cash financing transactions:                                                  |                                                                            |                                              |                                                    
|                                                                                  | Issuance of restricted stock                                               |                                              | $                                                  
|                                                                                  |                                                                            |                                              |                                                    
|Supplemental Cash Flow Information:                                               |                                                                            |                                              |                                                    
|                                                                                  | Cash paid for income taxes                                                 |                                              | $                                                  
|                                                                                  |                                                                            |                                              |                                                    
|                                                                                  | Cas paid for interest                                                      |                                              | $                                                  
|                                                                                  |                                                                            |                                              |                                                    

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SCIELE PHARMA, INC.  FORM 10-Q/A  INDEX

|PART I. FINANCIAL INFORMATION |  |                                                                                                                                  
|----------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------
|Item 1.                       |  | Consolidated Balance Sheets at September 30, 2007 (as restated) and December 31, 2006                                            
|                              |  | Consolidated Statements of Operations for the three and nine months ended September 30, 2007 (as restated) and September 30, 2006
|                              |  | Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 (as restated) and September 30, 2006          
|                              |  | Notes to Consolidated Financial Statements (as restated)                                                                         
|Item 2.                       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations (as restated)                              
|Item 4.                       |  | Controls and Procedures                                                                                                          
|PART II. OTHER INFORMATION    |  |                                                                                                                                  
|Item 1.                       |  | Exhibits                                                                                                                         
|                              |  | Signatures                                                                                                                       
|                              |  | Certifications                                                                                                                   

2

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SCIELE PHARMA, INC.        CONSOLIDATED BALANCE SHEETS        (in thousands, except share data)

|                                                                                                                                 |                                                                                                                                                           | September 30,
2007                         |         | December 31,
2006 |        
|-------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------------- | -------
|
|
|ASSETS                                                                                                                           |                                                                                                                                                           |                                            |         |                   |        
|Current assets:                                                                                                                  |                                                                                                                                                           |                                            |         |                   |        
|                                                                                                                                 | Cash and cash equivalents                                                                                                                                 |                                            | $       | 156,273           |        
|                                                                                                                                 | Marketable securities                                                                                                                                     |                                            |         | 47,943            |        
|                                                                                                                                 | Accounts receivable, net of allowances of $2,853 and $2,010 at September 30, 2007 and December 31, 2006, respectively                                     |                                            |         | 73,872            |        
|                                                                                                                                 | Inventories                                                                                                                                               |                                            |         | 24,879            |        
|                                                                                                                                 | Income taxes receivable                                                                                                                                   |                                            |         | 9,822             |        
|                                                                                                                                 | Current deferred tax assets                                                                                                                               |                                            |         | 4,553             |        
|                                                                                                                                 | Other current assets                                                                                                                                      |                                            |         | 34,649            |        
|                                                                                                                                 |                                                                                                                                                           |                                            |         |                   |        
|                                                                                                                                 |                                                                                                                                                           | Total current assets                       |         |                   | 351,991
|                                                                                                                                 |                                                                                                                                                           |                                            |         |                   |        
|Property and equipment, net                                                                                                      |                                                                                                                                                           |                                            | 19,235  |                   |        
|Other assets:                                                                                                                    |                                                                                                                                                           |                                            |         |                   |        
|                                                                                                                                 | Intangibles, net                                                                                                                                          |                                            |         | 423,082           |        
|                                                                                                                                 | Long term deferred tax assets                                                                                                                             |                                            |         | 150               |        
|                                                                                                                                 | Other                                                                                                                                                     |                                            |         | 24,774            |        
|                                                                                                                                 |                                                                                                                                                           |                                            |         |                   |        
|                                                                                                                                 |                                                                                                                                                           | Total other assets                         |         |                   | 448,006
|                                                                                                                                 |                                                                                                                                                           |                                            |         |                   |        
|                                                                                                                                 |                                                                                                                                                           | Total assets                               |         | $                 | 819,232
|                                                                                                                                 |                                                                                                                                                           |                                            |         |                   |        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                             |                                                                                                                                                           |                                            |         |                   |        
|Current liabilities:                                                                                                             |                                                                                                                                                           |                                            |         |                   |        
|                                                                                                                                 | Accounts payable                                                                                                                                          |                                            | $       | 39,355            |        
|                                                                                                                                 | Accrued expenses                                                                                                                                          |                                            |         | 28,992            |        
|                                                                                                                                 |                                                                                                                                                           |                                            |         |                   |        
|                                                                                                                                 |                                                                                                                                                           | Total current liabilities                  |         |                   | 68,347 
|Long-term liabilities:                                                                                                           |                                                                                                                                                           |                                            |         |                   |        
|                                                                                                                                 | Convertible debt                                                                                                                                          |                                            |         | 325,000           |        
|                                                                                                                                 | Deferred tax liabilities                                                                                                                                  |                                            |         | 2,942             |        
|                                                                                                                                 | Other long-term liabilities                                                                                                                               |                                            |         | 1,804             |        
|                                                                                                                                 |                                                                                                                                                           |                                            |         |                   |        
|                                                                                                                                 |                                                                                                                                                           | Total liabilities                          |         |                   | 398,093
|                                                                                                                                 |                                                                                                                                                           |                                            |         |                   |        
|Stockholders' equity:                                                                                                            |                                                                                                                                                           |                                            |         |                   |        
|                                                                                                                                 | Preferred stock, 1,000,000 shares authorized and none outstanding                                                                                         |                                            |         |                  |        
|                                                                                                                                 | Common stock, $0.001 par value; 100,000,000 shares authorized; 36,396,573 and 35,873,121 issued at September 30, 2007 and December 31, 2006, respectively |                                            |         | 36                |        
|                                                                                                                                 | Additional paid-in capital                                                                                                                                |                                            |         | 281,190           |        
|                                                                                                                                 | Retained earnings (See Note 13)                                                                                                                           |                                            |         | 161,851           |        
|                                                                                                                                 | Accumulated other comprehensive loss                                                                                                                      |                                            |         | (4,431            | )      
|                                                                                                                                 |                                                                                                                                                           |                                            |         |                   |        
|                                                                                                                                 |                                                                                                                                                           |                                            | 438,646 |                   |        
|Less: Treasury stock at cost, Common stock, 754,919 and 800,000 shares at September 30, 2007 and December 31, 2006, respectively |                                                                                                                                                           |                                            | (17,507 | )                 |        
|                                                                                                                                 |                                                                                                                                                           |                                            |         |                   |        
|                                                                                                                                 | Total stockholders' equity                                                                                                                                |                                            |         | 421,139           |        
|                                                                                                                                 |                                                                                                                                                           |                                            |         |                   |        
|                                                                                                                                 |                                                                                                                                                           | Total liabilities and stockholders' equity |         | $                 | 819,232
|                                                                                                                                 |                                                                                                                                                           |                                            |         |                   |        

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

3

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SCIELE PHARMA, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (unaudited, in thousands, except per share data)

|                                            |                                                                             | For The Three Months Ended September 30, |        | For The Nine Months Ended September 30, |       
|------------------------------------------- | --------------------------------------------------------------------------- | ---------------------------------------- | ------ | --------------------------------------- | ------
|
|
|Net revenues                                |                                                                             | $                                        | 99,372 |                                         | $     
|Operating costs and expenses:               |                                                                             |                                          |        |                                         |       
|                                            | Cost of revenues (excluding depreciation and amortization)                  |                                          |        | 13,304                                  |       
|                                            | Selling, general and administrative expense                                 |                                          |        | 47,061                                  |       
|                                            | Depreciation and amortization                                               |                                          |        | 7,587                                   |       
|                                            | Research and development expense                                            |                                          |        | 9,262                                   |       
|                                            |                                                                             |                                          |        |                                         |       
|                                            |                                                                             | Total operating costs and expenses       |        |                                         | 77,214
|                                            |                                                                             |                                          |        |                                         |       
|Operating income                            |                                                                             |                                          | 22,158 |                                         |       
|                                            |                                                                             |                                          |        |                                         |       
|Other income (expense):                     |                                                                             |                                          |        |                                         |       
|                                            | Interest expense                                                            |                                          |        | (2,964                                  | )     
|                                            | Interest income                                                             |                                          |        | 2,321                                   |       
|                                            | Other                                                                       |                                          |        |                                        |       
|                                            | In-process research and development in connection with an equity investment |                                          |        | (4,800                                  | )     
|                                            |                                                                             |                                          |        |                                         |       
|                                            |                                                                             | Total other income (expense)             |        |                                         | (5,443
|                                            |                                                                             |                                          |        |                                         |       
|Income before provision for income taxes    |                                                                             |                                          | 16,715 |                                         |       
|Provision for income taxes                  |                                                                             |                                          | 6,059  |                                         |       
|                                            |                                                                             |                                          |        |                                         |       
|Net income                                  |                                                                             | $                                        | 10,656 |                                         | $     
|Other comprehensive gain (loss)             |                                                                             |                                          | 361    |                                         |       
|                                            |                                                                             |                                          |        |                                         |       
|Comprehensive income                        |                                                                             | $                                        | 11,017 |                                         | $     
|                                            |                                                                             |                                          |        |                                         |       
|Net income per common share:                |                                                                             |                                          |        |                                         |       
|                                            | Basic earnings per common share                                             |                                          | $      | 0.30                                    |       
|                                            |                                                                             |                                          |        |                                         |       
|                                            | Diluted earnings per common share                                           |                                          | $      | 0.29                                    |       
|                                            |                                                                             |                                          |        |                                         |       
|Weighted average common shares outstanding: |                                                                             |                                          |        |                                         |       
|                                            | Basic                                                                       |                                          |        | 35,752                                  |       
|                                            |                                                                             |                                          |        |                                         |       
|                                            | Diluted                                                                     |                                          |        | 36,466                                  |       
|                                            |                                                                             |                                          |        |                                         |       

