##### Table of Contents



UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended September 30, 2005
 Commission file number: 0-27406
 CONNETICS CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction of
incorporation or organization)
    
    94-3173928(IRS Employer
Identification Number)3160 Porter Drive
Palo Alto, California(Address of principal executive offices)
    
    94304(Zip Code)
 Registrants telephone number, including area code: (650) 843-2800
 þ o
 þ o
 o þ




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CONNETICS CORPORATION
 TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets at September 30, 2005 and December 31, 2004
    
    
    3Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2005 and 2004
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2005 and 2004
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 6. Exhibits
    
    
    22Signatures
    
    
    24Exhibits
    
    
    25EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 CONNETICS CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 September 30,
    
    
    December 31,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    30,018
    
    
    $
    18,261Marketable securities
    
    
    238,847
    
    
    
    54,122Restricted cash  current
    
    
    1,000
    
    
    
    1,000Accounts receivable, net of allowances
    
    
    17,709
    
    
    
    21,206Inventory, net
    
    
    5,411
    
    
    
    5,020Prepaid expenses
    
    
    8,825
    
    
    
    7,561Other current assets
    
    
    3,626
    
    
    
    1,963Total current assets
    
    
    305,436
    
    
    
    109,133Property and equipment, net
    
    
    14,306
    
    
    
    11,830Restricted cash  long term
    
    
    3,059
    
    
    
    2,963Debt issuance costs, deposits and other assets
    
    
    12,604
    
    
    
    3,707Goodwill and other intangible assets, net
    
    
    118,461
    
    
    
    128,659Total assets
    
    $
    453,866
    
    
    $
    256,292LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    15,755
    
    
    $
    14,531Assumed liabilities related to acquisition of product rights
    
    
    2,070
    
    
    
    2,710Accrued payroll and related expenses
    
    
    6,345
    
    
    
    5,746Product rebate and coupon accruals
    
    
    12,765
    
    
    
    10,564Accrued clinical trial costs
    
    
    1,122
    
    
    
    751Other accrued liabilities
    
    
    6,775
    
    
    
    3,650Total current liabilities
    
    
    44,832
    
    
    
    37,952Convertible senior notes
    
    
    290,000
    
    
    
    90,000Other non-current liabilities
    
    
    546
    
    
    
    420Commitments and contingenciesStockholders equity:
    
    
    
    
    
    
    Preferred stock
    
    
    
    
    
    
    Common stock
    
    
    35
    
    
    
    36Additional paid-in capital
    
    
    209,942
    
    
    
    237,666Deferred stock compensation
    
    
    
    
    
    
    (13
    )Accumulated deficit
    
    
    (92,265
    )
    
    
    (111,173
    )Accumulated other comprehensive income
    
    
    776
    
    
    
    1,404Total stockholders equity
    
    
    118,488
    
    
    
    127,920Total liabilities and stockholders equity
    
    $
    453,866
    
    
    $
    256,292
 See accompanying notes to condensed consolidated financial statements.
 3




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CONNETICS CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Product
    
    $
    55,183
    
    
    $
    36,999
    
    
    $
    142,612
    
    
    $
    98,564Royalty and contract
    
    
    158
    
    
    
    345
    
    
    
    469
    
    
    
    2,015Total revenues
    
    
    55,341
    
    
    
    37,344
    
    
    
    143,081
    
    
    
    100,579Operating costs and expenses:Cost of product revenues
    
    
    4,183
    
    
    
    3,067
    
    
    
    12,931
    
    
    
    8,213Amortization of intangible assets
    
    
    3,399
    
    
    
    3,399
    
    
    
    10,198
    
    
    
    8,071Research and development
    
    
    8,382
    
    
    
    6,180
    
    
    
    23,237
    
    
    
    15,717Selling, general and administrative
    
    
    23,702
    
    
    
    16,986
    
    
    
    76,867
    
    
    
    49,746Acquired in-process research
and development and milestone expense
    
    
    
    
    
    
    3,500
    
    
    
    
    
    
    
    3,500Total operating costs and expenses
    
    
    39,666
    
    
    
    33,132
    
    
    
    123,233
    
    
    
    85,247Income from operations
    
    
    15,675
    
    
    
    4,212
    
    
    
    19,848
    
    
    
    15,332Interest income
    
    
    2,130
    
    
    
    303
    
    
    
    4,452
    
    
    
    803Interest expense
    
    
    (2,007
    )
    
    
    (706
    )
    
    
    (4,638
    )
    
    
    (2,087
    )Other income (expense), net
    
    
    37
    
    
    
    30
    
    
    
    (26
    )
    
