UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended September 30, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 333-153896
 
 AXCAN INTERMEDIATE HOLDINGS INC.
 (Exact name of registrant as specified in its charter)
 Delaware
(State or other jurisdiction of incorporation or organization)
 74-3249870
(IRS Employer Identification Number)
 22 Inverness Center Parkway
Suite 310
Birmingham, AL 35242
(Address of Principal Executive Offices) (Zip Code)
 Registrants telephone number, including area code: (205) 991-8085
 Securities registered pursuant to Section 12(b) of the Act: NONE
 Securities registered pursuant to Section 12(g) of the Act: NONE
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  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
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TABLE OF CONTENTS
 Forward-Looking Statements
    
    
    4Part I
    
    
    5Item 1. Business
    
    
    5Item 1a. Risk Factors
    
    
    24Item 1b. Unresolved Staff Comments
    
    
    45Item 2. Properties
    
    
    45Item 3. Legal Proceedings
    
    
    45Item 4. (Removed And Reserved)
    
    
    46Part II
    
    
    47Item 5. Market For Registrants Common Equity, Related Stockholder Matters And Issuer Purchases Of
Equity Securities
    
    
    47Item 6. Selected Financial Data
    
    
    48Item 7. Managements Discussion And Analysis Of Financial Condition And Results Of Operations
    
    
    53Item 7a. Quantitative And Qualitative Disclosures About Market Risk
    
    
    81Item 8. Financial Statements And Supplementary Data
    
    
    82Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
    
    
    130Item 9a. Controls And Procedures
    
    
    130Item 9b. Other Information
    
    
    130Part III
    
    
    131Item 10. Directors, Executive Officers And Corporate Governance
    
    
    131Item 11. Executive Compensation
    
    
    134Item 12. Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder
Matters
    
    
    151Item 13. Certain Relationships And Related Transactions, And Director Independence
    
    
    153Item 14. Principal Accounting Fees And Services
    
    
    154Part IV
    
    
    155Item 15. Exhibits And Financial Statement Schedules
    
    
    155Signatures
    
    
    156
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FORWARD-LOOKING STATEMENTS
 This Annual Report on Form 10-K includes assumptions, expectations, projections, intentions
and beliefs about future events. These statements are intended as forward-looking statements. We
caution that assumptions, expectations, projections, intentions and beliefs about
future events may and often do vary from actual results and the differences can be material.
 All statements in this document that are not statements of historical fact are forward-looking
statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. Forward-looking statements include, but are not
limited to, such matters as
 
    
    delays in obtaining, or a failure to obtain and maintain, regulatory approval for
our product candidates, including, but not limited to, our pancreatic enzyme products
in the United States;
    
    our ability to successfully regain market share for our pancreatic enzyme products
in the United States;
    
    our ability to market, commercialize and achieve market acceptance for any of the
products that we are developing, commercializing or may develop or commercialize in
the future, including the growth, establishment or acquisition of specialty sales,
marketing and distribution capabilities to commercialize products;
    
    the expected timing, costs, progress or success of any of our preclinical and
clinical development programs, regulatory approvals, or commercialization efforts;
    
    our ability to continue to successfully manufacture and commercialize our existing
products;
    
    the potential advantages of our products or product candidates over other existing
or potential products;
    
    our ability to enter into any new co-development or licensing agreements or to
maintain any existing co-development or licensing agreements with respect to our
product candidates or products;
    
    our ability to effectively maintain existing licensing relationships and establish
new licensing relationships;
    
    the expense, time and uncertainty involved in the development of our product
candidates, some or all of which may never reach the regulatory approval stage;
    
    our reliance on collaboration partners and licensees, to obtain and maintain
regulatory approval for certain of our products and product candidates and to
manufacture and commercialize such products;
    
    our ability to compete in the pharmaceutical industry against other branded or
generic products;
    
    our ability to obtain reimbursement for the products we commercialize;
    
    our ability to protect our intellectual property and know-how and operate our
business without infringing the intellectual property rights or regulatory exclusivity
of others;
    
    a loss of rights to develop and commercialize our products under our license and
sublicense agreements;
    
    a loss of any of our key scientists or management personnel;
    
    our estimates of market sizes and anticipated uses of our product candidates;
    
    our estimates of future performance; and
    
    our estimates regarding anticipated future revenue, expenses, operating losses,
capital requirements and our needs for additional financing.
 When used in this document, the words anticipate, believe, intend, estimate,
project, forecast, plan, potential, will, may, should and expect reflect
forward-looking statements. Such statements reflect our current views and assumptions and all
forward-looking statements are subject to various risks and uncertainties that could cause actual
results to differ materially from expectations. The factors that could affect our future financial
results are discussed more fully under Item 1A.  Risk Factors, as well as elsewhere in this
Annual Report on Form 10-K and in our other filings with the U.S. Securities and Exchange
Commission, referred to herein as the SEC. We caution readers of this Annual Report on Form 10-K ,
also referred to herein as the Annual Report, not to place undue reliance on these forward-looking
statements, which speak only as of their dates. We undertake no obligation to publicly update or
revise any forward-looking statements, except as required by law.
  -3-




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ITEM 1. BUSINESS
  www.axcan.com http://www.sec.gov
  Overview
   Subsequent Event
  INDUSTRY AND COMPANY
 Industry Overview
  The Gastrointestinal Market Outlook To 2014: Market Dynamics,
Competitive Landscape, Emerging Therapies
 Opportunities & Challenges in Digestive Diseases Research
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Competitive Strengths
  Diversified Portfolio of Branded Products.
 Leading Competitive Positions in Attractive Gastroenterology Markets.
 Non-Patent Hurdles to Entry.
 Focused Sales Force with Market-Leading Performance.
 Consistently High Free Cash Flow Generation.
 Proven Track Record in Acquiring Products and Building Market Share.
 Experienced and Dedicated Management Team. Frank Verwiel, M.D ., David
Mims Steve Gannon Dr. Alexandre LeBeaut Nicholas Franco Theresa
Stevens
 -5-




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Richard DeVleeschouwer Richard
Tarte
 Business Strategy
  Grow Sales of Existing Products.
 Launch New Products.
 Selectively Acquire or In-License Complementary Products.
 Pursue Growth Opportunities Through Developing Pipeline.
 Expand Internationally.
 Products
      -6-




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Mesalamine
 CANASA
  ®
 ® ® ® ® ®
     SALOFALK
   ®
  Sucralfate
 CARAFATE and SULCRATE
    -7-




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Ursodiol
 URSO 250 and URSO FORTE (U.S.)
   URSO and URSO DS (Canada)
    DELURSAN
   ®
  Helicobacter pylori eradication
 PYLERA
 Helicobacter pylori
 -8-




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® ®
 Helicobacter
pylori Helicobacter pylori Helicobacter pylori
 Pancreatic Enzyme Products
 ULTRASE
      ®  ®
  th Approved Drug Products with Therapeutic Equivalence Evaluations, ®  ®
 -9-




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Guidance for IndustryExocrine
Pancreatic Insufficiency Drug ProductsSubmitting NDAs
 VIOKASE
        PANZYTRAT
  ®
   Other Products
 LACTEOL
 Lactobacillus LB
  -10-




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PHOTOFRIN/PHOTOBARR
     ® ®
  FLEET PHOSPHO-SODA and CITRAFLEET
    -11-




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Products in Development
         Mesalamine
   Sucralfate
  Ursodiol
 URSO
   Journal of Hepatology
 -12-




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Helicobacter pylori eradication
 PYLERA
  Pancreatic Enzyme Products
 ULTRASE and VIOKASE
       PANZYTRAT
  Others
 Cx401
    -13-




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Sales and Marketing
 Helicobacter pylori
    Customers
    For the fiscal yearsended September 30,2010
    
    
    2009
    
    
    2008Customer A
    
    
    29.9
    %
    
    
    30.4
    %
    
    
    39.0
    %Customer B
    
    
    28.1
    %
    
    
    37.4
    %
    
    
    26.6
    %Customer C
    
    
    12.2
    %
    
    
    11.7
    %
    
    
    10.3
    %Total
    
    
    70.2
    %
    
    
    79.5
    %
    
    
    75.9
    %
 -14-




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Competition
    Manufacturing and Supply
      ® ®
  -15-




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Government Regulation
  U.S. Regulations
 New Drug Application
   Abbreviated New Drug Application
     505(b)(2) Application Process
  -16-




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Data Exclusivity
   Canadian Regulations
  European Economic Area
  Centralized Procedure
  Mutual Recognition and Decentralized Procedures
  Mutual Recognition
  -17-




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Decentralized Procedure
  International Regulations
   Trademarks and Patents
       -18-




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ULTRASE
   th Approved Drug Products with
Therapeutic Equivalence Evaluations, ® ® Guidance for
IndustryExocrine Pancreatic Insufficiency Drug ProductsSubmitting NDAs
 MAX-002
  Ursodiol
 URSO
   PHOTOFRIN
  -19-




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PANZYTRAT
  PYLERA
 Helicobacter pylori Helicobacter pylori
 Helicobacter pylori
 LACTEOL
 Lactobacillus LB
   Cx401
   -20-




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Employees
   -21-




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ITEM 1A. RISK FACTORS
   RISKS RELATED TO OUR BUSINESS
 Since we ceased distributing PEPs products in the U.S., we currently depend on three categories of
products for a large portion of our revenues; any material decline in the sales of any of them or
our inability to relaunch PEPs in the U.S. would have an adverse impact on our business.
   The entry of generics versions of our CARAFATE and CANASA products in the U.S. could have a
material adverse impact on our financial position, cash flows or overall trends in results of
operations.
 CANASA
    CARAFATE
    -22-