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

4

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SCIELE PHARMA, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        (unaudited, in thousands)

|                                                                                  |                                                                             | For The Nine Months Ended September 30,             |                                          
|--------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | --------------------------------------------------- | -----------------------------------------
|
|
|Cash flows from operating activities:                                             |                                                                             |                                                     |                                          
|Net income                                                                        |                                                                             | $                                                   | 34,292                                   
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                                             |                                                     |                                          
|                                                                                  | Depreciation and amortization                                               |                                                     |                                          
|                                                                                  | In-process research and development in connection with an equity investment |                                                     |                                          
|                                                                                  | Loss on sale of securities                                                  |                                                     |                                          
|                                                                                  | Loss on disposal of property and equipment                                  |                                                     |                                          
|                                                                                  | Non-cash compensation expense                                               |                                                     |                                          
|                                                                                  | Non-cash interest expense                                                   |                                                     |                                          
|                                                                                  | Deferred income tax expense                                                 |                                                     |                                          
|                                                                                  | Loss on extinguishment of debt                                              |                                                     |                                          
|                                                                                  | Changes in assets and liabilities, net of acquired assets and liabilities:  |                                                     |                                          
|                                                                                  |                                                                             | Accounts receivable                                 |                                          
|                                                                                  |                                                                             | Inventories                                         |                                          
|                                                                                  |                                                                             | Other current assets and other assets               |                                          
|                                                                                  |                                                                             | Income taxes receivable                             |                                          
|                                                                                  |                                                                             | Accrued expenses and other                          |                                          
|                                                                                  |                                                                             | Accounts payable                                    |                                          
|                                                                                  |                                                                             |                                                     |                                          
|                                                                                  |                                                                             |                                                     | Net cash provided by operating activities
|Cash flows from investing activities:                                             |                                                                             |                                                     |                                          
|                                                                                  | Purchases and advanced payments for products and licenses                   |                                                     |                                          
|                                                                                  | Purchase of property and equipment                                          |                                                     |                                          
|                                                                                  | Proceeds from sale of property and equipment                                |                                                     |                                          
|                                                                                  | Acquisition of business, net of cash acquired                               |                                                     |                                          
|                                                                                  | Proceeds from sale of marketable securities                                 |                                                     |                                          
|                                                                                  | Purchase of equity investments                                              |                                                     |                                          
|                                                                                  | Purchase of securities                                                      |                                                     |                                          
|                                                                                  |                                                                             |                                                     |                                          
|                                                                                  |                                                                             | Net cash used in investing activities               |                                          
|Cash flows from financing activities:                                             |                                                                             |                                                     |                                          
|                                                                                  | Repurchase of common stock                                                  |                                                     |                                          
|                                                                                  | Financing debt costs                                                        |                                                     |                                          
|                                                                                  | Reduction in taxes payablestock option exercises                           |                                                     |                                          
|                                                                                  | Net proceeds from issuance of common stock                                  |                                                     |                                          
|                                                                                  | Proceeds from long-term debt                                                |                                                     |                                          
|                                                                                  | Payments on long-term debt                                                  |                                                     |                                          
|                                                                                  |                                                                             |                                                     |                                          
|                                                                                  |                                                                             | Net cash provided by (used in) financing activities |                                          
|Effect of foreign exchange rates on cash                                          |                                                                             |                                                     | (700                                     
|Net increase in cash and cash equivalents                                         |                                                                             |                                                     | 111,012                                  
|Cash and cash equivalents, beginning of period                                    |                                                                             |                                                     | 45,261                                   
|                                                                                  |                                                                             |                                                     |                                          
|Cash and cash equivalents, end of period                                          |                                                                             | $                                                   | 156,273                                  
|                                                                                  |                                                                             |                                                     |                                          
|Non-cash financing transactions:                                                  |                                                                             |                                                     |                                          
|                                                                                  | Issuance of restricted stock                                                |                                                     | $                                        
|                                                                                  |                                                                             |                                                     |                                          
|Supplemental Cash Flow Information:                                               |                                                                             |                                                     |                                          
|                                                                                  | Cash paid for income taxes                                                  |                                                     | $                                        
|                                                                                  |                                                                             |                                                     |                                          
|                                                                                  | Cash paid for interest                                                      |                                                     | $                                        
|                                                                                  |                                                                             |                                                     |                                          

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

5

---





SCIELE PHARMA, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (unaudited)

1. Basis of Presentation

The accompanying unaudited interim consolidated financial statements of Sciele Pharma, Inc. (the "Company") reflect all adjustments which management
considers necessary for the fair presentation of the financial position, results of operations and cash flows of the Company for the interim periods. Certain footnote disclosures normally included in
financial statements prepared according to accounting principles generally accepted in the United States of America have been condensed or omitted from these interim financial statements as permitted
by the rules and regulations of the Securities and Exchange Commission. Interim results are not necessarily indicative of results for the full year. The interim results should be read in conjunction
with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2006 (File
No. 000-30123).

2. New Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 159, The Fair Value for
Financial Assets and Financial Liabilities. This Statement permits entities to choose to measure financial assets and liabilities,
with certain exceptions, at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at
each subsequent reporting date. This Statement is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. The Company has not determined the impact,
if any, SFAS No. 159 will have on its financial statements.

On
September 29, 2006, the FASB issued SFAS No. 158,Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plans. This Statement requires an employer to recognize the over funded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an
asset or liability in its statement of financial position and to recognize changes in that
funded status in the year in which the changes occur through comprehensive income. This statement also requires an employer to measure the funded status of a plan as of the date of its
year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined
benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. The requirement to measure plan assets and benefit
obligations as of the date of the employer's fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The adoption of SFAS
No. 158 is not expected to have a material impact on the Company's financial statements.

On
September 15, 2006 the FASB issued SFAS No. 157,Fair Value Measurements.The Statement provides guidance for using fair
value to measure assets and liabilities. This Statement references fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants in the market in which the reporting entity transacts. The Statement applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The
Statement does not expand the use of fair value in any new circumstances. It is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years. The Company has not determined the impact, if any, SFAS No. 157 will have on its financial statements.

6

---



SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

2. New Accounting Pronouncements (Continued)

In
July 2006, the FASB issued FASB Interpretation Number 48,Accounting for Uncertainty in Income Taxes("FIN No. 48"). FIN
No. 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN
No. 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. In addition, FIN No. 48
scopes out income taxes from SFAS No. 5,Accounting for Contingencies. FIN No. 48 is effective for fiscal years beginning after
December 15, 2006. As a result of the implementation, the Company recognized an increase of approximately $209,000 to reserve for uncertain tax positions. This increase was accounted for as an
adjustment to the beginning balance of retained earnings on the Balance Sheet as of January 1, 2007. See Note 13, "Income Taxes," for additional information.

In
June 2006, the Emerging Issues Task Force ("EITF") ratified the consensus on EITF 06-3, "How Taxes Collected from Customers and Remitted to Governmental Authorities
Should Be Presented in the Income Statement" ("EITF 06-3"). EITF 06-3 provides that taxes imposed by a governmental authority on a revenue producing transaction
between a seller and a customer should be shown in the income statement on either a gross or a net basis, based on the entity's accounting policy, which should be disclosed pursuant to Accounting
Principles Board Opinion No. 22, "Disclosure of Accounting Policies." Amounts that are allowed to be charged to customers as an offset to taxes owed by a company are not considered taxes
collected and remitted. If government-imposed taxes are significant, and are presented on a gross basis, the amounts of those taxes should be disclosed. EITF 06-3 will be effective
for interim and annual reporting periods beginning after December 15, 2006. Our policy is to
account for taxes collected from customers on a net basis. The adoption EITF 06-3 did not have a material impact on the Company's financial statements.

In
March 2006, the FASB issued SFAS No. 156,Accounting for Servicing of Financial Assets,which amends FAS 140, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities.In a significant change to current guidance, SFAS
No. 156 permits an entity to choose either of the following subsequent measurement methods for each class of separately recognized servicing assets and servicing liabilities:
(1) Amortization Method or (2) Fair Value Measurement Method. SFAS No. 156 is effective as of the beginning of an entity's first fiscal year that begins after September 15,
2006. The adoption of SFAS No. 156 did not have a material impact on the Company's financial statements.

In
February 2006, the FASB issued SFAS No. 155,Accounting for Certain Hybrid Financial Instrumentsan amendment of FASB Statements
No. 133 and 140.This Statement permits fair value of remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require
bifurcation; clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133,Accounting for
Derivative Instruments and Hedging Activities,establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding
derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; clarifies that concentrations of credit risk in the form of subordination are not
embedded derivatives; and amended SFAS No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,to
eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial
instrument. SFAS No. 155 is effective for all financial instruments

7

---



SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

2. New Accounting Pronouncements (Continued)

acquired
issued, or subject to a remeasurement (new basis) event occurring after the beginning of an entity's first fiscal year that begins after September 15, 2006. The adoption of SFAS
No. 155 did not have a material impact on the Company's financial statements.