    
    11Income before income taxes
    
    
    15,835
    
    
    
    3,839
    
    
    
    19,636
    
    
    
    14,059Income tax provision
    
    
    470
    
    
    
    144
    
    
    
    728
    
    
    
    1,034Net income
    
    $
    15,365
    
    
    $
    3,695
    
    
    $
    18,908
    
    
    $
    13,025Net income per share:Basic
    
    $
    0.44
    
    
    $
    0.10
    
    
    $
    0.54
    
    
    $
    0.37Diluted
    
    $
    0.39
    
    
    $
    0.10
    
    
    $
    0.50
    
    
    $
    0.35Shares used to calculate net income per share:Basic
    
    
    35,075
    
    
    
    35,510
    
    
    
    35,197
    
    
    
    34,794Diluted
    
    
    40,812
    
    
    
    38,064
    
    
    
    41,665
    
    
    
    37,179
 See accompanying notes to condensed consolidated financial statements.
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CONNETICS CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months EndedSeptember 30,2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    18,908
    
    
    $
    13,025Adjustments to reconcile net income to net cash from operating activities:Depreciation
    
    
    1,260
    
    
    
    1,082Amortization of intangible assets
    
    
    10,199
    
    
    
    8,071Amortization of convertible senior notes offering costs
    
    
    911
    
    
    
    552Allowance for discounts, returns and chargebacks
    
    
    1,397
    
    
    
    8,666Stock compensation expense
    
    
    13
    
    
    
    13Changes in assets and liabilities:Accounts receivable
    
    
    2,103
    
    
    
    (8,250
    )Prepaids and other assets
    
    
    (5,705
    )
    
    
    (2,003
    )Inventory
    
    
    (336
    )
    
    
    (3,916
    )Accounts payable
    
    
    1,622
    
    
    
    11,989Product rebates and coupon accruals
    
    
    2,201
    
    
    
    3,360Accrued and other current liabilities
    
    
    3,600
    
    
    
    (11
    )Other non-current liabilities
    
    
    126
    
    
    
    Net cash provided by operating activities
    
    
    36,299
    
    
    
    32,578Cash flows from investing activities:Purchases of marketable securities
    
    
    (300,033
    )
    
    
    (46,608
    )Sales and maturities of marketable securities
    
    
    114,772
    
    
    
    90,926Purchases of property and equipment
    
    
    (3,873
    )
    
    
    (4,096
    )Transfer to restricted cash
    
    
    (96
    )
    
    
    (3,659
    )Acquisition of patent and product rights
    
    
    
    
    
    
    (123,529
    )Net cash used in investing activities
    
    
    (189,230
    )
    
    
    (86,966
    )Cash flows from financing activities:Proceeds from issuance of convertible senior notes, net of issuance costs
    
    
    192,625
    
    
    
    Proceeds from issuance of common stock, net of issuance costs
    
    
    
    
    
    
    56,901Repurchase of common stock
    
    
    (35,000
    )
    
    
    Proceeds from exercise of stock options and employee stock purchase plan,
net of repurchases of unvested shares
    
    
    7,135
    
    
    
    4,813Net cash provided by financing activities
    
    
    164,760
    
    
    
    61,714Effect of foreign currency exchange rate changes on cash and cash equivalents
    
    
    (72
    )
    
    
    (113
    )Net change in cash and cash equivalents
    
    
    11,757
    
    
    
    7,213Cash and cash equivalents at beginning of period
    
    
    18,261
    
    
    
    17,946Cash and cash equivalents at end of period
    
    $
    30,018
    
    
    $
    25,159
 See accompanying notes to condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Basis of Presentation and Policies
   Principles of Consolidation
  Use of Estimates
   Revenue Recognition
 Product Revenues
   6




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Royalty Revenue
 Contract Revenue
  Inventory
  Stock-Based Compensation
   pro forma
 7




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(in thousands except per share amounts):
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net income, as reported
    
    $
    15,365
    
    
    $
    3,695
    
    
    $
    18,908
    
    
    $
    13,025Add: Stock-based employee compensation
expense, net of related tax effects
    
    
    5
    
    
    
    5
    
    
    
    13
    
    
    
    13Deduct: Total stock-based employee
compensation expense determined under the
fair value method for all awards, net of
related tax effects
    
    
    (4,010
    )
    
    
    (2,743
    )
    
    
    (13,661
    )
    