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The launch of a product that competes with our ursodiol product line in France could have a
material adverse impact on our financial position, cash flows or overall trends in results of
operations.
  ®
  Some of our key products face competition from generic or unbranded products.
   Future sales of our marketed products might be less than expected.
  
    
    the timing of regulatory approvals and product launches by us or competitors, and
any generic or over-the-counter competitors;
    
    perceptions by physicians and other members of the health-care community regarding
the safety and efficacy of the products;
    
    price increases, and the price of our products relative to other drugs or
competing treatments;
    
    patient and physician demand;
    
    adverse side effects or unfavorable publicity regarding our products or other
drugs in our class;
    
    the results of product development efforts for new indications;
    
    the scope and timing of additional marketing approvals and favorable reimbursement
programs for expanded uses;
    
    availability of sufficient commercial quantities of the products; and
    
    our success in getting other companies to distribute our products outside our
target markets.
 The concentration of our product sales to only a few wholesale distributors increases the risk
that we will not be able to effectively distribute our products if we need to replace any of
these distributors, which would cause our sales to decline.
   Wholesaler buying patterns may change, and this could have a detrimental effect on our future
revenue and financial condition.
  -23-




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We use third parties to manufacture and test most of our products and product candidates. This
may increase the risk of not having sufficient quantity of our products or product candidates,
quantity at an acceptable cost or product with acceptable quality or in compliance with standards
and specifications. This could adversely affect sales of our products or result in the clinical
development or commercialization of our products or product candidates being delayed, prevented
or impaired.
    
    
    Manufacturing of products may be difficult to scale up when required, which could
result in delays, inefficiencies and poor or low yields of quality products.
    
    Some of our contracts contain purchase commitments that require us to make minimum
purchases that might exceed needs or limit the ability to negotiate with other
manufacturers, which might increase costs.
    
    Cost involved in manufacturing certain products may lead to such products being
prohibitively expensive.
    
    Delays in site transfers or scale-up to commercial quantities and any difficulty in
manufacturing could delay clinical studies, regulatory submissions, approval and
commercialization or continued commercialization of our products.
    
    In the event of a manufacturing change, the FDA and other comparable country
regulators require testing and compliance inspections; new manufacturers may have to
be educated to our products production process, which requires time.
    
    There is a limited number of manufacturers that operate under cGMP regulations and
that are both capable of manufacturing for us and willing to do so. If the third
parties that we engage to manufacture and/or test a product for commercial sale or for
our clinical trials were to cease to continue to do so for any reason, we could
experience delays in obtaining sufficient quantities of our products for us to meet
commercial demand or in advancing production of our commercial products or our clinical
trials while we identify and qualify replacement suppliers.
 -24-




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
    
    If, for any reason, we were not able to obtain adequate supply of our product and
product candidates or the drug substances used to manufacture them, it would be
difficult for us to develop, transfer or manufacture our products ourselves and compete
effectively.
  We rely on our third-party manufacturers for compliance with applicable regulatory requirements.
This may increase the risk of sanctions being imposed on us or on a manufacturer of our products
or product candidates, which could result in our inability to obtain sufficient quantities of
these products or product candidates.
   
    
    fines;
    
    injunctions;
    
    civil penalties;
    
    failure of regulatory authorities to grant marketing approval of our product candidates;
    
    delays, suspension or withdrawal of approvals;
    
    suspension of manufacturing operations;
    
    license revocation;
    
    seizures or recalls of products or product candidates;
    
    operating restrictions; and
    
    criminal prosecutions.
  We rely on third parties to conduct, supervise and monitor our clinical trials, and those
third parties may perform in an unsatisfactory manner, such as by failing to meet
established deadlines for the completion of such trials.
  Our business could suffer as a result of adverse drug reactions to the products
we market.
   
    
    restrictions on the products, manufacturers or manufacturing processes;
    
    warning letters and untitled letters;
    
    civil penalties and criminal prosecutions and penalties;
 -25-




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
    
    fines;
    
    injunctions;
    
    product seizures or detentions;
    
    import or export bans or restrictions;
    
    voluntary or mandatory product recalls and related publicity requirements;
    
    suspension or withdrawal of regulatory approvals;
    
    total or partial suspension of production; and
    
    refusal to approve pending applications for marketing approval of new
products or of supplements to approved applications.
 The publication of negative results of studies or clinical trials may adversely impact our sales
revenue.
  We may not be able to acquire or successfully integrate new products or businesses.
  Acquisitions that we may undertake will involve a number of inherent risks, any of which could
cause us not to realize the anticipated benefits.
  There is no assurance that we will continue to be successful in our licensing and marketing
operations.
  The success of our strategic investments, partnerships or development alliances depends upon the
performance of the companies in which we invest, or with which we partner or co-develop products.
  
    
    the ability of these companies to successfully develop, manufacture and obtain
necessary governmental approvals for the products that serve as the basis for our
investments in, or relationship with, such companies;
    
    the ability of competitors of these companies to develop similar or more effective
products, making the drugs developed by these companies difficult or impossible to
market;
    
    the ability of these companies to adequately secure patents for their products and protect
their proprietary information;
    
    the ability of these companies to enter the marketplace without infringing upon competitors
patents;
 -26-




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
    
    the ability of these companies to finance their operations;
    
    the ability of these companies to remain technologically competitive; and
    
    the dependence of these companies upon key scientific and managerial personnel.
  Our operations could be disrupted if our information systems fail or if we are unsuccessful in
implementing necessary upgrades.
  Our quarterly results may fluctuate.
  Our business depends on key scientific, sales and managerial personnel for continued success.
  RISKS RELATED TO OUR PANCREATIC ENZYME PRODUCTS (PEPs)
 Our ULTRASE MT and VIOKASE PEPs may never be approved in the U.S.
     -27-




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If ULTRASE MT and VIOKASE are approved and relaunched, competition in the PEP market could be
more intense than expected.
 ®  ®
 If ULTRASE MT and VIOKASE are approved and relaunched, our future revenues and profitability will
be adversely affected if governmental, private third-party payors and other third-party payors,
including Medicare and Medicaid, do not sufficiently defray the cost
of ULTRASE MT and VIOKASE to the consumer.
    RISKS RELATED TO REGULATORY MATTERS
 If our products fail in clinical studies or if we fail, or encounter difficulties, in obtaining
regulatory approval for our new products or new indications of existing products or relaunching
our PEPs, we will have expended significant resources for no return.
  
    
    Our products are shown not to be effective.
    
    We do not comply with requirements concerning the investigational NDAs, biologic
license applications (BLAs) or new drug submissions (NDSs), for the protection of the
rights and welfare of human subjects.
    
    Patients experience unacceptable side effects or die during clinical trials.
    
    Patients do not enroll in the studies at the rate we expect.
    
    A drug is modified during testing.
    
    Product supplies are delayed or are not sufficient to treat the patients participating
in the studies.
    
    Failure by our manufacturers or suppliers to comply with any of the FDAs or other
relevant foreign counterparts continuing regulations.
    -28-




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
    
    delays, warning letters and fines;
    
    product recalls or seizures and injunctions on sales;
    
    refusal to review pending applications;
    
    total or partial suspension of production;
    
    withdrawals of previously approved marketing applications; and
    
    civil penalties and criminal prosecutions.
  We may find it difficult to achieve market acceptance of our PEPS or products in our product
pipeline.
  
    
    demonstration of clinical safety and efficacy compared to other products;
    
    the relative convenience and ease of administration;
    
    the prevalence and severity of any adverse side effects;
    
    limitations or warnings contained in a products FDA, TPD or EMA approved labeling;
    
    availability of alternative treatments for the indications we target;
    
    pricing and cost effectiveness compared to competing products, particularly generic products;
    
    the effectiveness of our or any future collaborators sales and marketing strategies;
    
    the effectiveness of our manufacturing and distribution plans;
    
    our ability to obtain sufficient third-party coverage or reimbursement; and
    
    the willingness of patients to pay out-of-pocket in the absence of third-party coverage.
  Our business is subject to limitations imposed by government regulations.
    -29-




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Regulatory approval for our currently marketed products is limited by the regulatory authorities to
those specific indications and conditions for which clinical safety and efficacy have been
demonstrated.
   Our approved products and pipeline products remain subject to ongoing regulatory requirements.
If we fail to comply with these requirements, we could lose these approvals, and the sales of
any such approved commercial products could be suspended.
  Our approved products and pipeline products remain subject to ongoing regulatory requirements.
     -30-




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RISKS RELATED TO OUR INDUSTRY
 The pharmaceutical industry is highly competitive and is subject to rapid and significant change,
which could render our products obsolete or uncompetitive.
   Pricing pressures from, and other measures taken by, third-party payors, including managed care
organizations, government sponsored health-care systems and regulations relating to Medicare and
Medicaid, Health Care and Education Reconciliation Act of 2010, pharmaceutical reimbursements and
pricing in general could decrease our revenue s.
     -31-




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The Patient Protection and Affordable Care Act of 2010 and the Health Care and Education
Reconciliation Act of 2010, known together as the Affordable Care Act, enacted in the U.S in March
2010 contain several provisions that could impact our business.
    Uncertainties regarding the Affordable Care Act and third-party reimbursement may impair our
ability to continue to sell our products or form collaborations.
  Our relationships with customers and payors are subject to applicable fraud and abuse and other
health-care laws and regulations, which could expose us to criminal sanctions, civil penalties,
contractual damages, reputational harm, and diminished profits and future earnings.
  