In
May 2005, the FASB issued Statement 154,Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement
No. 3.The Statement requires retrospective application to prior periods' financial statements of a voluntary change in accounting principle unless it is deemed
impracticable, unless the change in accounting relates to the principle method of depreciation, amortization, or depletion for long-lived, non-financial assets in which case
the change is accounted for as a change in accounting estimate that is affected by a change in accounting principle. The Statement is effective for accounting changes and corrections of errors made
occurring in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 did not have a material impact on the Company's financial position or results of operations.

3. Stock Based Compensation

As of September 30, 2007, the Company had one stock-based compensation plan allowing for the issuance of stock options and restricted shares and an
employee stock ownership plan ("ESOP"). Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R) ("SFAS 123R"),
"Share-Based Payment", using the modified-prospective-transition method. Under that transition method, compensation cost recognized in the nine months
ended September 30, 2007 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair
value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on
the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R. The Company did not grant any stock options in the nine months ended September 30,
2007. The Company recognized $0.4 million and $1.5 million of stock-based compensation expense for stock options in the three and nine months ended September 30, 2007,
respectively. The Company recognized $0.6 million and $2.1 million of stock-based compensation expense for stock options in the three and nine months ended September 30, 2006,
respectively.

In
2006 and through September 30, 2007, the Company issued restricted stock and restricted units to board members, executives, and employees. The following table summarizes
restricted stock and restricted units outstanding at September 30, 2007 and changes during the nine months ended (shares in thousands):

Number of Shares Subject to
Issuance

Weighted Average Share PriceOutstanding at December 31, 2006

1,083

$
18.16Granted

243


24.69Cancelled

(60
)

21.37Issued

(119
)

18.01Outstanding at September 30, 2007

1,147

$
19.36


8

---



SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

3. Stock Based Compensation (Continued)

The
restrictions on the restricted stock and restricted units lapse according to one of two schedules. Under one schedule, the restrictions will lapse when specific key performance
objectives have been reached or on the fifth anniversary date of the issuance. Under the second schedule, the restrictions will lapse 25% annually over four years. The fair value of the restricted
stock and restricted units are expensed over the period during which the restrictions lapse. For the three months ended September 30, 2007 and September 30, 2006, the Company recognized
$1.5 million and $0.8 million, respectively, in deferred compensation expenses related to restricted shares. For the nine months ended September 30, 2007 and September 30,
2006, the Company recognized $4.6 million and $2.4 million, respectively, in deferred compensation expense related to the restricted shares.

The
Company's ESOP provides benefits to substantially all employees. The annual contribution, if any, to the ESOP is at the discretion of the Board of Directors of the Company. The
Company distributed 45,081 shares and 200,000 shares to the ESOP during the nine-month periods ending September 30, 2007 and September 30, 2006, respectively. The Company did
not recognize any expense related to the ESOP for the three months ended September 30, 2007, compared to $0.6 million for the three months ended September 30, 2006. In the nine
months ended September 30, 2007 and September 30, 2006, the Company recognized $1.0 million and $2.1 million, respectively, in compensation expense for the ESOP.

4. Marketable Securities

The Company classifies its existing marketable securities as available-for-sale. All available-for-sale securities
are classified as current as the Company has the ability to use them for current operating and investing purposes.

The
Company had no realized losses in the three and nine months ended September 30, 2007 and less than $0.1 million in realized losses for the three and nine months ended
September 30, 2006. The Company had a total of $0.3 million in net unrealized losses at September 30, 2007. At December 31, 2006, the Company had net unrealized losses from
marketable securities of $0.9 million. The carrying amount of available-for-sale securities and their approximate fair values at September 30, 2007 were as
follows (in thousands):

|                                               |                             | Amortized Cost |        | Gross Unrealized Gains |   | Gross Unrealized Losses |   | Estimated Fair Value
|---------------------------------------------- | --------------------------- | -------------- | ------ | ---------------------- | - | ----------------------- | - | --------------------
|U.S. Government and Federal agency obligations |                             | $              | 21,146 |                        | $ | 1                       |   | $                   
|All other corporate bonds                      |                             |                | 27,054 |                        |   | 2                       |   |                     
|                                               |                             |                |        |                        |   |                         |   |                     
|                                               | Total marketable securities |                | $      | 48,200                 |   | $                       | 3 |                     
|                                               |                             |                |        |                        |   |                         |   |                     

9

---



SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

4. Marketable Securities (Continued)

The
following table presents the age of gross unrealized losses and fair value by investment category for all securities in a loss position as of September 30, 2007 (in
thousands):

|                                               |                             | Less than 12 Months |        | 12 Months or More |   | Total |     
|---------------------------------------------- | --------------------------- | ------------------- | ------ | ----------------- | - | ----- | ----
|
|U.S. Government and Federal agency obligations |                             | $                   | 13,080 |                   | $ | (99   | )   
|Corporate bonds                                |                             |                     | 14,660 |                   |   | (19   | )   
|                                               |                             |                     |        |                   |   |       |     
|                                               | Total marketable securities |                     | $      | 27,740            |   | $     | (118
|                                               |                             |                     |        |                   |   |       |     

The
Company has determined that its unrealized losses are temporary based on the minor amount of the losses compared to amortized cost and the short duration of the losses, as well as
the credit worthiness of the investments. The Company expects that all losses will be recovered, and intends to hold securities to recovery. If market, industry and/or investee conditions deteriorate,
we may incur future impairments.

The
amortized cost and estimated fair value of marketable securities at September 30, 2007 by contractual maturity are shown below (in thousands):

Amortized Cost

Estimated Fair ValueDue in one year or less

$
5,852

$
5,844Due after one year through three years


29,657


29,425Due after three years through five years


2,734


2,717Due after five years


9,957


9,957$
48,200

$
47,943


The
carrying amount of available-for-sale securities and their approximate fair values at December 31, 2006 were as follows (in thousands):

|                                               |  | Amortized Cost |         | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Estimated Fair Value
|---------------------------------------------- |  | -------------- | ------- | ---------------------- | - | ----------------------- |  | --------------------
|U.S. Government and Federal agency obligations |  | $              | 52,437  |                        | $ |                        |  | $                   
|Corporate bonds                                |  |                | 69,685  |                        |   | 2                       |  |                     
|                                               |  |                |         |                        |   |                         |  |                     
|Total                                          |  | $              | 122,122 |                        | $ | 2                       |  | $                   
|                                               |  |                |         |                        |   |                         |  |                     

5. Inventories

Inventories consist of purchased pharmaceutical products, and are stated at the lower of cost or market. Cost is determined using the first-in,
first-out method, and market is considered to be net realizable value. Inventories consist of both finished product and bulk product awaiting processing and

10

---



SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

5. Inventories (Continued)

packaging
into finished product. Inventories, net of reserves of $0.2 million and $0.3 million at September 30, 2007 and December 31, 2006, respectively, consisted of (in
thousands):

September 30, 2007

December 31, 2006Bulk product

$
9,018

$
8,559Finished product


15,861


18,081Total inventories

$
24,879

$
26,640


6. Goodwill, Product Rights and Other Intangibles

In August 2007, the Company and LifeCycle Pharma received U.S. Food and Drug Administration ("FDA") approval for LifeCycle Pharma's novel formulation of
fenofibrate in 120-milligram and 40-milligram dosage strengths for the treatment of hyperlipidemia and hypertriglyceridemia. Under the terms of the agreement, the Company has
made payments of $9.0 million to LifeCycle Pharma. These payments are classified as licensing rights and will be amortized over the remaining useful life of the asset.

In
June 2007, the Company acquired Alliant Pharmaceuticals, Inc. ("Alliant") in a transaction accounted for under SFAS No. 141,Business
Combinations. Alliant was a specialty pharmaceutical company focused on acquiring, developing and commercializing proprietary products for the pediatric and pediatric specialty
markets. The Company has recorded approximately $127 million in intangible assets and goodwill for the acquisition of Alliant, which included $114.6 million in purchase price,
$1.0 million in transaction costs and $11.4 million in assumed liabilities.

Intangible
assets which are not deemed to have an indefinite life are amortized on a straight line basis over their respective useful lives.