    
    (8,044
    )Pro forma net income
    
    $
    11,360
    
    
    $
    957
    
    
    $
    5,260
    
    
    $
    4,994Net income per share:Basic net income  as reported
    
    $
    0.44
    
    
    $
    0.10
    
    
    $
    0.54
    
    
    $
    0.37Diluted net income  as reported
    
    $
    0.39
    
    
    $
    0.10
    
    
    $
    0.50
    
    
    $
    0.35Basic net income  pro forma
    
    $
    0.32
    
    
    $
    0.03
    
    
    $
    0.15
    
    
    $
    0.14Diluted net income  pro forma
    
    $
    0.28
    
    
    $
    0.03
    
    
    $
    0.13
    
    
    $
    0.13
  Stock Option Plans
    
    Stock Option PlansThree Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Expected stock volatility
    
    
    47.1
    %
    
    
    55.8
    %
    
    
    47.1
    %
    
    
    56.3
    %Risk-free interest rate
    
    
    3.9
    %
    
    
    2.9
    %
    
    
    3.6
    %
    
    
    2.8
    %Expected life (in years)
    
    
    4.0
    
    
    
    3.4
    
    
    
    4.0
    
    
    
    3.4Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
 Stock Purchase Plan
    
    Stock Purchase PlanThree Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Expected stock volatility
    
    
    55.9
    %
    
    
    47.6
    %
    
    
    52.1
    %
    
    
    44.4
    %Risk-free interest rate
    
    
    1.5
    %
    
    
    3.1
    %
    
    
    1.6
    %
    
    
    2.6
    %Expected life (in years)
    
    
    1.4
    
    
    
    1.6
    
    
    
    1.4
    
    
    
    1.5Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
  pro forma
 Recent Accounting Pronouncements
 pro forma
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Note 2. Net Income Per Share
  (in thousands except
per share amounts)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income, as reported
    
    $
    15,365
    
    
    $
    3,695
    
    
    $
    18,908
    
    
    $
    13,025Add: interest on convertible note, net of tax effect
    
    
    655
    
    
    
    
    
    
    
    1,966
    
    
    
    Net income, diluted
    
    $
    16,020
    
    
    $
    3,695
    
    
    $
    20,874
    
    
    $
    13,025Basic weighted-average shares outstanding
    
    
    35,075
    
    
    
    35,510
    
    
    
    35,197
    
    
    
    34,794Effect of:Dilutive stock options
    
    
    1,534
    
    
    
    2,525
    
    
    
    2,265
    
    
    
    2,350Dilutive warrants
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    35Convertible debt
    
    
    4,203
    
    
    
    
    
    
    
    4,203
    
    
    
    Diluted weighted-average shares outstanding
    
    
    40,812
    
    
    
    38,064
    
    
    
    41,665
    
    
    
    37,179Net income per share:Basic
    
    $
    0.44
    
    
    $
    0.10
    
    
    $
    0.54
    
    
    $
    0.37Diluted    
    $
    0.39
    
    
    $
    0.10
    
    
    $
    0.50
    
    
    $
    0.35
 (in thousands)
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Common stock equivalents:Options
    
    
    3,053
    
    
    
    18
    
    
    
    1,456
    
    
    
    15Convertible debt
    
    
    
    
    
    
    4,203
    
    
    
    
    
    
    
    4,203Total
    
    
    3,053
    
    
    
    4,221
    
    
    
    1,456
    
    
    
    4,218
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Note 3. Comprehensive Income
 (in thousands)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income
    
    $
    15,365
    
    
    $
    3,695
    
    
    $
    18,908
    
    
    $
    13,025Foreign currency translation adjustment
    
    
    (9
    )
    
    
    109
    
    
    
    (92
    )
    
    
    (252
    )Change in unrealized gain on
securities, net of reclassification
adjustments for realized gain (loss)
    
    
    (362
    )
    
    
    (140
    )
    
    
    (536
    )
    
    
    (571
    )Comprehensive income
    
    $
    14,994
    
    
    $
    3,664
    
    
    $
    18,280
    
    
    $
    12,202
  Note 4. Convertible Senior Notes and Stock Repurchase
     Note 5. Inventory
 (in thousands)
 September 30,
    
    
    December 31,2005
    
    
    2004Raw materials
    
    $
    1,212
    
    
    $
    677Finished goods, net of allowance for excess and obsolete inventory
    
    
    4,199
    
    
    
    4,343Total inventory
    
    $
    5,411
    
    
    $
    5,020
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Note 6. Goodwill and Purchased Intangible Assets
 (in thousands)
 September 30, 2005
    
    
    December 31, 2004Useful Life
    
    Gross Carrying
    
    
    Accumulated
    
    
    
    
    
    
    Gross Carrying
    
    
    Accumulatedin Years
    
    Amount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    NetAcquired product rights
    
    10
    
    $
    127,652
    
    
    $
    (20,212
    )
    