    
    The federal health-care anti-kickback statute prohibits, among other things, persons
from knowingly and willfully soliciting, offering, receiving or providing remuneration,
directly or indirectly, in cash or in kind, to induce or reward either the referral of an
individual for, or the purchase, order or recommendation of, any good or service, for
which payment may be made under federal health-care programs such as Medicare and
Medicaid.
    
    The federal False Claims Act imposes criminal and civil penalties, against
individuals or entities for knowingly presenting, or causing to be presented, to the
federal government, claims for payment that are false or fraudulent or making a false
statement to avoid, decrease, or conceal an obligation to pay money to the federal
government.
    
    The federal false statements statute prohibits knowingly and willfully falsifying,
concealing or covering up a material fact or
 -32-




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making any materially false statement in
connection with the delivery of or payment for health-care benefits, items or services.
    
    Analogous state laws and regulations, such as state anti-kickback and false claims
laws, may apply to sales or marketing arrangements and claims involving health-care
items or services reimbursed by non-governmental third-party payors, including private
insurers, and some state laws require pharmaceutical companies to comply with the
pharmaceutical industrys voluntary compliance guidelines and the relevant compliance
guidance promulgated by the federal government.
    
    There are similar laws in countries outside the U.S.
   The FDAAA may make it more difficult and costly for us to obtain regulatory approval of our
product candidates and to produce, market and distribute our existing products.
  Changes in laws and regulations could affect our results of operations, financial position or cash
flows.
  We may be subject to investigations or other inquiries concerning our compliance with
reporting obligations under federal health-care program pharmaceutical pricing requirements.
  Future litigation and the outcome of current litigation may harm our business.
   -33-




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Exposure relating to product liability claims may harm our business.
  RISKS RELATED TO INTELLECTUAL PROPERTY
 We rely on the intellectual property of others, and we may not be able to protect our own
intellectual property.
   Litigation or third-party claims of intellectual property infringement could require
substantial time and money to resolve. Unfavorable outcomes to these proceedings could
limit our intellectual property rights and our activities.
     -34-




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Our intellectual property rights might not afford us with meaningful protection.
    RISKS RELATED TO GENERAL ECONOMIC AND FINANCIAL CONDITIONS
 We are exposed to political, economic and other risks that arise from operating a multinational
business.
  
    
    changes in general economic, social and political conditions;
    
    adverse tax consequences;
    
    the difficulty of enforcing agreements and collecting receivables through certain
legal systems;
    
    inadequate protection of intellectual property;
    
    required compliance with a variety of laws and regulations of jurisdictions
outside of the U.S., including labor and tax laws;
    
    customers outside of the U.S. may have longer payment cycles;
    
    changes in laws and regulations of jurisdictions outside of the U.S.; and
    
    terrorist acts and natural disasters.
  Currency exchange rate fluctuations may have a negative effect on our financial condition.
    -35-




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We might be impacted by unfavorable decisions in proceedings related to future tax assessments.
  RISKS RELATED TO OUR INDEBTEDNESS
 We may need additional capital.
  
    
    any impact on us of current conditions and uncertainties in the economy;
    
    patient and physician demand for our products;
    
    the status of competitive products, including current and potential generics;
    
    the results, costs and timing of our research and development activities,
regulatory approvals and product launches;
    
    our ability to reduce our costs in the event product demand is less than expected,
or regulatory approvals are delayed or more expensive than expected;
    
    the number of products and/or companies we acquire or in-license;
    
    the actual amounts of returns we receive compared to our current estimates; and
    
    our ability to maintain our current credit facility.
  Our substantial level of indebtedness could materially adversely affect our ability to generate
sufficient cash to fulfill our obligations under our existing indebtedness, our ability to
react to changes in our business and our ability to incur additional indebtedness to fund
future needs.
  ($ in millions of dollars)Debt:Senior secured term loan facility(1)
    
    $
    135.2Senior secured revolving credit facility
    
    
    0Secured Notes(2)
    
    
    226.2Senior Notes(3)
    
    
    233.1Total
    
    $
    594.5
 
 (1)
    
    Represents the net proceeds received on our $175.0 million senior secured term
loan facility after original issue discount.(2)
    
    Represents the net proceeds received on $228.0 million aggregate principal
amount of secured notes after original issue discount.(3)
    
    Represents the net proceeds received on $235.0 million aggregate principal amount of
senior notes after original issue discount.  -36-




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
    
    make it more difficult for us to satisfy our obligations with respect to our
indebtedness, including the notes, and any failure to comply with the obligations under
any of our debt instruments, including restrictive covenants, could result in an event of
default under the indentures governing the notes and the agreements governing such other
indebtedness;
    
    require us to dedicate a substantial portion of our cash flow from operations to
payments on our indebtedness, thereby reducing funds available for working capital,
capital expenditures, acquisitions, selling and marketing efforts, research and
development and other purposes;
    
    increase our vulnerability to adverse economic and industry conditions, which could
place us at a competitive disadvantage compared to our competitors that have relatively
less indebtedness;
    
    limit our flexibility in planning for, or reacting to, changes in our business and the
industries in which we operate;
    
    limit our ability to borrow additional funds, or to dispose of assets to raise
funds, if needed, for working capital, capital expenditures, acquisitions, research
and development and other corporate purposes; and
    
    prevent us from raising the funds necessary to buy back all notes tendered to us
upon the occurrence of certain changes of control, which would constitute a default under
the indentures governing the notes.
 We, including our subsidiaries, have the ability to incur substantially more indebtedness,
including senior secured indebtedness.
  
    
    we had $361.4 million of senior secured debt, including borrowings under our senior
secured credit facilities, and the secured notes;
    
    we had $233.1 million of senior unsecured indebtedness under the senior notes;
    
    we had approximately $115.0 million available for borrowing under our senior
secured revolving credit facilities, which, if borrowed, would be senior secured
indebtedness; and
    
    subject to our compliance with certain covenants under the terms of our senior
secured credit facility, we have the option to increase the senior secured term loan
facility by up to $75 million without satisfying any additional financial tests under the
indentures governing the notes, which, if borrowed, would be senior secured indebtedness.
  Restrictions imposed by the indentures governing the notes, our senior secured credit
facilities and our other outstanding indebtedness may limit our ability to operate our business
and to finance our future operations or capital needs or to engage in other business
activities.
  
    
    incur or guarantee additional indebtedness;
    
    pay dividends on our capital stock or redeem, repurchase or retire our capital stock or
indebtedness;
 -37-




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##### 




    
    make investments, loans, advances and acquisitions;
    
    create restrictions on the payment of dividends or other amounts to us from our restricted
subsidiaries;
    
    engage in transactions with our affiliates;
    
    sell assets, including capital stock of our subsidiaries;
    
    consolidate or merge; and
    
    create liens.
  We may not be able to generate sufficient cash to service all of our indebtedness and may be
forced to take other actions to satisfy our obligations under our indebtedness, which may not be
successful.
   Our note holders right to receive payments on the senior notes is effectively junior to the
right of lenders who have a security interest in our assets to the extent of the value of
those assets.
   
    
    $361.4 million of senior secured debt, including borrowings under our senior
secured credit facilities, and the secured notes;
    
    an additional $115.0 million of borrowing capacity under our senior secured
revolving credit facility, which, if borrowed, would be senior secured
indebtedness; and
    
    subject to our compliance with certain covenants under the terms of our senior
secured credit facilities, the option to increase our senior secured term loan facility
by up to $75 million, which, if borrowed, would be senior secured indebtedness.
 -38-




---



##### 



Our ability to repay our debt is affected by the cash flow generated by our subsidiaries.
  Claims of note holders will be structurally subordinated to claims of creditors of certain of our
subsidiaries that will not guarantee the notes.
   The lenders under our senior secured credit facilities have the discretion to release any
guarantors under these facilities in a variety of circumstances, which will cause those
guarantors to be released from their guarantees of the notes.
  If we default on our obligations to pay our other indebtedness, we may not be able to make payments
on the notes.
  
    
    the holders of such indebtedness could elect to declare all the funds borrowed
thereunder to be due and payable, together with accrued and unpaid interest;
    
    the lenders under our senior secured credit facilities could elect to terminate
their commitments thereunder, cease making further loans and institute foreclosure
proceedings against our assets; and
    
    we could be forced into bankruptcy or liquidation.
  -39-




---



##### 



We may not be able to repurchase the notes upon a change of control.
  Insolvency and fraudulent transfer laws and other limitations may preclude the recovery of
payment under the notes and the guarantees.
  
    
    We or any of the guarantors, as applicable, were insolvent or rendered insolvent
by reason of the issuance of the notes or the incurrence of the guarantees or
subsequently become insolvent for other reasons.
    
    The issuance of the notes or the incurrence of the guarantees left us or any
of the guarantors, as applicable, with an unreasonably small amount of capital to
carry on the business.
    
    We or any of the guarantors intended to, or believed that we or such guarantor
would, incur debts beyond our or such guarantors ability to pay such debts as they
mature.
    
    We or any of the guarantors was a defendant in an action for money damages, or
had a judgment for money damages docketed against us or such guarantor if, in either
case, after final judgment, the judgment is unsatisfied.
   
    
    the sum of its debts, including contingent liabilities, was greater than the fair saleable
value of all its assets;
    
    the present fair saleable value of its assets was less than the amount that would
be required to pay its probable liability on its existing debts, including contingent
liabilities, as they become absolute and mature; or
    
    it could not pay its debts as they become due.
   -40-




---



##### 



Enforcing our note holders rights under the guarantees entered into by certain of our
foreign subsidiaries across multiple jurisdictions may be difficult.
  We are indirectly owned and controlled by the Sponsor, and the Sponsors interests as equity
holders may conflict with the interests of our note holders.
  Holders of secured notes may not be able to fully realize the value of their liens.
 The security for the benefit of holders of secured notes may be released without such holders
consent.
  