The
following table reflects the components of intangible assets as of September 30, 2007 (in thousands):

|                               |  | Gross Amount |         | Accumulated Amortization |   | Net Amount |   | Expected Life
|------------------------------ |  | ------------ | ------- | ------------------------ | - | ---------- | - | -------------
|Licensing rights               |  | $            | 433,070 |                          | $ | (96,209    | ) | $            
|Trade names                    |  |              | 11,960  |                          |   | (3,373     | ) |              
|Supply/Distribution agreements |  |              | 10,350  |                          |   | (5,762     | ) |              
|Other intangibles              |  |              | 3,177   |                          |   | (965       | ) |              
|Goodwill                       |  |              | 70,834  |                          |   |           |   |              
|                               |  |              |         |                          |   |            |   |              
|Total                          |  | $            | 529,391 |                          | $ | (106,309   | ) | $            
|                               |  |              |         |                          |   |            |   |              

11

---



SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

6. Goodwill, Product Rights and Other Intangibles (Continued)

The following table reflects the components of all intangible assets as of December 31, 2006 (in thousands):

|                               |  | Gross Amount |         | Accumulated Amortization |   | Net Amount |   | Average Life
|------------------------------ |  | ------------ | ------- | ------------------------ | - | ---------- | - | ------------
|Licensing rights               |  | $            | 368,674 |                          | $ | (79,734    | ) | $           
|Trade names                    |  |              | 11,060  |                          |   | (2,845     | ) |             
|Contracts                      |  |              | 8,300   |                          |   | (8,049     | ) |             
|Supply/Distribution agreements |  |              | 10,350  |                          |   | (4,986     | ) |             
|Other intangibles              |  |              | 3,108   |                          |   | (838       | ) |             
|                               |  |              |         |                          |   |            |   |             
|Total                          |  | $            | 401,492 |                          | $ | (96,452    | ) | $           
|                               |  |              |         |                          |   |            |   |             

For
the three and nine months ended September 30, 2007, amortization expense related to the intangible assets was $6.7 million and $18.2 million, respectively.
Amortization is calculated on a straight-line basis over the estimated useful life of the intangible asset. Estimated annual amortization expense for each of the five succeeding fiscal
years is as follows (in thousands)

Fiscal year ended December 31:

Amount2007

$
26,7632008


26,7632009


26,7632010


26,7632011


26,492


7. Other Long-Term Assets

Other long term assets at September 30, 2007 and December 31, 2006 consisted of the following (in thousands):

September 30, 2007

December 31, 2006(restated)Deferred finance costs

$
8,092

$
6,634Advanced refundable payments for product licenses


9,000


Deposits


49


29Long-term investments


7,633


Total other assets

$
24,774

$
6,663


In
May 2007, the Company purchased a $6.4 million equity stake in Plethora Solutions Holding plc ("Plethora") in conjunction with the closing of the exclusive licensing
agreement to market Plethora's product, PSD502, for premature ejaculation. Sciele has purchased 1,772,505 new ordinary shares in Plethora. The Company's investment in Plethora amounts to approximately
5.6% of the ordinary shares outstanding. Plethora is headquartered in the United Kingdom and is listed on the London Stock Exchange (AIM:PLE). Per the agreement with Plethora, the shares purchased
will not be sold until

12

---



SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

7. Other Long-Term Assets (Continued)

June
2011. The investment in Plethora is accounted for under the cost method. The investment is classified as long term securities under other long term assets on the balance sheet.

In
July 2007, the Company signed an exclusive agreement with Addrenex Pharmaceuticals, Inc. to market, upon approval by the U.S. Food & Drug Administration (FDA), Clonicel,
a patented, extended-release formulation of clonidine hydrochloride for the treatment of hypertension and attention deficit and hyperactivity disorder in North America. Under the terms of the
agreement, the Company paid $6 million, of which $1.2 million was allocated to an equity stake in Addrenex and $4.8 million was expensed as in-process research and development.
The Company will have the right to increase its equity position in the future. The Company will also make regulatory milestone payments of up to $11 million and royalty payments to Addrenex on
future product sales. In accordance with Accounting Principles Board Opinion No. 18,The Equity Method of Accounting for Investments in Common
Stock, the Company's Addrenex investment will be accounted for using the equity method. The $1.2 million asset is classified as long term securities under other long
term assets on the balance sheet.

8. Accrued Expenses

Accrued expenses at September 30, 2007 and December 31, 2006 consisted of the following below (in thousands). During the three months ended
September 30, 2007, the Company changed its method of accounting for product rebates and increased the estimated liability for product rebates by $1.6 million.

September 30, 2007

December 31, 2006Employee compensation and benefits

$
8,593

$
3,706Product returns


6,771


1,568Product rebates


1,586


1,763Sales deductions


5,384


4,203Accrued royalties


4,250


4,960Other


2,408


2,765Total accrued expenses

$
28,992

$
18,965


9. Long-term Debt

On May 14, 2007, the Company issued and sold $325 million aggregate principal amount of its 2.625% Contingent Convertible Senior Notes due 2027 (the
"Notes") in a registered offering under the Securities Act of 1933, as amended. The Notes were initially sold pursuant to an underwriting agreement, dated May 9, 2007, between the Company and
UBS Securities LLC, as representative of the underwriters. The Notes are due May 15, 2027 and accrued interest is payable semi-annually in arrears on May 15 and
November 15 of each year, beginning November 15, 2007. In addition to the interest on the Notes, after May 15, 2012, we are also required to pay contingent interest during
specified six-month periods if the average trading price of the Notes per $1,000 principal amount for the five day trading period ending on the third trading day immediately preceding the
first day of the applicable six-month period equals $1,200 or more. During any period when contingent interest is

13

---



SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

9. Long-term Debt (Continued)

payable,
it will be payable at a rate equal to 0.5% per annum. In addition, if we default in our reporting obligations under the indenture, we can elect to pay special interest on the Notes at a rate
equal to 0.25% per annum as the sole remedy for a specified period of time.

The
Notes are our senior unsecured obligations and rank equally in right of payment with each other and with all of our other senior unsecured indebtedness. The Notes will be
subordinated in right of payment to all of our existing and future secured indebtedness (to the extent of the value of the collateral securing the same). The indenture does not contain any restriction
on the payment of dividends, the incurrence of indebtedness or the repurchase of our securities, and does not contain any financial covenants.

Conversion Rights.Holders may convert the Notes only under the following circumstances:



14

---





SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

9. Long-term Debt (Continued)

The Notes will be convertible into cash and, if applicable, shares of our common stock as follows: Upon conversion, holders will receive, per $1,000 principal
amount being converted, a "settlement amount" that is equal to the sum of the "daily settlement amounts" for each of the 30 trading days during the "cash settlement averaging period." The "daily
settlement amount" for each trading day consists of (i) cash equal to the lesser of $33.33 and the "daily conversion value"; and (ii) to the extent the daily conversion value exceeds
$33.33, a number of shares equal to the excess of the daily conversion value over $33.33, divided by the volume-weighted average price per share of our common stock on that trading day. The "cash
settlement averaging period" is the 30 consecutive trading days beginning on, and including, the third trading day following the conversion date; provided that if a Note is surrendered for conversion
within the period prior to maturity, the cash settlement averaging period is the 30 consecutive trading days beginning on, and including, the 30th scheduled trading day prior to the maturity
date. The "daily conversion value" on a given trading day generally means one-thirtieth of the product of the applicable conversion rate and the volume-weighted average price per share of
our common stock on that trading day.

The
Company will adjust the conversion rate applicable to the Notes in the event we make any cash distributions to holders of our common stock. The Notes are subject to additional
anti-dilution protection that covers stock dividends, subdivisions, combinations and reclassifications of common stock, distributions of certain rights and warrants, distributions in kind
and certain issuer tender and exchange offers. The Company capitalized $9.4 million in association with the issuance of the 2007 Notes. It will be amortized over the estimated life of the loan.

In
March 2004, the Company issued a total of $150.0 million of its 1.75% senior subordinated contingent convertible notes due in 2024 (the "2004 Notes") in transactions that were
exempt from registration in reliance upon Rule 144A and other available exemptions under the Securities Act. In May 2006 and pursuant to a registered exchange offer, the Company exchanged each
outstanding 2004 Note with new notes (the "2006 Notes") that, among other things, required the Company to redeem the $150.0 million 2004 Notes with cash instead of common stock.

In
June 2007, the Company redeemed all of its 2006 Notes with the proceeds from the issuance of the Notes, in accordance with the indenture dated May 3, 2006. In addition to the
$150 million face value of the bonds, bondholders received a total of 839,930 shares of Company stock, pursuant to the terms of the exchange offer. The remaining capitalized financing costs
associated with the 2006 Notes exchange of $5.3 million were expensed in the second quarter of 2007.

10. Credit Agreement

On September 18, 2006, we entered into a senior secured credit agreement (the "Credit Agreement") with UBS Securities LLC and LaSalle Bank National
Association as lead arrangers, UBS AG, Stamford Branch, as issuing bank, administrative agent and collateral agent, Regents Bank, Fifth Third Bank and Bank of America, N.A. as
co-documentation agents and UBS Loan Finance LLC, as swing line lender. The Credit Agreement provides us and our Cayman subsidiary, Sciele Pharma Cayman Ltd., with a
five-year revolving credit facility of up to $100 million, with an option to expand the facility credit line by up to an additional $75 million.

Amounts
outstanding under the new credit facility generally bear interest at the lenders' corporate base rate or LIBOR, plus a specified margin of between 1.75% and 2.5% depending on our
ratio of

15

---



SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

10. Credit Agreement (Continued)

indebtedness
to earnings. The Credit Agreement contains customary negative covenants and financial covenants.

Our
obligations under the Credit Agreement are secured by a pledge of substantially all of our assets and are guaranteed by substantially all of our subsidiaries that are not borrowers.

We
terminated our previous credit agreement with LaSalle Bank National Association, dated February 11, 2003, as subsequently amended, upon entering into the new Credit Agreement.

The
Company had no debt outstanding under the credit facility as of September 30, 2007.

11. Share Buyback Program

The Company adopted a share repurchase program effective August 3, 2006, that authorizes the repurchase of up to $30.0 million of its outstanding
shares of common stock over the next twelve months with no periodic sub-limits on the amount of repurchases. This plan replaced all prior share repurchase plans and expired on
August 2, 2007. In the third quarter of 2006, the Company repurchased 409,973 shares of common stock at an average cost of $19.19 per share, or $7.9 million. In the first quarter of
2007, the Company repurchased 18,822 shares of common stock at an average cost of $23.87 per share, or $0.4 million. In the second quarter of 2007, the Company repurchased 567,870 shares of
common stock at an average cost of $24.59 per share, or $14.0 million. In the third quarter of 2007, under the old plan, the Company did not repurchase any shares of common stock. All
repurchased shares have been retired.