    $
    107,440
    
    
    $
    127,652
    
    
    $
    (10,638
    )
    
    $
    117,014Existing technology
    
    10
    
    
    6,810
    
    
    
    (3,036
    )
    
    
    3,774
    
    
    
    6,810
    
    
    
    (2,525
    )
    
    
    4,285Patents
    
    10 to 13
    
    
    1,661
    
    
    
    (686
    )
    
    
    975
    
    
    
    1,661
    
    
    
    (572
    )
    
    
    1,089Total
    
    
    
    $
    136,123
    
    
    $
    (23,934
    )
    
    $
    112,189
    
    
    $
    136,123
    
    
    $
    (13,735
    )
    
    $
    122,388
  (in thousands)
 AmortizationExpenseRemaining three months in 2005
    
    $
    3,399For the year ending December 31, 2006
    
    
    13,598For the year ending December 31, 2007
    
    
    13,598For the year ending December 31, 2008
    
    
    13,598For the year ending December 31, 2009
    
    
    13,598For the year ending December 31, 2010
    
    
    13,598Thereafter
    
    
    40,800Total
    
    $
    112,189
 Note 7. Guaranties and Indemnifications
   Note 8. Co-Promotion Agreements
  11




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Note 9. Commitments








Note 10. Subsequent Events


Litigation with Perrigo. R






Repurchase of Common Stock.




12



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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   
    
    OLUX (clobetasol propionate) Foam, 0.05%, a super high-potency topical steroid prescribed for the treatment of steroid
responsive dermatological diseases of the scalp and mild to moderate plaque-type psoriasis of non-scalp regions excluding
the face and intertriginous areas;
    
    Luxíq (betamethasone valerate) Foam, 0.12%, a mid-potency topical steroid prescribed for scalp dermatoses such as
psoriasis, eczema and seborrheic dermatitis;
    
    Soriatane (acitretin), an oral medicine for the treatment of severe psoriasis; and
    
    Evoclin (clindamycin phosphate) Foam, 1%, a topical treatment for acne vulgaris.
   tm
    13




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Critical Accounting Policies




14



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Results of Operations
 Revenues
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(In thousands)
    
    
    (In thousands)2005
    
    
    2004
    
    
    2005
    
    
    2004Product revenues:Soriatane
    
    $
    23,077
    
    
    $
    14,724
    
    
    $
    58,992
    
    
    $
    35,518OLUX
    
    
    17,323
    
    
    
    15,962
    
    
    
    47,148
    
    
    
    45,555Luxíq
    
    
    7,014
    
    
    
    6,281
    
    
    
    18,503
    
    
    
    17,366Evoclin
    
    
    7,724
    
    
    
    
    
    
    
    17,828
    
    
    
    Other
    
    
    45
    
    
    
    32
    
    
    
    141
    
    
    
    125Total product revenues
    
    
    55,183
    
    
    
    36,999
    
    
    
    142,612
    
    
    
    98,564Royalty and contract revenues:Royalty
    
    
    158
    
    
    
    58
    
    
    
    386
    
    
    
    1,583Contract
    
    
    
    
    
    
    287
    
    
    
    83
    
    
    
    432Total royalty and contract revenues
    
    
    158
    
    
    
    345
    
    
    
    469
    
    
    
    2,015Total revenues
    
    $
    55,341
    
    
    $
    37,344
    
    
    $
    143,081
    
    
    $
    100,579
    Cost of Product Revenues
  15




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Amortization of Intangible Assets
  Research and Development
   Selling, General and Administrative Expenses
    Interest and other income (expense), net
  16




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Income Taxes
  Liquidity and Capital Resources
 Working Capital
   Capital Expenditures
  Capital Resources
    17




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Contractual Obligations and Commercial Commitments
   (in thousands)
 Increase inOperating LeasePaymentsFor the year ending December 31, 2006
    
    $
    339For the year ending December 31, 2007
    
    
    303For the year ending December 31, 2008
    
    
    315For the year ending December 31, 2009
    
    
    338For the year ending December 31, 2010
    
    
    88Total
    
    $
    1,383
  Recent Accounting Pronouncements
  Factors that May Affect Future Results, Financial Condition and the Market Price of Securities
 Please also read Item 1 in our Annual Report on Form 10-K for the year ended December 31,
2004, where we have described our business and the challenges and risks we may face in the future.
  18