    
    The security documents generally provide for an automatic release of all
liens on any asset that is disposed of in compliance with the provisions of the
senior secured credit facilities.
    
    Any lien can be released if approved by the requisite number of lenders under our senior
secured credit facilities.
    
    The collateral agent and the issuer may amend the provisions of the security
documents with the consent of the requisite number of lenders under our senior secured
credit facilities and without consent of the holders of secured notes.
    
    The lenders under our senior secured credit facilities will have the sole ability to
control remedies (including upon sale or liquidation of the collateral after acceleration
of the secured notes or debt under the senior secured credit facilities) with respect to
the collateral.
    
    So long as we have the senior secured credit facilities or another senior secured
credit facility, the secured notes will automatically cease to be secured by those liens
if those liens no longer secure our senior secured credit facilities for other reasons.
   The collateral may not be valuable enough to satisfy all the obligations secured by the collateral.
  The value of the pledged assets in the event of a liquidation will depend upon market and
economic conditions, the availability of
 -41-




---



##### 



Bankruptcy laws may limit the ability of holders of secured notes to realize value from the
collateral.
  The collateral is subject to casualty risks and no mortgage title insurance has been obtained.
    -42-




---



##### 



Rights of holders of secured notes in the collateral may be adversely affected by the failure to
perfect security interests in collateral.
  Any future pledge of collateral in favor of the holders of secured notes might be voidable in
bankruptcy.
  ITEM 1B. UNRESOLVED STAFF COMMENTS
  ITEM 2. PROPERTIES
       ITEM 3. LEGAL PROCEEDINGS
   -43-




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##### 



ITEM 4. (REMOVED AND RESERVED)
 -44-




---



##### 



PART II
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 Market and other information
  Holders
  Dividends
  -45-




---



##### 



ITEM 6. SELECTED FINANCIAL DATA
 Transactions
 The February 2008 Transactions
    The Refinancing
  Financial Information
  -46-




---



##### 



Successor
    
    
    PredecessorFebruary 26,
    
    
    October 1,2008
    
    
    2007Fiscal Year
    
    
    Fiscal Year
    
    
    through
    
    
    throughEnded
    
    
    Ended
    
    
    September 30,
    
    
    February 25,
    
    
    Fiscal Years Ended September 30,September 30, 2010
    
    
    September 30, 2009
    
    
    2008
    
    
    2008
    
    
    2007
    
    
    2006($ in thousands)

    
    

    ($ in thousands)Statement of Operations Data:Net product sales
    
    $
    354,587
    
    
    $
    409,826
    
    
    $
    223,179
    
    
    $
    158,579
    
    
    $
    348,947
    
    
    $
    292,317Other Revenue
    
    
    
    
    
    
    7,113
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Revenue
    
    $
    354,587
    
    
    $
    416,939
    
    
    $
    223,179
    
    
    $
    158,579
    
    
    $
    348,947
    
    
    $
    292,317Cost of goods sold(1)
    
    
    130,915
    
    
    
    103,023
    
    
    
    77,227
    
    
    
    38,739
    
    
    
    83,683
    
    
    
    72,772Selling and administrative
expenses(1)(2)
    
    
    115,033
    
    
    
    122,942
    
    
    
    88,246
    
    
    
    76,198
    
    
    
    101,273
    
    
    
    93,338Management Fees
    
    
    4,412
    
    
    
    5,351
    
    
    
    99
    
    
    
    
    
    
    
    
    
    
    
    Research and development
expenses(1)(3)
    
    
    31,715
    
    
    
    36,037
    
    
    
    17,768
    
    
    
    10,256
    
    
    
    28,655
    
    
    
    39,789Depreciation and amortization
    
    
    61,011
    
    
    
    60,305
    
    
    
    35,579
    
    
    
    9,595
    
    
    
    22,494
    
    
    
    22,823Acquired in-process research
    
    
    7,948
    
    
    
    
    
    
    
    272,400
    
    
    
    
    
    
    
    10,000
    
    
    
    Partial write-down of intangible assets
    
    
    107,158
    
    
    
    55,665
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,800Operating Income (loss)
    
    
    (103,605
    )
    
    
    33,616
    
    
    
    (268,140
    )
    
    
    23,791
    
    
    
    102,842
    
    
    
    57,795Financial expenses
    
    
    64,956
    
    
    
    69,809
    
    
    
    41,513
    
    
    
    262
    
    
    
    4,825
    
    
    
    6,988Other interest income
    
    
    (688
    )
    
    
    (389
    )
    
    
    (808
    )
    
    
    (5,440
    )
    
    
    (11,367
    )
    
    
    (5,468
    )Other income
    
    
    (9,704
    )
    
    
    (3,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss (gain) on foreign currency
    
    
    1,247
    
    
    
    (328
    )
    
    
    (1,841
    )
    
    
    (198
    )
    
    
    2,352
    
    
    
    (1,110
    )Income (loss) before income taxes
    
    
    (159,416
    )
    
    
    (31,976
    )
    
    
    (307,004
    )
    
    
    29,167
    
    
    
    107,032
    
    
    
    57,385Income taxes
    
    
    10,950
    
    
    
    (24,082
    )
    
    
    (17,740
    )
    
    
    12,042
    
    
    
    35,567
    
    
    
    18,266Net income (loss)
    
    $
    (170,366
    )
    
    $
    (7,894
    )
    
    $
    (289,264
    )
    
    $
    17,125
    
    
    $
    71,465
    
    
    $
    39,119Balance Sheet Data (at period end):Cash and cash equivalents
    
    $
    161,503
    
    
    $
    126,435
    
    
    $
    56,105
    
    
    $
    348,791
    
    
    $
    179,672
    
    
    $
    55,830Short-term investments, available for
sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129,958
    
    
    
    117,151Total current assets
    
    
    226,749
    
    
    
    250,682
    
    
    
    176,980
    
    
    
    471,170
    
    
    
    402,127
    
    
    
    262,378Total assets
    
    
    713,177
    
    
    
    914,602
    
    
    
    944,812
    
    
    
    902,384
    
    
    
    832,611
    
    
    
    695,817Total short-term borrowings
    
    
    13,163
    
    
    
    30,708
    
    
    
    10,938
    
    
    
    373
    
    
    
    527
    
    
    
    681Total debt
    
    
    594,475
    
    
    
    613,294
    
    
    
    622,184
    
    
    
    441
    
    
    
    649
    
    
    
    126,246Total current liabilities
    
    
    111,329
    
    
    
    121,022
    
    
    
    99,300
    
    
    
    166,456
    
    
    
    104,737
    
    
    
    64,617Total liabilities
    
    
    734,209
    
    
    
    750,838
    
    
    
    779,142
    
    
    
    206,903
    
    
    
    142,414
    
    
    
    228,393Total shareholders equity(4)
    
    
    (21,032
    )
    
    
    163,764
    
    
    
    165,670
    
    
    
    695,401
    
    
    
    690,197
    
    
    
    467,424Statement of Cash Flows Data:Net cash from (used in):Operating activities
    
    $
    63,120
    
    
    $
    92,382
    
    
    $
    (47,512
    )
    
    $
    73,245
    
    
    $
    136,102
    
    
    $
    84,334Investing activities
    
    
    (6,058
    )
    
    
    (10,600
    )
    
    
    (961,556
    )
    
    
    126,630
    
    
    
    (19,415
    )
    
    
    (108,139
    )Financing activities
    
    
    (21,338
    )
    
    
    (11,594
    )
    
    
    1,066,053
    
    
    
    (31,243
    )
    
    
    6,553
    
    
    
    (616
    )Other Financial Data:EBITDA(5)
    
    
    (34,137
    )
    
    
    97,749
    
    
    
    (230,720
    )
    
    
    33,584
    
    
    
    122,984
    
    
    
    81,728Adjusted EBITDA(5)
    
    
    162,397
    
    
    
    172,828
    
    
    
    84,539
    
    
    
    70,119
    
    
    
    141,407
    
    
    
    92,582
 
 (1)
    
    Exclusive of depreciation and amortization.(2)
    
    Amounts shown for the fiscal year ended September 30, 2007, five-month period
ended February 25, 2008, seven-month period ended September 30, 2008, and for the fiscal
year ended September 30, 2009 include expenses related to the February 2008
Transactions. Amount shown for the fiscal year ended September 30, 2010 includes
reorganization, special projects and due diligence costs.(3)
    
    Amount shown for the fiscal year ended September 30, 2006 includes an up-front
licensing fee equal to $1,500,000 paid in connection with a co-development agreement
with AGI Therapeutics Ltd. Such amount is counted as acquired in-process research for
purposes of calculating Adjusted EBITDA.(4)
    
    A portion of our common stock was issued to our parent company, Axcan MidCo
Inc., in the February 2008 Transactions in exchange for a note receivable amounting to
$133,154,405. Pursuant to U.S. GAAP, we report the principal amount as a separate
balance offset against shareholders equity. Furthermore, we do not recognize interest
income related to this note receivable due from Axcan MidCo Inc. in our income statement. -47-




---



##### 



(5)
    