On
August 3, 2007, the Company adopted a new share repurchase program authorizing the repurchase of up to $40.0 million of outstanding common stock. This plan replaces all
prior share repurchase plans and will expire on August 2, 2008. In the third quarter of 2007, the Company repurchased 305,214 shares of common stock at an average cost of $22.94, or
$7.0 million. These shares have been retired. As of September 30, 2007, $33.0 million is available for repurchases under the program.

|Fiscal Period                          |  | Total
Number of
Shares
Purchased |  | Average
Price
Per Share |       | Total Number of
Shares Purchased
as Part of Publicly
Announced Plans |         | Plan |   | Approximate Dollar
Value of Shares
that May Yet Be
Purchased Under
the Plans
|-------------------------------------- |  | -------------------------------- |  | ----------------------- | ----- | -------------------------------------------------------------------- | ------- | ---- | - | ----------------------------------------------------------------------------
|January 1 through March 31, 2007       |  | 18,822                           |  | $                       | 23.87 |                                                                      | 18,822  |      | 1 |                                                                             
|April 1 through June 30, 2007          |  | 567,870                          |  | $                       | 24.59 |                                                                      | 567,870 |      | 1 |                                                                             
|July 1 through August 2, 2007          |  |                                 |  | $                       |      |                                                                      |        |      | 1 |                                                                             
|August 3 through August 31, 2007       |  | 209,915                          |  | $                       | 23.03 |                                                                      | 209,915 |      | 2 |                                                                             
|September 1 through September 30, 2007 |  | 95,299                           |  | $                       | 22.74 |                                                                      | 95,299  |      | 2 |                                                                             
|                                       |  |                                  |  |                         |       |                                                                      |         |      |   |                                                                             
|Total                                  |  | 891,906                          |  | $                       | 24.02 |                                                                      | 891,906 |      |   |                                                                             
|                                       |  |                                  |  |                         |       |                                                                      |         |      |   |                                                                             

Plan 1 refers to the Share Repurchase Plan effective August 3, 2006 through August 2, 2007. Plan 2 refers to the Share Repurchase Plan effective August 3,
2007 through August 2, 2008.

16

---



SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

12. Earnings Per Share

Below is the calculation of basic and diluted net income per share (in thousands except per share data):

|                                                                          |  | For The
Three Months
Ended September 30, |        | For The Nine Months
Ended September 30,
|------------------------------------------------------------------------- |  | ---------------------------------------- | ------ | ---------------------------------------
|
|
|Net income                                                                |  | $                                        | 10,656 |                                        
|Add: Interest expense on the old contingent convertible notes, net of tax |  |                                          |       |                                        
|                                                                          |  |                                          |        |                                        
|Adjusted net income                                                       |  | $                                        | 10,656 |                                        
|                                                                          |  |                                          |        |                                        
|Weighted average common shares outstandingbasic                          |  |                                          | 35,752 |                                        
|Diluted effect of stock options restricted shares and convertible debt    |  |                                          | 714    |                                        
|                                                                          |  |                                          |        |                                        
|Weighted average common shares outstandingdiluted                        |  |                                          | 36,466 |                                        
|                                                                          |  |                                          |        |                                        
|Basic earnings per common share:                                          |  | $                                        | 0.30   |                                        
|                                                                          |  |                                          |        |                                        
|Diluted earnings per common share:                                        |  | $                                        | 0.29   |                                        
|                                                                          |  |                                          |        |                                        

For
the three months ended September 30, 2007, there were 81,475 potential common shares outstanding that were excluded from the diluted net income per share calculation because
their effect would have been anti-dilutive. For the nine months ended September 30, 2007, there were 81,475 potential common shares outstanding that were excluded from the diluted
net income per share calculation because their effect would have been anti-dilutive. There were no shares of unvested restricted stock that were anti-dilutive for the three or
nine months ended September 30, 2007. For the three and nine months ended September 30, 2006, there were 819,429 and 800,681 potential common shares outstanding and 53,500 and 37,000
shares of unvested restricted stock, respectively, that were excluded from the diluted net income per share calculation because their effect would have been anti-dilutive.

13. Income Taxes

The Company adopted FASB Interpretation 48,Accounting for Uncertainty in Income Taxes("FIN 48"), on
January 1, 2007. As a result of the implementation, the Company recognized an increase of approximately $209,000 to reserves for uncertain tax positions. This increase in reserves was accounted
for as an adjustment to the beginning balance of retained earnings on the Balance Sheet. Including the cumulative effect increase, on January 1, 2007, the Company had approximately $684,000 of
total gross unrecognized tax benefits, which includes interest of approximately $140,000. Of this total, approximately $445,000 (net of the federal benefit on state issues) represents the amount of
unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods. The Company recognized interest and/or penalties related to income tax
matters in income tax expense.

The
Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. The Company should not be subject to U.S.
federal income tax

17

---



SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

13. Income Taxes (Continued)

examinations
for tax years before 2003. Furthermore, the Company should not be subject to state and local examinations before 2001 or foreign tax examinations before 2002.

During
2007, the statute of limitations in certain state and local jurisdictions will expire. However, the Company does not expect the statute to have a material impact on their tax
reserves.

14. Segment Reporting

The Company is engaged solely in the business of developing, marketing and selling prescription pharmaceutical products. Accordingly, the Company's business is
classified in a single reportable segment: the development, sale and marketing of prescription pharmaceutical products. Prescription products include a variety of branded pharmaceuticals for the
treatment of cardiovascular and metabolic diseases, women's health and pediatric health conditions.

The
following presents revenues for prescription products by area of treatment:

|                        |  | For The
Three Months
Ended September 30, |        | For The Nine Months
Ended September 30,
|----------------------- |  | ---------------------------------------- | ------ | ---------------------------------------
|
|Cardiovascular/Diabetes |  | $                                        | 65,349 |                                        
|Women's Health          |  |                                          | 21,316 |                                        
|Pediatrics/other        |  |                                          | 12,707 |                                        
|                        |  |                                          |        |                                        
|Net revenues            |  | $                                        | 99,372 |                                        
|                        |  |                                          |        |                                        

15. Commitments and Contingencies

The Company, certain former and current officers and directors are defendants in a consolidated securities lawsuit filed on August 22, 2002 in the United
States District Court for the Northern District of Georgia. Plaintiffs in the class action alleged in general terms that we violated Sections 11 and
12(a) (a) of the Securities Act of 1933 and that we violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. In
an amended complaint, Plaintiffs claim that we issued a series of materially false and misleading statements to the market in connection with our public offering on April 24, 2002 and
thereafter relating to alleged "channel stuffing" activities. The amended complaint also alleged controlling person liability on behalf of certain of our officers under Section 15 of the
Securities Act of 1933 and Section 20 of the Securities Exchange Act of 1934. Plaintiffs seek an unspecified amount of compensatory damages.

On
September 29, 2004, the U.S. District Court for the Northern District of Georgia held that the amended complaint was a "shotgun" pleading because it failed to properly link the
allegations with the causes of action. The court indicated that it would dismiss, without prejudice, the class action lawsuit unless Plaintiffs amended their complaint to correct the pleading
deficiencies and pay all of the Defendants' fees and costs associated with filing the motion to dismiss the lawsuit. Plaintiffs did not file a second amended complaint as permitted, but instead
filed a motion asking the District Court to lift the condition in its September 29, 2004 order that they must pay Defendants' fees and costs before further amendment. On June 22, 2005,
the District Court denied Plaintiffs' motion and gave them another opportunity to amend if they paid Defendants' fees and costs. Once again, Plaintiffs chose not

18

---



SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

15. Commitments and Contingencies (Continued)

to
file a second amended complaint. Instead, Plaintiffs filed an appeal to the United States Court of Appeals for the Eleventh Circuit.

On
September 18, 2006, the Eleventh Circuit Court of Appeals affirmed the District Court's determination that the Amended Complaint was a "shotgun pleading" that did not satisfy
the pleading requirements under the federal rules. The Court of Appeals, however, disagreed with the remedy ordered by the District Court. Instead of dismissing the Amended Complaint with a right to
further amend if Plaintiffs paid Defendants' fees and costs, the Court of Appeals held that the District Court should have ordered Plaintiffs to replead under Federal Rule of Civil Procedure 12(e).
The Court of Appeals also held that Plaintiffs' claims under the Securities Act of 1933 must meet the heightened pleading standards of Federal Rule of Civil Procedure 9(b) because those claims sound
in fraud. Accordingly, the Court of Appeals vacated the District Court's orders and remanded with instructions to order a repleading. On April 20, 2007, Plaintiffs filed a second amended
complaint. On June 29, 2007, the Company filed a motion to dismiss the second amended complaint, which currently is pending. No accrual is recorded in the Company's financial statements related
to this case as the Company believes that its risk of loss is remote.

The
Company shall continue to vigorously defend this action.

On
September 10, 2007, the Company received a Paragraph 4 certification in connection with Sular 40mg indicating that Mylan Laboratories, Inc. wishes to introduce a
generic version of this product. The certification relates to U.S. Patent No. 4,892,741 for the product which expires June 8, 2008. As a result, the Company has initiated patent
litigation in the United States District Court for the District of Delaware.

The
Company is also involved with other various legal proceedings incident to the course of business. None of these proceedings are expected to have a material adverse effect on the
consolidated financial statements.

16. Restatement

The Company restated its financial results for the three and nine months ended September 30, 2007.