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Our Business Strategy May Cause Fluctuating Operating Results
  
    
    changes in the levels we spend to develop new product lines,
    
    changes in the amounts we spend to promote our products,
    
    the cost of litigation to protect our products or defend our intellectual property,
    
    changes in treatment practices of physicians that currently prescribe our products,
    
    changes in reimbursement policies of health plans and other similar health insurers, including changes that affect newly
developed or newly acquired products,
    
    increasing regulatory requirements that may affect timing of new product development and ultimate commercialization,
    
    the development of new competitive products by others,
    
    the mix of products that we sell during any time period,
    
    increases in the cost of raw materials used to manufacture our products,
    
    our responses to price competition,
    
    costs of product distribution service agreements and potential changes;
    
    forward-buying patterns by wholesalers that may result in quarterly swings in revenue reporting, and
    
    fluctuations in royalties paid by third parties.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
 R
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Item 6. Exhibits
 ExhibitNumber
    
    Description10.1*
    
    Consulting Agreement dated August 22, 2005 between Connetics
Corporation and G. Kirk Raab (previously filed as Exhibit 10.1
to the Companys Current Report on Form 8-K dated August 24,
2005 and filed with the Commission on August 25, 2005)10.2*
    
    Non-Qualified Stock Option Agreement between Connetics
Corporation and Scott William Meggs (previously filed as Exhibit
10.27 to the Companys Form S-1 Registration Statement No.
333-125982 filed on August 26, 2005)10.3*
    
    Non-Qualified Stock Option Agreement between Connetics
Corporation and Luis C. Peña (previously filed as Exhibit 10.28
to the Companys Form S-1 Registration Statement No. 333-125982
filed on August 26, 2005)10.4*
    
    Non-Qualified Stock Option Agreement between Connetics
Corporation and Claudette S. MacMillan (previously filed as
Exhibit 10.1 to the Companys Current Report on Form 8-K filed
on October 4, 2005)10.5*
    
    Distribution Agreement between Connetics Corporation and
AmerisourceBergen Drug Corporation dated September 30, 2005
(previously filed as Exhibit 10.1 to the Companys Current
Report on Form 8-K filed on October 6, 2005)
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##### Table of Contents



ExhibitNumber
    
    Description31.1
    
    Rule 13a-14(a) Certification of the Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification of the Chief Financial Officer32.1
    
    Section 1350 Certification of the Chief Executive Officer 32.2
    
    Section 1350 Certification of the Chief Financial Officer 
 
 *
    
    Incorporated by this reference to the previous filing, as indicated.
    
    The certifications attached as Exhibits 32.1 and 32.2 that accompany this quarterly report on
Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be
incorporated by reference into any filing of Connetics Corporation under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or
after the date of this Form 10-Q, irrespective of any general incorporation language contained
in such filing. 
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##### Table of Contents



Connetics CorporationBy:
    
    /s/ John L. HigginsJohn L. HigginsExecutive Vice President, Finance and CorporateDevelopment and Chief Financial Officer(Principal Financial Officer and PrincipalAccounting Officer and Duly Authorized Officer
of the Registrant)
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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description10.1*
    
    Consulting Agreement dated August 22, 2005 between Connetics
Corporation and G. Kirk Raab (previously filed as Exhibit 10.1
to the Companys Current Report on Form 8-K dated August 24,
2005 and filed with the Commission on August 25, 2005)10.2*
    
    Non-Qualified Stock Option Agreement between Connetics
Corporation and Scott William Meggs (previously filed as Exhibit
10.27 to the Companys Form S-1 Registration Statement No.
333-125982 filed on August 26, 2005)10.3*
    
    Non-Qualified Stock Option Agreement between Connetics
Corporation and Luis C. Peña (previously filed as Exhibit 10.28
to the Companys Form S-1 Registration Statement No. 333-125982
filed on August 26, 2005)10.4*
    
    Non-Qualified Stock Option Agreement between Connetics
Corporation and Claudette S. MacMillan (previously filed as
Exhibit 10.1 to the Companys Current Report on Form 8-K filed
on October 4, 2005)10.5*
    
    Distribution Agreement between Connetics Corporation and
AmerisourceBergen Drug Corporation dated September 30, 2005
(previously filed as Exhibit 10.1 to the Companys Current
Report on Form 8-K filed on October 6, 2005)
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##### Table of Contents



ExhibitNumber
    
    Description31.1
    
    Rule 13a-14(a) Certification of the Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification of the Chief Financial Officer32.1
    
    Section 1350 Certification of the Chief Executive Officer 32.2
    
    Section 1350 Certification of the Chief Financial Officer 
 
 *
    
    Incorporated by this reference to the previous filing, as indicated.
    
    The certifications attached as Exhibits 32.1 and 32.2 that accompany this quarterly report on
Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be
incorporated by reference into any filing of Connetics Corporation under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or
after the date of this Form 10-Q, irrespective of any general incorporation language contained
in such filing. 26