    EBITDA and Adjusted EBITDA are both non-U.S. GAAP financial measures and are
presented in this report because our management considers them important supplemental
measures of our performance and believes that they are frequently used by interested
parties in the evaluation of companies in the industry. EBITDA, as we use it, is net income
before financial expenses, interest income, income taxes and depreciation and amortization.
We believe that the presentation of EBITDA enhances an investors understanding of our
financial performance. We believe that EBITDA is a useful financial metric to assess our
operating performance from period to period by excluding certain items that we believe are
not representative of our core business. The term EBITDA is not defined under U.S. GAAP,
and EBITDA is not a measure of net income, operating income or any other performance
measure derived in accordance with U.S. GAAP, and is subject to important limitations.
Adjusted EBITDA, as we use it, is EBITDA adjusted to exclude certain non-cash charges,
unusual or non-recurring items and other adjustments set forth below. Adjusted EBITDA is
calculated in the same manner as EBITDA and Consolidated EBITDA as those terms are
defined under the indentures governing our notes and Credit Facility further described in
the section Liquidity and Capital ResourcesLong-term Debt and New Senior Secured Credit
Facility. We believe that the inclusion of supplementary adjustments applied to EBITDA in
presenting Adjusted EBITDA are appropriate to provide additional information to investors
about certain material non-cash items and unusual or non-recurring items that we do not
expect to continue in the future and to provide additional information with respect to our
ability to meet our future debt service and to comply with various covenants in our
indentures and Credit Facility. Adjusted EBITDA is not a measure of net income, operating
income or any other performance measure derived in accordance with U.S. GAAP, and is
subject to important limitations. EBITDA and Adjusted EBITDA have limitations as an
analytical tool, and they should not be considered in isolation, or as substitutes for
analysis of our results as reported under U.S. GAAP. Some of these limitations are: 
    
    EBITDA and Adjusted EBITDA do not reflect all cash expenditures, future requirements for
capital expenditures, or contractual commitments;
    
    EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working
capital needs;
    
    EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments, on our debt;
    
    Although depreciation and amortization are non-cash charges, the assets being depreciated
and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA
do not reflect any cash requirements for such replacements;
    
    Adjusted EBITDA reflects additional adjustments as provided in the indentures governing
our secured and unsecured notes and new senior secured credit facilities; and
    
    Other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than
we do, limiting its usefulness as a comparative measure.
 -48-




---



##### 



Successor
    
    PredecessorFebruary 26,
    
    October 1,2008
    
    2007Fiscal Year
    
    Fiscal Year
    
    through
    
    through
    
    Fiscal Years EndedEnded
    
    Ended
    
    September 30,
    
    February 25,
    
    September 30,September 30, 2010
    
    September 30, 2009
    
    2008
    
    2008
    
    2007
    
    2006($ in thousands)
    
    ($ in thousands)Net income to EBITDA:Net income (loss)
    
    $
    (170,366
    )
    
    $
    (7,894
    )
    
    $
    (289,264
    )
    
    $
    17,125
    
    
    $
    71,465
    
    
    $
    39,119Financial expenses
    
    
    64,956
    
    
    
    69,809
    
    
    
    41,513
    
    
    
    262
    
    
    
    4,825
    
    
    
    6,988Interest income
    
    
    (688
    )
    
    
    (389
    )
    
    
    (808
    )
    
    
    (5,440
    )
    
    
    (11,367
    )
    
    
    (5,468
    )Income taxes expense (benefit)
    
    
    10,950
    
    
    
    (24,082
    )
    
    
    (17,740
    )
    
    
    12,042
    
    
    
    35,567
    
    
    
    18,266Depreciation and amortization
    
    
    61,011
    
    
    
    60,305
    
    
    
    35,579
    
    
    
    9,595
    
    
    
    22,494
    
    
    
    22,823EBITDA
    
    $
    (34,137
    )
    
    $
    97,749
    
    
    $
    (230,720
    )
    
    $
    33,584
    
    
    $
    122,984
    
    
    $
    81,728EBITDA to Adjusted EBITDA:EBITDA
    
    $
    (34,137
    )
    
    $
    97,749
    
    
    $
    (230,720
    )
    
    $
    33,584
    
    
    $
    122,984
    
    
    $
    81,728Transaction, integration refinancing costs and other payments to
third parties(a)
    
    
    9,058
    
    
    
    7,891
    
    
    
    12,603
    
    
    
    26,489
    
    
    
    
    
    
    
    Management Fees(b)
    
    
    4,412
    
    
    
    5,351
    
    
    
    99
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense excluding impact of the unapproved
PEPs event(c)
    
    
    4,540
    
    
    
    6,172
    
    
    
    7,443
    
    
    
    10,046
    
    
    
    4,548
    
    
    
    3,554Impairment of intangible assets and goodwill related to the
unapproved PEPs event(d)
    
    
    107,158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Partial write-down of intangible assets(e)
    
    
    
    
    
    
    55,665
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,800Other adjustments related to the unapproved PEPs event(f)
    
    
    63,418
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Acquired in-process research
    
    
    7,948
    
    
    
    
    
    
    
    272,400
    
    
    
    
    
    
    
    10,000
    
    
    
    1,500Loss of disposal and write-down of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,875
    
    
    
    Inventories stepped-up value expensed(g)
    
    
    
    
    
    
    
    
    
    
    22,714
    
    
    
    
    
    
    
    
    
    
    
    Adjusted EBITDA(h)
    
    $
    162,397
    
    
    $
    172,828
    
    
    $
    84,539
    
    
    $
    70,119
    
    
    $
    141,407
    
    
    $
    92,582
 
 a)
    
    Represents integration and refinancing costs as well as due diligence costs
related to certain non-recurring transactions, payments to third parties in respect of
research and development milestones and other progress payments as defined within our credit
agreement.b)
    
    Represents management fees and other charges associated with the Management
Services Agreement with TPG.c)
    
    Represents stock-based employee compensation expense under the provisions of FASB
guidance, excluding the impact of the unapproved PEPs event.d)
    
    Intangible assets and goodwill impairment charges related to the unapproved PEPs
event.e)
    
    Partial write-down of intangible assets related to URSO products.f)
    
    Adjustments and other charges related to the unapproved PEPs event, including an
additional product returns and other sales deduction provision of $23.4 million during the
fiscal year ended September 30, 2010, inventory net realizable value and accrual for
purchases and other materials and supply commitments of $44.9 million during the fiscal year
ended September 30, 2010, and a stock-based compensation recovery of $4.9 million during the
fiscal year ended September 30, 2010.g)
    
    Represents inventories stepped-up value, arising from the February 2008
Transactions, expensed as acquired inventory is sold.h)
    
    EBITDA and Adjusted EBITDA are both non-U.S. GAAP financial measures and are
presented in this report because our management considers them important supplemental
measures of our performance and believes that they are frequently used by interested parties
in the evaluation of companies in the industry. EBITDA, as we use it, is net income before
financial expenses, interest income, income taxes -49-




---



##### 



and depreciation and amortization. We
believe that the presentation of EBITDA enhances an investors understanding of our
financial performance. We believe that EBITDA is a useful financial metric to assess our
operating performance from period to period by excluding certain items that we believe are
not representative of our core business. The term EBITDA is not defined under U.S. GAAP, and
EBITDA is not a measure of net income, operating income or any other performance measure
derived in accordance with U.S. GAAP, and is subject to important limitations. Adjusted
EBITDA, as we use it, is EBITDA adjusted to exclude certain non-cash charges, unusual or
non-recurring items and other adjustments set forth below. Adjusted EBITDA is calculated in
the same manner as EBITDA
and Consolidated EBITDA as those terms are defined under the indentures governing our notes
and Credit Facility further described in the section Liquidity and Capital
ResourcesLong-term Debt and New Senior Secured Credit Facility. We believe that the
inclusion of supplementary adjustments applied to EBITDA in presenting Adjusted EBITDA are
appropriate to provide additional information to investors about certain material non-cash
items and unusual or non-recurring items that we do not expect to continue in the future and
to provide additional information with respect to our ability to meet our future debt service
and to comply with various covenants in our indentures and Credit Facility. Adjusted EBITDA is
not a measure of net income, operating income or any other performance measure derived in
accordance with U.S. GAAP, and is subject to important limitations. EBITDA and Adjusted EBITDA
have limitations as an analytical tool, and they should not be considered in isolation, or as
substitutes for analysis of our results as reported under U.S. GAAP. Some of these limitations
are: 
    
    EBITDA and Adjusted EBITDA do not reflect all cash expenditures, future
requirements for capital expenditures, or contractual commitments;
    
    EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for,
working capital needs;
    
    EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or
the cash requirements necessary to service interest or principal payments, on our debt;
    
    Although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the future, and EBITDA and
Adjusted EBITDA do not reflect any cash requirements for such replacements;
    
    Adjusted EBITDA reflects additional adjustments as provided in the indentures
governing our secured and unsecured notes and new senior secured credit facilities; and
    
    Other companies in our industry may calculate EBITDA and Adjusted EBITDA
differently than we do, limiting its usefulness as a comparative measure.
  -50-




---



##### 



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 You should read the following discussion of our results of operations and financial condition with
Item 6. Selected Financial Data and the historical audited consolidated financial statements and
related notes included elsewhere in this Report. The results of operations for the fiscal years
ended September 30, 2010, and September 30, 2009, and the seven-month period ended September 30,
2008, reflect the results of operations for Axcan Intermediate Holdings Inc. and its consolidated
subsidiaries (the Successor). The results of operations for the five-month period ended February
25, 2008, reflect the results of operations for Axcan Pharma Inc. and its consolidated subsidiaries
(the Predecessor).
 Unless the context otherwise requires, in this Managements Discussion and Analysis of Financial
Condition and Results of Operations, the terms Axcan,Axcan Pharma Inc., Company, we, us
and our refer (i) for the period prior to the consummation of the February 2008 Transactions (as
defined in this section), to Axcan Pharma Inc. and its consolidated subsidiaries and (ii) for
periods following the consummation of the February 2008 Transactions, to Axcan Intermediate
Holdings Inc. and its consolidated subsidiaries.
 This discussion contains forward-looking statements and involves numerous risk and uncertainties,
including but not limited to those described in Item 1A Risk Factors and Forward-Looking
Statements. Actual results may differ materially from those contained in any forward-looking
statements.
 Overview
 Our Business
    Business Environment
      -51-