On
February 26, 2008, the Company was informed by its independent registered public accounting firm, BDO Seidman, LLP ("BDO Seidman"),
that due primarily to the ownership of approximately 20% of the voting stock of Addrenex, the Company's appointment of one director to Addrenex's three person board of directors, as well as the
magnitude of the Company's cash investment ($6 million) relative to Addrenex's equity after the investment, the Company is deemed to have significant influence over Addrenex. As a result, in
accordance with Accounting Principles Board Opinion No. 18,The Equity Method of Accounting for Investments in Common Stock("APB No. 18"), the Company's Addrenex investment should be accounted for using the equity method as opposed to the cost method as previously
reflected in the Company's September 30, 2007 Form 10-Q.

As
a result of the required change in accounting treatment for the Company's investment in Addrenex, the Company recorded a charge to acquired in-process R&D in connection with our
equity investment and a corresponding reduction of $4.8 million to its investment in Addrenex which is reported in other long term assets on the Company's balance sheet. The effect on net
income after tax

19

---



SCIELE PHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

16. Restatement (Continued)

adjustments
for the quarter ended September 30, 2007 was a reduction in net income of $3.2 million, or $0.09 per diluted share.

Effect
of the adjustment on the consolidated statements of operations for the three and nine months ended September 30, 2007, is as follows:

|                             |                                                               | For the Three Months
Ended September 30, 2007 |        | For the Nine Months
Ended September 30, 2007 |  
|---------------------------- | ------------------------------------------------------------- | --------------------------------------------- | ------ | -------------------------------------------- | -
|
|                             | In-process research and development loss on equity investment |                                               |        |                                             |  
|                             |                                                               |                                               |        |                                              |  
|Provision for income taxes   |                                                               |                                               | 7,666  |                                              |  
|                             |                                                               |                                               |        |                                              |  
|Net income                   |                                                               | $                                             | 13,849 |                                              | $
|Net income per common share: |                                                               |                                               |        |                                              |  
|                             | Basic earnings per common share                               |                                               | $      | 0.39                                         |  
|                             |                                                               |                                               |        |                                              |  
|                             | Diluted earnings per common share                             |                                               | $      | 0.38                                         |  
|                             |                                                               |                                               |        |                                              |  

Effect
of the adjustment on the consolidated balance sheet as September 30, 2007 is as follows:

|                                           |                          | September 30, 2007
|------------------------------------------ | ------------------------ | ------------------
|
|                                           | Income tax receivable    |                   
|                                           | Other long term assets   |                   
|                                           |                          |                   
|Total assets                               |                          | $                 
|                                           |                          |                   
|                                           | Deferred tax liabilities |                   
|                                           | Retained earnings        |                   
|                                           |                          |                   
|Total liabilities and stockholders' equity |                          | $                 
|                                           |                          |                   

Effect of the adjustment on the consolidated statement of cash flows for the nine months ended September 30, 2007 is as follows:

|           |                                                               | For the Nine Months Ended September 30, 2007 |       
|---------- | ------------------------------------------------------------- | -------------------------------------------- | ------
|
|Net income |                                                               | $                                            | 37,485
|           | In-process research and development loss on equity investment |                                              |       
|           | Deferred income tax expense                                   |                                              |       
|           |                                                               | Income taxes receivable                      |       

20

---





ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (AS RESTATED)

The following should be read with the consolidated financial statements and related footnotes and Management's Discussion and Analysis of Results of Operations
and Financial Condition included in the Company's Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 000-30123). The results
discussed below are not necessarily indicative of the results to be expected in any future periods. The following discussion contains forward-looking statements that are subject to risks and
uncertainties, which could cause actual results to differ from the statements made.

Overview

Sciele Pharma, Inc. is a pharmaceutical company specializing in sales, marketing and development of branded prescription products focused on
Cardiovascular/Diabetes, Women's Health, and Pediatric treatment. The Company's Cardiovascular/Diabetes products treat patients with high cholesterol, hypertension, high triglycerides, unstable
angina, and Type 2 Diabetes. Its Women's Health products are designed to improve the health and well-being of women of all ages, as well as expectant and nursing mothers and their
babies. Its Pediatric product focus includes the sub-specialties of allergy and immunology, psychiatry, neurology, urology and infectious diseases.            Headquartered in
Atlanta, Georgia, and founded in 1992, Sciele Pharma employs more than 900 people. Our key promoted products include:

Cardiology/Diabetes

Women's Health

PediatricAltoprev

Prenate DHA

AllegraFortamet

Prenate Elite

MethylinNitrolingual

Zovirax

OrapredSularTriglide


Our
current operating plan focuses on maximizing the sales of our existing product portfolio. We also plan to accelerate growth by launching line extensions to our current products and
by acquiring or licensing approved products or late stage development products and other businesses. We plan to focus on products that complement our Cardiovascular/Diabetes, Women's Health and
Pediatric categories that will allow us to leverage our existing sales force infrastructure as well as additional therapeutic areas which compliment our existing sales structure.

We
currently market and sell 21 products, 11 of which are actively promoted and which accounted for approximately 87.5% of our total sales for the nine months ended September 30,
2007. We promote our products through our nationwide sales and marketing force, targeting high-prescribing primary care physicians, endocrinologists, cardiologists, obstetricians and
gynecologists, and pediatrics.

Results of Operations

Net Revenue.Net revenues for the three months ended September 30, 2007 increased $24.6 million or 33% to
$99.4 million, as compared to $74.8 million for the three months ended September 30, 2006. Net revenues for the nine months ended September 30, 2007 increased
$63.7 million or 30% to $277.3 million, as compared to $213.6 million for the nine months ended September 30, 2006. Net revenues from our promoted products increased by
$21.2 million and $54.9 million for the three and nine months ended September 30, 2007, respectively, as a result of the addition of our new Pediatric products, growth from
increased promotion of our pre-existing products, as well as continued success in the execution of our marketing strategy. In addition we have seen the continued growth of Zovirax and
Sular scripts which is attributed to the successful leveraging of our improved managed care position by our sales force, as well as price increases. Net revenues from our

21

---



non-promoted
product revenues increased by $3.4 million and $8.8 million for the three and nine months ended September 30, 2007, respectively. The fluctuation for the
nine month period ended September 30, 2007 was primarily related to larger Furadantin shipments in the first quarter of 2007, due to manufacturing issues resolved in the first quarter of 2007.

Product Overview

|                |  | Change in total dispensed prescriptions
for the three months ended
September 30, 2007 compared
to the three months ended
September 30, 2006(a) |    | Change in new dispensed prescriptions
for the three months ended
September 30, 2007 compared
to the three months ended
September 30, 2006(a) |   
|--------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------- | -- | -------------------------------------------------------------------------------------------------------------------------------------------- | --
|Altoprev        |  | (37.5                                                                                                                                          | )% | (44.1                                                                                                                                        | )%
|Fortamet        |  | (13.4                                                                                                                                          | )% | (23.5                                                                                                                                        | )%
|Nitrolingual(b) |  | 0.7                                                                                                                                            | %  | 0.5                                                                                                                                          | % 
|Sular           |  | 5.2                                                                                                                                            | %  | 2.5                                                                                                                                          | % 
|Triglide        |  | 31.2                                                                                                                                           | %  | 25.7                                                                                                                                         | % 
|Prenate DHA(c)  |  | N/A                                                                                                                                            |    | N/A                                                                                                                                          |   
|Prenate Elite   |  | (7.9                                                                                                                                           | )% | (7.6                                                                                                                                         | )%
|Zovirax(d)      |  | N/A                                                                                                                                            |    | N/A                                                                                                                                          |   
|Allegra         |  | N/A                                                                                                                                            |    | N/A                                                                                                                                          |   
|Methylin        |  | 39.5                                                                                                                                           | %  | 39.3                                                                                                                                         | % 
|Orapred         |  | 151.3                                                                                                                                          | %  | 156.2                                                                                                                                        | % 

---

Net
revenues from our Cardiolovascular and Metabolic products (namely Sular, Fortamet, Triglide, Altoprev and Nitrolingual) were $65.4 million and $192.3 million for the
three and nine months ended September 30, 2007, compared to $59.6 million and $164.6 million for the three and nine months ended September 30, 2006, respectively. The
increase was primarily due to the continued growth of Sular, Nitrolingual Pumpspray, and Triglide, as well as price increases implemented in the first quarter of 2007. Cardiovascular/diabetes products
represented 66.0% of the Company's total sales in the third quarter of 2007.

Net
revenues from our Women's Health products (namely Prenate DHA, Prenate Elite, OptiNate, Zovirax, Ponstel and Ostiva), were $21.3 million and $57.7 million for the three
and nine months ended September 30, 2007 compared to $12.7 million and $37.9 million for the three and nine months ended September 30, 2006. This increase is primarily
related to the expansion of our women's health sales force in the first quarter of 2007, which resulted in an increase in Prenate Elite's market share. In June 2007, the Company launched
Prenate DHA, the first and only prescription prenatal vitamin with 300 milligrams of DHA (from a total 365 mg of omega-3 fatty acids) which is the highest amount available in a
prescription prenatal vitamin.

Net
revenues for our Pediatrics and other products were $12.7 million and $27.3 million for the three and nine months ended September 30, 2007 compared to
$2.4 million and $11.1 million for the three and nine months ended September 30, 2006. The increase in revenues for pediatric and

22

---



non-promoted
products were the result of the Alliant acquisition, larger shipments of Furadantin in the first quarter of 2007, due to manufacturing issues resolved in the first quarter of
2007.