---



##### 



The Transactions
 The February 2008 Transactions
   
    
    each share of Axcan Pharma common stock outstanding was deemed transferred to Axcan
Intermediate Holdings Inc. and holders of such common stock received $23.35 per share of
Axcan Pharma common stock, or the offer price, in compensation from us, without interest
and less any required withholding taxes;
    
    all granted and outstanding options to purchase common stock of Axcan Pharma under Axcan
Pharmas stock plans, other than those options held by Axcan Holdings Inc. or its
affiliates, were deemed vested and transferred to Axcan Pharma and cancelled in exchange
for an amount in cash equal to the excess, if any, of the offer price over the applicable
exercise price for the option for each share of common stock subject to such option, less
any required withholding taxes; and
    
    all vested and unvested deferred stock units, or DSUs, and restricted stock units, or
RSUs, issued under Axcan Pharmas stock option plans, were deemed vested and then cancelled
and terminated. Each holder of a DSU or RSU received the offer price, less any required
withholding taxes, for each DSU and RSU formerly held.
   The Refinancing
   -52-




---



##### 



$Cash
    
    
    348.8Inventories
    
    
    54.1Other current assets
    
    
    91.9Property, plant and equipment
    
    
    36.9Intangible assets
    
    
    581.7Acquired in-process research
    
    
    272.4Goodwill
    
    
    169.6Deferred debt issue expenses
    
    
    0.9Deferred income tax assets
    
    
    7.2Current liabilities
    
    
    (174.5
    )Long-term debt
    
    
    (0.1
    )Deferred income tax liabilities
    
    
    (81.6
    )Total
    
    
    1,307.3
 Presentation of Financial Information
  FINANCIAL OVERVIEW FOR FISCAL YEARS ENDED SEPTEMBER 30, 2010, 2009 AND 2008
   Unapproved pancreatic enzyme products (PEPs) event
   -53-




---



##### 



a)
    
    The quantity and expiration dates of PEPs inventory in the distribution channel;b)
    
    Short-term prescription demand during the period of time during which the products continued
to be available at the pharmacy level;c)
    
    Assumptions regarding the probability of obtaining an eventual NDA approval for our PEPs and
the time required for such approval;d)
    
    Assumptions regarding market share growth after an eventual re-launch of our PEPs; ande)
    
    Other factors.
  
 -54-




---



##### 



For the fiscalyear endedSeptember 30,(in millions of U.S. dollars)
    
    2010$Net product sales (increase in product returns)
    
    
    (23.4
    )Cost of goods sold (inventory net realizable value adjustment and estimated loss for
purchase and other materials and supply commitments)
    
    
    44.9Impairment of intangible assets and goodwill
    
    
    107.2Selling and administrative expenses (decrease in stock-based compensation expense)
    
    
    (4.9
    )Total operating expenses
    
    
    147.2Operating loss
    
    
    (170.6
    )Income tax expense (tax benefit of above items, net of an increase in valuation allowance)
    
    
    26.1Net loss
    
    
    (196.7
    )
 Financial highlights
 September 30,
    
    
    September 30,(in millions of U.S. dollars)
    
    2010
    
    
    2009$
    
    
    $Total assets
    
    
    713.2
    
    
    
    914.6Long-term debt (a)
    
    
    594.5
    
    
    
    613.3Shareholders equity (deficiency)
    
    
    (21.0
    )
    
    
    163.8
 (a)
    
    Including the current portion
 For the
    
    
    For theFor the fiscal
    
    
    For the fiscal
    
    
    For the fiscal
    
    
    seven-month
    
    
    five-monthyear ended
    
    
    year ended
    
    
    year ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    February 25,(in millions of U.S. dollars)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2008
    
    
    2008CombinedPredecessor/Successor
    
    
    Successor
    
    
    Successor
    
    
    Successor
    
    
    Predecessor$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Total revenue
    
    
    354.6
    
    
    
    416.9
    
    
    
    381.8
    
    
    
    223.2
    
    
    
    158.6EBITDA (1)
    
    
    (34.1
    )
    
    
    97.7
    
    
    
    (197.1
    )
    
    
    (230.7
    )
    
    
    33.6Adjusted EBITDA (1)
    
    
    162.4
    
    
    
    172.8
    
    
    
    154.6
    
    
    
    84.5
    
    
    
    70.1Net income (loss)
    
    
    (170.4
    )
    
    
    (7.9
    )
    
    
    (272.2
    )
    
    
    (289.3
    )
    
    
    17.1
 -55-




---



##### 



(1)
    
    A reconciliation of net income to EBITDA (a non-U.S. GAAP measure) and from EBITDA
to Adjusted EBITDA (a non-U.S. GAAP measure) for the fiscal years ended September 30, 2010,
2009 and 2008 are as follows:
 For the
    
    
    For theFor the fiscal
    
    
    For the fiscal
    
    
    For the fiscal
    
    
    seven-month
    
    
    five-monthyear ended
    
    
    year ended
    
    
    year ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    February 25,(in millions of U.S. dollars)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2008
    
    
    2008CombinedPredecessor/Successor
    
    
    Successor
    
    
    Successor
    
    
    Successor
    
    
    Predecessor$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Net income (loss)
    
    
    (170.4
    )
    
    
    (7.9
    )
    
    
    (272.2
    )
    
    
    (289.3
    )
    
    
    17.1Financial expenses
    
    
    65.0
    
    
    
    69.8
    
    
    
    41.8
    
    
    
    41.5
    
    
    
    0.3Interest income
    
    
    (0.7
    )
    
    
    (0.4
    )
    
    
    (6.2
    )
    
    
    (0.8
    )
    
    
    (5.4
    )Income tax expense (benefit)
    
    
    11.0
    
    
    
    (24.1
    )
    
    
    (5.7
    )
    
    
    (17.7
    )
    
    
    12.0Depreciation and amortization
    
    
    61.0
    
    
    
    60.3
    
    
    
    45.2
    
    
    
    35.6
    
    
    
    9.6EBITDA i)
    
    
    (34.1
    )
    
    
    97.7
    
    
    
    (197.1
    )
    
    
    (230.7
    )
    
    
    33.6Transaction, integration, refinancing costs and
other payments to third parties a)
    
    
    9.0
    
    
    
    7.8
    
    
    
    39.1
    
    
    
    12.6
    
    
    
    26.5Management fees b)
    
    
    4.4
    
    
    
    5.4
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    Stock-based compensation expense excluding impact of
the unapproved PEPs event c)
    
    
    4.5
    
    
    
    6.2
    
    
    
    17.4
    
    
    
    7.4
    
    
    
    10.0Impairment of intangible assets and goodwill related
to the unapproved PEPs event d)
    
    
    107.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Partial write-down of intangible assets e)
    
    
    
    
    
    
    55.7
    
    
    
    
    
    
    
    
    
    
    
    Other adjustments related to the unapproved PEPs
event f)
    
    
    63.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Acquired in-process research g)
    
    
    8.0
    
    
    
    
    
    
    
    272.4
    
    
    
    272.4
    
    
    
    Inventory stepped-up value
expenses h)
    
    
    
    
    
    
    
    
    
    
    22.7
    
    
    
    22.7
    
    
    
    Adjusted EBITDA i)
    
    
    162.4
    
    
    
    172.8
    
    
    
    154.6
    
    
    
    84.5
    
    
    
    70.1
 
 a)
    
    Represents integration and refinancing costs as well as due diligence costs related
to certain non-recurring transactions, payments to third parties in respect of research and
development milestones and other progress payments as defined within our credit agreement.b)
    
    Represents management fees and other charges associated with the Management Services
Agreement with TPG.c)
    
    Represents stock-based employee compensation expense under the provisions of FASB
guidance, excluding the impact of the unapproved PEPs event.d)
    
    Intangible assets and goodwill impairment charges related to the unapproved PEPs
event.e)
    
    Partial write-down of intangible assets related to URSOproducts.f)
    
    Adjustments and other charges related to the unapproved PEPs event, including an
additional product returns and other sales deduction provision of $23.4 million during the
fiscal year ended September 30, 2010, inventory net realizable value adjustment and accrual
for purchases and other materials and supply commitments of $44.9 million during the fiscal
year ended September 30, 2010, and a stock-based compensation recovery of $4.9 million during
the fiscal year ended September 30, 2010.g)
    
    Represents the acquired in-process research.h)
    
    Represents inventories stepped-up value, arising from the February 2008 Transactions,
expensed as acquired inventory is sold.i)
    
    EBITDA and Adjusted EBITDA are both non-U.S. GAAP financial measures and are
presented in this report because our management considers them important supplemental measures
of our performance and believes that they are frequently used by interested parties in the
evaluation of companies in the industry. EBITDA, as we use it, is net income before financial
expenses, interest income, income taxes and depreciation and -56-




---



##### 



amortization. We believe that the
presentation of EBITDA enhances an investors understanding of our financial performance. We
believe that EBITDA is a useful financial metric to assess our operating performance from
period to period by excluding certain items that we believe are not representative of our core
business. The term EBITDA is not defined under U.S. GAAP, and EBITDA is not a measure of net
income, operating income or any other performance measure derived in accordance with U.S.
GAAP, and is subject to important limitations. Adjusted EBITDA, as we
use it, is EBITDA adjusted to exclude certain non-cash charges, unusual or non-recurring items
and other adjustments set forth below. Adjusted EBITDA is calculated in the same manner as
EBITDA and Consolidated EBITDA as those terms are defined under the indentures governing our
notes and Credit Facility further described in the section Liquidity and Capital
ResourcesLong-term Debt and New Senior Secured Credit Facility. We believe that the inclusion
of supplementary adjustments applied to EBITDA in presenting Adjusted EBITDA are appropriate to
provide additional information to investors about certain material non-cash items and unusual or
non-recurring items that we do not expect to continue in the future and to provide additional
information with respect to our ability to meet our future debt service and to comply with
various covenants in our indentures and Credit Facility. Adjusted EBITDA is not a measure of net
income, operating income or any other performance measure derived in accordance with U.S. GAAP,
and is subject to important limitations. EBITDA and Adjusted EBITDA have limitations as an
analytical tool, and they should not be considered in isolation, or as substitutes for analysis
of our results as reported under U.S. GAAP. Some of these limitations are: 
    
    EBITDA and Adjusted EBITDA do not reflect all cash expenditures, future requirements for
capital expenditures, or contractual commitments;
    
    EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working
capital needs;
    
    EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments, on our debt;
    
    Although depreciation and amortization are non-cash charges, the assets being depreciated
and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA
do not reflect any cash requirements for such replacements;
    
    Adjusted EBITDA reflects additional adjustments as provided in the indentures governing
our secured and unsecured notes and new senior secured credit facilities; and
    
    Other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than
we do, limiting its usefulness as a comparative measure.
  Fiscal year ended September 30, 2010, compared to fiscal year ended September 30, 2009
 Overview of results of operations
 For the fiscal
    
    
    For the fiscalyear ended
    
    
    year endedSeptember 30,
    
    
    September 30,(in millions of U.S. dollars)
    
    2010
    
    
    2009
    
    
    Change$
    
    
    $
    
    
    $
    
    
    %Net product sales b)
    
    
    354.6
    
    
    
    409.8
    
    
    
    (55.2
    )
    
    
    (13.5
    )Other revenue
    
    
    
    
    
    
    7.1
    
    
    
    (7.1
    )
    
    
    (100.0
    )Total revenue
    
    
    354.6
    
    
    
    416.9
    
    
    
    (62.3
    )
    
    
    (14.9
    )Cost of goods sold a) b)
    
    
    130.9
    
    
    
    103.0
    
    
    
    27.9
    
    
    
    27.1Selling and administration expenses a) b)
    
    
    115.0
    
    
    
    122.9
    
    
    
    (7.9
    )
    
    
    (6.4
    )Management fees
    
    
    4.4
    
    
    
    5.4
    
    
    
    (1.0
    )
    
    
    (18.5
    )Research and development expensesa)
    
    
    31.7
    
    
    
    36.0
    
    
    
    (4.3
    )
    
    
    (11.9
    )Acquired in-process research
    
    
    8.0
    
    
    
    
    
    
    
    8.0
    
    
    
    Depreciation and amortization
    
    
    61.0
    
    
    
    60.3
    
    
    
    0.7
    
    
    
    1.2Impairment of intangible assets and goodwill
b)
    
    
    107.2
    
    
    
    55.7
    
    
    
    51.5
    
    
    
    92.5Total operating expenses
    
    
    458.2
    
    
    
    383.3
    
    
    
    74.9
    
    
    
    19.5Operating income (loss)
    
    
    (103.6
    )
    
    
    33.6
    
    
    
    (137.2
    )
    
    
    (408.3
    )Financial expenses
    
    
    65.0
    
    
    
    69.8
    
    
    
    (4.8
    )
    
    
    (6.9
    )Interest income
    
    
    (0.7
    )
    
    
    (0.4
    )
    
    
    (0.3
    )
    
    
    (75.0
    )Other income
    
    
    (9.7
    )
    
    
    (3.5
    )
    
    
    (6.2
    )
    
    
    (177.1
    )Loss (gain) on foreign currencies
    
    
    1.2
    
    
    
    (0.3
    )
    
    
    1.5
    
    
    
    500.0Total other expenses
    
    
    55.8
    
    
    
    65.6
    
    
    
    (9.8
    )
    
    
    (14.9
    )Income (loss) before income taxes
    
    
    (159.4
    )
    
    
    (32.0
    )
    
    
    (127.4
    )
    
    
    (398.1
    )Income taxes expense (benefit) b)
    
    
    11.0
    
    
    
    (24.1
    )
    
    
    35.1
    
    
    
    145.6Net income (loss)
    
    
    (170.4
    )
    
    
    (7.9
    )
    
    
    (162.5
    )
    
    
    (2,057.0
    )
 a)
    
    Exclusive of depreciation and amortizationb)
    
    2010 includes charges related to the unapproved PEPs event
 -57-




---



##### 



Net product sales
   
   For the fiscal
    
    
    For the fiscalyear ended
    
    
    year endedSeptember 30,
    
    
    September 30,(in millions of U.S. dollars)
    
    2010
    
    
    2009
    
    
    Change$
    
    
    $
    
    
    $
    
    
    %Gross product sales
    
    
    474.6
    
    
    
    503.1
    
    
    
    (28.5
    )
    
    
    (5.7
    )Gross-to-net product sales adjustmentsProduct returns
    
    
    9.3
    
    
    
    10.7
    
    
    
    (1.4
    )
    
    
    (13.1
    )Chargebacks
    
    
    37.3
    
    
    
    33.7
    
    
    
    3.6
    
    
    
    10.7Contract rebates
    
    
    36.3
    
    
    
    36.5
    
    
    
    (0.2
    )
    
    
    (0.5
    )DSA fees
    
    
    5.6
    
    
    
    3.6
    
    
    
    2.0
    
    
    
    55.6Discounts and other allowances
    
    
    8.1
    
    
    
    8.8
    
    
    
    (0.7
    )
    
    
    (8.0
    )Provisions related to the unapproved PEPs
event
    
    
    23.4
    
    
    
    
    
    
    
    23.4
    
    
    
    Total gross-to-net product sales adjustments
    
    
    120.0
    
    
    
    93.3
    
    
    
    26.7
    
    
    
    28.6Total net product sales
    
    
    354.6
    
    
    
    409.8
    
    
    
    (55.2
    )
    
    
    (13.5
    )
    -58-




---



##### 



Affordable Care Act
     Performance of our main product lines
   
    
    Sales of pancreatic enzyme products (ULTRASE, PANZYTRAT and VIOKASE) decreased $44.5
million (39.5%) to $68.3 million from $112.8 million for the preceding fiscal year mainly due
to decreases in sales volume as a result of the unapproved PEPs event.
    
    Sales of ursodiol products (URSO, URSO 250, URSO FORTE, URSO DS and DELURSAN,) decreased
$29.3 million (39.6%) to $44.6 million from $73.9 million for the preceding fiscal year. This
decrease resulted mainly in sales volume from the entry of generic versions of URSO 250 and
URSO FORTE on the U.S. market, approved by the Office of Generic Drugs on May 13, 2009.
    
    Sales of mesalamine products (CANASA and SALOFALK) decreased $3.0 million (2.9%) to $100.7
million from $103.7 million for the preceding fiscal year.
    
    Sales of sucralfate products (CARAFATE and SULCRATE) increased $18.0 million (26.3%) to
$86.5 million from $68.5 million for the preceding fiscal year. The increase mainly resulted
from price increases announced during the preceding fiscal year and, to a lesser extent, from
an increase in prescription volumes.
    
    Sales of other products increased $3.6 million (7.1%) to $54.5 million from $50.9 million
for the preceding fiscal year.
 Other revenue
  -59-




---



##### 



Cost of goods sold
  Selling and administrative expenses
  Management fees
  Research and development expenses
  Acquired in-process research
  Depreciation and amortization
  Impairment of intangible assets and goodwill
  -60-




---



##### 



,
 Financial expenses
  Interest income
  Other income
  Income taxes
   For the fiscal
    
    
    For the fiscalyear ended
    
    
    year endedSeptember 30,
    
    
    September 30,(in millions of US dollars)
    
    2010
    
    
    2009%
    
    
    $
    
    
    %
    
    
    $Combined statutory rate applied to pre-tax
income (loss)
    
    
    35.00
    
    
    
    (55.8
    )
    
    
    35.00
    
    
    
    (11.2
    )Increase (decrease) in taxes resulting from:Change in promulgated rates
    
    
    0.01
    
    
    
    0.0
    
    
    
    (0.91
    )
    
    
    0.3Difference with foreign tax rates
    
    
    1.70
    
    
    
    (2.7
    )
    
    
    8.10
    
    
    
    (2.6
    )Valuation allowance
    
    
    (36.09
    )
    
    
    57.5
    
    
    
    (2.30
    )
    
    
    0.7Tax benefit arising from a financing structure
    
    
    11.18
    
    
    
    (17.8
    )
    
    
    44.46
    
    
    
    (14.2
    )Non-deductible items
    
    
    (21.89
    )
    
    
    34.9
    
    
    
    (9.72
    )
    
    
    3.1Investment tax credits
    
    
    0.96
    
    
    
    (1.5
    )
    
    
    4.24
    
    
    
    (1.3
    )State taxes
    
    
    1.95
    
    
    
    (3.1
    )
    
    
    (0.34
    )
    
    
    0.1Other
    
    
    0.31
    
    
    
    (0.5
    )
    