Cost of Revenues.Cost of revenues for the three and nine months ended September 30, 2007 were $13.3 million
and $37.2 million, compared to $10.3 million and $30.2 million for the three and nine months ended September 30, 2006. The increase in cost of revenues is related to the
change in product mix, increases in freight costs and the increase in sales for the three and nine months ended September 30, 2007 as compared to the equivalent periods ending
September 30, 2006.

Gross Margin.Gross margin for the three and nine months ended September 30, 2007 were 86.6% and 86.6%, respectively,
compared to 86.2% and 85.8% for the three and nine months ended September 30, 2006, respectively. This increase in gross margin for the three and nine months ended September 30, 2007 is
the result of a change in product mix and price increases.

Selling, General and Administrative Expenses.Selling, general and administrative ("SG&A") expenses increased
$11.2 million, or 31%, to $47.1 million for the three months ended September 30, 2007, compared to $35.9 million for the three months ended September 30, 2006. SG&A
expenses increased $28.3 million, or 26%, to $135.3 million for the nine months ended September 30, 2007, compared to
$107.0 million for the nine months ended September 30, 2006. The increase in SG&A expense in the third quarter of 2007 is primarily due to costs associated with the launch of Prenate
DHA, the cost of the new Alliant sales force, higher royalties and commissions, and new marketing programs associated with certain products. Also affecting SG&A expenses was an increase in stock
compensation expense in the first three months of 2007 related to the acceleration of vesting for restricted shares. The acceleration is the result of the achievement of defined goals by the Company.

Depreciation and Amortization Expense.Depreciation and amortization expense increased $0.8 million, or 12%, to
$7.6 million for the quarter ended September 30, 2007 compared to $6.8 million for the quarter ended September 30, 2006. Depreciation and amortization expense increased
$0.8 million, or 4%, to $20.6 million for the nine months ended September 30, 2007 compared to $19.8 million for the nine months ended September 30, 2006. The
increase in amortization expense is primarily related to the addition of our intangibles related to Zovirax, and the final Sular milestone paid in 2006 and the new Pediatric products acquired in the
second quarter of 2007. The increase was offset by the decrease in amortization expense related to completing the amortization of a portion of Sular intangible assets in the first quarter of 2007.

Research and Development Expense.Research and development ("R&D") expense increased $4.8 million to $9.3 million for the
three months ended September 30, 2007 compared to $4.5 million for the three months ended September 30, 2006. R&D expense increased $12.0 million to $23.3 million for the nine
months ended September 30, 2007 compared to $11.3 million for the same period in 2006. This increase in the third quarter of 2007, was primarily related to in-process R&D
charges for recently licensed products, completion of Phase III patient enrollments for both Glycopyrrolate and the Pravastatin/Fenofibrate combination, and the expansion of the Company's
clinical and regulatory group. The Company also incurred development expenses related to new Sular formulation in the first nine months of 2007.

Interest Expense.Interest expense was $3.0 million and $5.8 million for the three and nine months ended
September 30, 2007 compared to $0.9 million and $2.4 million for the three and nine months ended September 30, 2006. The increase is due to the issuance of the
$325 million convertible bonds (see Note 9) as well as the entry into the new $100 million secured credit facility in September 2006 (see Note 10). The increase was
partially offset by the elimination of the interest expense related to our retired $150 million contingent convertible note.

23

---



Interest Income.Interest income was $2.3 million and $7.5 million for the three and nine months ended
September 30, 2007, compared to $1.4 million and $3.4 million for the three and nine months ended September 30, 2006. The increase is primarily due to higher average cash
balance, due to timing of the new $325 million contingent convertible notes being issued in May 2007 offset by the extinguishment of the $150 million contingent convertible notes in June
2007 and the closing of the acquisition of Alliant
in June 2007. In addition, we have benefited from larger cash generation from sales and higher returns on current investments.

Other Expense.Other expense was $5.3 million for the nine months ended September 30, 2007. The Company
incurred $5.3 million which was related to the retirement of $150 million contingent convertible debt and the write-off of the related capitalized finance costs in the second
quarter of 2007. There were no comparative expenses for the same period in 2006.

Loss on Equity Investments.The Company incurred $4.8 million of in-process research and development in
connection with an equity investment relating to Addrenex in the third quarter of 2007. There were no comparative expenses for the same period in 2006.

Provision for Income Taxes.Income taxes were provided for at a rate of 36.3% and 34.7% for the three and nine months ended
September 30, 2007, respectively, compared to 31.0% and 31.8% for the three and nine months ended September 30, 2006. This increase in the effective tax rate is due to the change in the
mix of tax jurisdictions, both domestic and international, as a result of our implementation of international operations where our income was earned, adjustments recorded into our 2006 tax filings, as
well as a change in the ratio of non-deductible expenses to pre-tax income.



Our cash and cash equivalents were $156.3 million on September 30, 2007 compared to $45.3 million at December 31, 2006. Net cash
provided by operating activities for the nine months ended September 30, 2007 was $42.3 million. This source of cash was primarily the result of net income of $34.3 million, resulting primarily
from the sales of our promoted products, an increase in accounts payable of $14.0 million, primarily related to increased business volume, an in-process research and development in connection
with an equity investment related to Addrenex of $4.8 million, a decrease in inventory of $1.9 million, primarily related to increased sales, and an increase in accrued expenses and
other long-term liabilities of $0.2 million, primarily related to increased commissions and royalties as a result of increased sales. Additional providers of cash include
non-cash items of depreciation and amortization of $20.6 million, stock based compensation expenses of $7.1 million, interest expense of $1.2 million and the loss on
the extinguishment of debt of $5.3 million. Partially offsetting these cash providers were cash uses related to an increase in income tax receivable of $5.2 million related primarily to
estimated tax payments made during the year, an increase in accounts receivable of $24.3 million, as a result of increase sales, deferred income tax expense of $4.7 million, and an increase in
other current assets of $12.9 million.

We
maintain supply agreements with third party suppliers for most of our products. Some of these supply agreements contain minimum purchase requirements. For most of these supply
agreements, we
believe that our inventory requirements and related purchases of inventory will exceed the minimum purchase requirement in 2007. In those cases in which we do not believe our purchases will exceed the
minimum purchase requirements, we are seeking to negotiate waivers or modifications of the minimum purchase requirements.

Our
cash and cash equivalents were $35.6 million on September 30, 2006 compared to $17.0 million at December 31, 2005. Net cash provided by operating
activities for the nine months ended September 30, 2006 was $74.3 million. This source of cash was primarily the result of net income of $31.6 million, resulting primarily from
the sales of our promoted products, a decrease in accounts

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receivable
of $5.1 million, as a result of an overall reduction in our days sales outstanding, an increase in accounts payable of $1.8 million, primarily related to increased business
volume, a decrease in inventory of $4.1 million, primarily related to improved inventory management, an increase of $1.4 million for other current assets and other assets and an increase
of $4.4 million in accrued expenses and other long-term liabilities, primarily related to the $5.0 million milestone payment for Sular which was paid in October 2006 and
partially offset by decreases in general accruals. Additional cash providers include adjustment for non-cash expense items of depreciation and amortization of $19.8 million, stock
based compensation expenses of $6.5 million, interest expense of $0.3 million, deferred income tax expenses of $3.7 million, recognized losses on the disposal of property and
equipment of $0.2 million and less than $0.1 million for the loss on sale of securities. Partially offsetting these cash providers was an increase in income tax receivable of
$4.6 million related primarily to estimated tax payments made during the year.

Net
cash used in investing activities for the nine months ended September 30, 2007 was $81.3 million. The primary uses of this cash were related to the $113.8 million
purchase of Alliant, net of the cash acquired, the $16.8 million for the purchases and advanced payments for products and licenses, primarily related to the purchase of fenofibrate of
$9.0 million, the purchase of securities of $246.7 million, purchase of equity investments of $12.2 million and the acquisition of property plant and equipment of $12.5 million,
primarily for the development of a manufacturing line and new computer and audio-visual systems for the home office. The uses of cash were offset by proceeds from the sale of securities of
$320.7 million.

Net
cash used in investing activities for the nine months ended September 30, 2006 was $44.9 million. The principal uses of this cash were for the purchase of marketable
securities of $131.1 million, of which $94.9 million were reinvestment from maturing securities, $3.2 million for the purchase of property and equipment, primarily for new office
furniture and computer systems for the new home office, $5.0 million for a milestone payment to Bayer Healthcare AG in January 2006, and a $0.6 million payment for the launch of Ostiva
in September 2006. Partially offsetting these uses was $0.1 million of proceeds from the sale of property and equipment.

Net
cash provided by financing activities was $150.7 million for the nine months ended September 30, 2007 primarily resulting from the issuance of $325.0 million
contingent convertible senior notes, $4.6 million from the issuances of common stock related to shares issued in connection with the
retirement of the $150 million convertible notes and executive and employee stock options and restricted shares, and $2.0 million for a non-cash reduction in taxes payable
relating to stock options. Partially offsetting the cash proceeds was the retirement of the $150.0 million senior subordinated contingent convertible notes, the repurchase of our common stock
for $21.4 million and $9.4 million in capitalizable debt cost related to the issuance of the $325 million notes costs associated with the exchange of the contingent convertible
debt, discussed in footnote 10 of our financial statements.

Net
cash used in financing activities was $12.0 million for the nine months ended September 30, 2006 primarily resulting from the common stock repurchase of
$14.8 million and the incurrence of $3.8 million in debt financing costs relating to the exchange of the contingent convertible debt, discussed in footnote 10 of our financial
statements, of $1.8 million and the secured debt agreement, discussed in footnote 11 of our financial statements, of $1.9 million. Partially offsetting this net cash used was
$4.4 million for the issuances of common stock related to executive and employee stock options and $2.1 million for a non-cash reduction in taxes payable relating to stock
options.

We
believe that our cash on hand, cash we expect to generate from our operations and cash available under our revolving credit facility will be sufficient to fund our working capital
requirements, at least for the next twelve months. However, in the event that we make significant acquisitions, we may need to raise additional funds through additional borrowings or the issuance of
debt or equity

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securities,
or both. Some of our supply agreements contain minimum purchase requirements. We expect we will also experience growth in our accounts receivable as our sales increase.

On
May 14, 2007, the Company issued and sold $325 million aggregate principal amount of its 2.625% Contingent Convertible Senior Notes due 2027 (the "2007 Notes") in a
registered offering under the Securities Act of 1933, as amended. The Notes were initially sold pursuant to an underwriting agreement, dated May 9, 2007, between the Company and UBS
Securities LLC, as Representative of the underwriters named therein, all as more thoroughly described in Note 10 to our financial statements.

In
June 2007, following the issuance of the 2007 Notes and with the proceeds therefrom, the Company redeemed all of its 1.75% Contingent Convertible Senior Subordinated Notes Due 2024,
in accordance with the indenture dated May 3, 2006. In addition to the $150 million face value of the redeemed notes, the noteholders received a total of 839,930 shares of Company stock,
pursuant to the terms of the exchange offer.

On
September 18, 2006, we entered into a senior secured credit agreement (the "Credit Agreement") with UBS Securities LLC and LaSalle Bank National Association as lead
arrangers, UBS AG, Stamford Branch, as issuing bank, administrative agent and collateral agent, Regents Bank, Fifth Third Bank and Bank of America, N.A. as co-documentation agents and UBS
Loan Finance LLC, as swing line lender. The Credit Agreement provides us and our Cayman subsidiary, Sciele Pharma
Cayman Ltd., with a five-year revolving credit facility of up to $100 million, with an option to expand the facility credit line by up to an additional $75 million.

Amounts
outstanding under the new credit facility generally bear interest at the lenders' corporate base rate or the LIBOR, plus a specified margin of between 1.75% and 2.5% depending on
our ratio of indebtedness to earnings. The Credit Agreement contains customary negative covenants and financial covenants.

Our
obligations under the Credit Agreement are secured by a pledge of substantially all of our assets and are guaranteed by substantially all of our subsidiaries that are not borrowers.

We
terminated our previous credit agreement with LaSalle Bank National Association, dated February 11, 2003, as subsequently amended, upon entering into the new Credit Agreement.

The
Company adopted a share repurchase program effective August 3, 2006, that authorizes the repurchase of up to $30.0 million of its outstanding shares of common stock
over the next twelve months with no periodic sub-limits on the amount of repurchases. This plan replaced all prior share repurchase plans and expired on August 2, 2007. In the third
quarter of 2006, the Company repurchased 409,973 shares of common stock at an average cost of $19.19 per share, or $7.9 million. In the first quarter of 2007, the Company repurchased 18,822
shares of common stock at an average cost of $23.87 per share, or $0.4 million. In the second quarter of 2007, the Company repurchased 567,870 shares of common stock at an average cost of
$24.59 per share, or $14.0 million. In the third quarter of 2007, under the old plan, the Company did not repurchase any shares of common stock. All repurchased shares have been retired.

On
August 3, 2007, the Company adopted a new share repurchase program authorizing the repurchase of up to $40.0 million of outstanding common stock. This plan replaces all
prior share repurchase plans and will expire on August 2, 2008. In the third quarter of 2007, the Company repurchased 305,214 shares of common stock at an average cost of $22.94, or
$7.0 million. These shares have been retired. As of September 30, 2007, $33.0 million is available for repurchases under the program.

We
expect that our existing sources of working capital or liquidity will be sufficient to enable us to execute our main operational goals of maximizing the sales of our existing products
and acquiring companies having such products, accelerating growth by launching line extensions to our current products and acquiring or licensing approved products or late stage development products,
as well as any capital requirements necessary to meet these operational goals.

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Critical Accounting Policies

We view our critical accounting policies to be those policies which are very important to the portrayal of our financial condition and results of operations, and
require management's most difficult, complex or subjective judgments. The circumstances that make these judgments difficult or complex relate to the need for management to make estimates about the
effect of matters that are inherently uncertain. We believe our critical accounting policies are as follows:



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Forward Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a
number of risks and uncertainties. Although our forward-looking statements reflect the good faith judgment of our management, these statements can only be based on facts and factors currently known by
us. Consequently, forward-looking statements are inherently subject to risks and uncertainties. Actual results and outcomes may differ materially from results and outcomes discussed in the
forward-looking statements.

Risks
and uncertainties that could cause our forward-looking statements to fail to occur include, but are not limited to, the following:



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These
risk factors are not exhaustive. We may not have correctly identified and appropriately assessed all factors affecting our business and the publicly available and other information
with respect to these matters may not be complete and correct. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial also may adversely impact us.
Should any risks and uncertainties develop into actual events, these developments could have material adverse effects on our business, financial condition, and results of operations. For these
reasons, we caution you not to place undue reliance on our forward-looking statements.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to certain market risks that arise in the ordinary course of business. A discussion of the Company's primary market risk exposure is
presented below.

Foreign Currency Exchange Risk

Our purchases of Sular, Triglide and Nitrolingual are made in Euros. Although we did not enter into any forward contracts in the third quarter of 2007, we may
eliminate risks from foreign currency fluctuations after the time of shipment of product by entering into forward contracts for these purchases of inventory at the time of product shipments. The
Company's earnings and cash flows could be adversely affected in the future by the relationship of the U.S. dollar with foreign currencies.

Market Risk on Investments

The fair value of our investment portfolio would be negatively affected by an increase in interest rates. Since the majority of the Company's investments are
fixed rate interest-bearing securities and therefore subject to the risk of loss in market value from an increase in rates or a change in the underlying risk of the issuers of the notes, the Company's
future earnings and cash flows could be affected adversely if the Company were to sell the securities prior to their maturity date. There were no realized losses from the sale of investments for the
quarter ended September 30, 2007. At September 30, 2007, the Company had total net unrealized losses from marketable securities of $0.3 million.

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Market Risk on Variable Rate Debt

In connection with borrowings we may make under the senior secured revolving credit facility arranged by UBS Securities LLC, we could experience market
risk with respect to changes in the general level of the interest rates and its effect upon our interest expense. Borrowings under this facility bear interest at variable rates. Because such rates are
variable, an increase in interest rates will result in additional interest expense and a reduction in interest rates will result in reduced interest expense. Accordingly, our present exposure to
interest rate fluctuations is primarily dependent on rate changes that may occur while borrowings under this credit facility are outstanding. On September 30, 2007, there was no debt
outstanding under this facility.

Market Risk on Fixed Rate Debt

The Company's long-term fixed interest rate senior subordinated contingent convertible notes are also subject to market risk. Fixed rate debt
outstanding at September 30, 2007 was $325.0 million with an interest rate of 2.625%. All other things being equal, the fair market value of the Company's fixed rate debt will increase
as rates decline and will decrease as rates rise. The fixed rate notes outstanding totaling $325.0 million at September 30, 2007 had a fair value of $348.7 million based on quoted
market rates.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file under
the Securities Exchange Act of 1934, as amended ("Exchange Act"). These reports are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. After
discussions with our registered independent public accountant, we carried out an additional evaluation under the supervision and with the participation of management, including our Chief Executive
Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) of the Exchange Act as
of the end of the period covered by this Amendment and we have concluded that a control deficiency relating to the review and analysis of the Company's minority investments in other companies
constituted a material weakness in our disclosure controls and internal controls over financial reporting. Accordingly, our Chief Executive Officer and our Chief Financial Officer have concluded that
our disclosure controls were not effective as of September 30, 2007. Specifically, with respect to the Addrenex investment (as described in the Explanatory Note to this Amendment), the
Company's accounting determination with sufficient application of APB No. 18. After investigation with respect to other Company transactions, management has determined the control deficiency
has not resulted in other incidences of the misapplication of APB No. 18. To improve controls over financial reporting for investments in third parties, management has taken steps to remediate
this deficiency by establishing an internal policy to seek outside professional advice with respect to its accounting treatment of significant investments in third parties.

Changes in Internal Control over Financial Reporting

There have been no changes in Sciele Pharma's primary internal controls over financial reporting during the third fiscal quarter of 2007 that have materially
affected, or are reasonably likely to materially affect, Sciele Pharma's internal controls over financial reporting.

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PART IIOTHER INFORMATION

ITEM 1:    EXHIBITS

|31.1 |  | Certifications of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                         
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.2 |  | Certifications of Chief Financial Officer, Secretary and Treasurer pursuant to Securities Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                   
|32.2 |  | Certification of Chief Financial Officer, Secretary and Treasurer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                          

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SIGNATURES

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

|                        |  | SCIELE PHARMA, INC.(Registrant)
|----------------------- |  | -------------------------------
|Date: February 29, 2008 |  | By:                            
|Date: February 29, 2008 |  | By:                            

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