    
    (3.22
    )
    
    
    1.0(6.87
    )
    
    
    11.0
    
    
    
    75.31
    
    
    
    (24.1
    )
 -61-




---



##### 



Net loss
  Balance sheets as at September 30, 2010, and September 30, 2009
  As at September 30,(in millions of U.S. dollars)
    
    2010
    
    
    2009
    
    
    Change$
    
    
    $
    
    
    $
    
    
    %Cash and cash equivalents
    
    
    161.5
    
    
    
    126.4
    
    
    
    35.1
    
    
    
    27.8Current assets
    
    
    226.7
    
    
    
    250.7
    
    
    
    (24.0
    )
    
    
    (9.6
    )Total assets
    
    
    713.2
    
    
    
    914.6
    
    
    
    (201.4
    )
    
    
    (22.0
    )Current liabilities
    
    
    111.3
    
    
    
    121.0
    
    
    
    (9.7
    )
    
    
    (8.0
    )Long-term debt
    
    
    581.3
    
    
    
    582.6
    
    
    
    (1.3
    )
    
    
    (0.2
    )Total liabilities
    
    
    734.2
    
    
    
    750.8
    
    
    
    (16.6
    )
    
    
    (2.2
    )Shareholders equity (deficiency)
    
    
    (21.0
    )
    
    
    163.8
    
    
    
    (184.8
    )
    
    
    (112.8
    )Working capital
    
    
    115.4
    
    
    
    129.7
    
    
    
    (14.3
    )
    
    
    (11.0
    )
   -62-




---



##### 



Fiscal year ended September 30, 2009, compared to fiscal year ended September 30, 2008
 Overview of results of operations
 For the
    
    
    For theFor the fiscal
    
    
    For the fiscal
    
    
    seven-month
    
    
    five-monthyear ended
    
    
    year ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    February 25,(in millions of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    ChangeNon U.S.GAAPCombinedPredecessor/Successor
    
    
    Successor
    
    
    Successor
    
    
    Predecessor$
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    %Net product sales
    
    
    409.8
    
    
    
    381.8
    
    
    
    223.2
    
    
    
    158.6
    
    
    
    28.0
    
    
    
    7.3Other revenue
    
    
    7.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.1
    
    
    
    Total revenue
    
    
    416.9
    
    
    
    381.8
    
    
    
    223.2
    
    
    
    158.6
    
    
    
    35.1
    
    
    
    9.2Cost of goods sold a)
    
    
    103.0
    
    
    
    115.9
    
    
    
    77.2
    
    
    
    38.7
    
    
    
    (12.9
    )
    
    
    (11.1
    )Selling and administration
expenses a)
    
    
    122.9
    
    
    
    164.4
    
    
    
    88.2
    
    
    
    76.2
    
    
    
    (41.5
    )
    
    
    (25.2
    )Management fees
    
    
    5.4
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    5.3
    
    
    
    5,300.0Research and development
expenses a)
    
    
    36.0
    
    
    
    28.1
    
    
    
    17.8
    
    
    
    10.3
    
    
    
    7.9
    
    
    
    28.1Acquired in-process research
    
    
    
    
    
    
    272.4
    
    
    
    272.4
    
    
    
    
    
    
    
    (272.4
    )
    
    
    (100.0
    )Depreciation and amortization
    
    
    60.3
    
    
    
    45.2
    
    
    
    35.6
    
    
    
    9.6
    
    
    
    15.1
    
    
    
    33.4Partial write-down of intangible
assets
    
    
    55.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55.7
    
    
    
    Total operating expenses
    
    
    383.3
    
    
    
    626.1
    
    
    
    491.3
    
    
    
    134.8
    
    
    
    (242.8
    )
    
    
    (38.8
    )Operating income (loss)
    
    
    33.6
    
    
    
    (244.3
    )
    
    
    (268.1
    )
    
    
    23.8
    
    
    
    277.9
    
    
    
    113.8Financial expenses
    
    
    69.8
    
    
    
    41.8
    
    
    
    41.5
    
    
    
    0.3
    
    
    
    28.0
    
    
    
    67.0Interest income
    
    
    (0.4
    )
    
    
    (6.2
    )
    
    
    (0.8
    )
    
    
    (5.4
    )
    
    
    5.8
    
    
    
    93.5Other income
    
    
    (3.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3.5
    )
    
    
    Gain on foreign currencies
    
    
    (0.3
    )
    
    
    (2.0
    )
    
    
    (1.8
    )
    
    
    (0.2
    )
    
    
    1.7
    
    
    
    85.0Total other expenses (income)
    
    
    65.6
    
    
    
    33.6
    
    
    
    38.9
    
    
    
    (5.3
    )
    
    
    32.0
    
    
    
    95.2Income (loss) before income taxes
    
    
    (32.0
    )
    
    
    (277.9
    )
    
    
    (307.0
    )
    
    
    29.1
    
    
    
    245.9
    
    
    
    88.5Income taxes expense (benefit)
    
    
    (24.1
    )
    
    
    (5.7
    )
    
    
    (17.7
    )
    
    
    12.0
    
    
    
    (18.4
    )
    
    
    (322.8
    )Net income (loss)
    
    
    (7.9
    )
    
    
    (272.2
    )
    
    
    (289.3
    )
    
    
    17.1
    
    
    
    264.3
    
    
    
    97.1
 
 a)
    
    Exclusive of depreciation and amortization Net product sales
  
   -63-




---



##### 



For the fiscal
    
    
    For the fiscalyear ended
    
    
    year endedSeptember 30,
    
    
    September 30,(in millions of U.S. dollars)
    
    2009
    
    
    2008
    
    
    ChangeCombinedPredecessor/Successor
    
    
    Successor$
    
    
    $
    
    
    $
    
    
    %Gross product sales
    
    
    503.1
    
    
    
    447.1
    
    
    
    56.0
    
    
    
    12.5Gross-to-net product sales adjustmentsProduct returns
    
    
    10.7
    
    
    
    9.2
    
    
    
    1.5
    
    
    
    16.3Chargebacks
    
    
    33.7
    
    
    
    20.6
    
    
    
    13.1
    
    
    
    63.6Contract rebates
    
    
    36.5
    
    
    
    25.3
    
    
    
    11.2
    
    
    
    44.3DSA fees
    
    
    3.6
    
    
    
    2.1
    
    
    
    1.5
    
    
    
    71.4Discounts and other allowances
    
    
    8.8
    
    
    
    8.1
    
    
    
    0.7
    
    
    
    8.6Total gross-to-net product sales
adjustments
    
    
    93.3
    
    
    
    65.3
    
    
    
    28.0
    
    
    
    42.9Total net product sales
    
    
    409.8
    
    
    
    381.8
    
    
    
    28.0
    
    
    
    7.3
   
    
    our estimate of future demand for URSO based on the actual erosion of product demand for
several comparable products that were previously genericized, and the actual demand for URSO
experienced during 2009 subsequent to the generic approvals and launch;
    
    our estimate of chargeback and rebate activity based on actual chargeback and rebate
activity during fiscal year 2009 subsequent to the generic approvals and launch; and
    
    other relevant factors.
  Performance of our main product lines
   
    
    Sales of pancreatic enzyme products (ULTRASE, PANZYTRAT and VIOKASE) amounted to $112.8
million, an increase of 24.1% over fiscal year 2008. Sales during the fiscal year were
favorably affected by an increase in both price and prescription volumes. Most unbranded
pancreatic enzyme products for which a new drug application (NDA) had not been submitted by
April 2009 have been withdrawn from the market, leaving room for ULTRASE and VIOKASE to
capture a portion of their market share in the U.S. market.
    
    Sales of ursodiol products (URSO, URSO 250, URSO FORTE, URSO DS and DELURSAN,) decreased
19.9% from fiscal year 2008 to $73.9 million. This decrease resulted from the entry of generic
versions of URSO 250 and URSO FORTE on the U.S. market, approved by the Office of Generic
Drugs on May 13, 2009. This decrease was partially offset by price increases announced on our
URSO 250and URSO FORTE branded products, and by sales generated from the launch of
our authorized generic version of these ursodiol products.
    
    Sales of mesalamine products (CANASA and SALOFALK) amounted to $103.7 million, a 11.3%
increase from the prior fiscal year. The increase was attributed to price increases announced
during the fiscal year.
 -64-




---



##### 




    
    Sales of sucralfate products (CARAFATE and SULCRATE) amounted to $68.5 million, an increase
of 30.5% over the prior fiscal year. The increase mainly resulted from price increases
announced during the fiscal year and from an increase in prescription volumes.
    
    Sales of other products amounted to $50.9 million, a 3.6% decrease over the prior fiscal
year. This decrease mainly results from foreign exchange effect on foreign denominated sales.
 Other revenue
  Cost of goods sold
  Selling and administrative expenses
  Management fees
  Research and development expenses
  Acquired in-process research
  -65-




---



##### 



Depreciation and amortization
  Partial write-down of intangible assets
  Financial expenses
  Interest income
  Other income
  Income taxes
  -66-




---



##### 



For the
    
    
    For thefiscal year ended
    
    
    fiscal year endedSeptember 30,
    
    
    September 30,(in millions of US dollars)
    
    2009
    
    
    2008CombinedPredecessor/Successor
    
    
    Successor%
    
    
    $
    
    
    %
    
    
    $Combined statutory rate applied to pre-tax
income (loss)
    
    
    35.00
    
    
    
    (11.2
    )
    
    
    35.33
    
    
    
    (98.2
    )Increase (decrease) in taxes resulting from:Change in promulgated rates
    
    
    (0.91
    )
    
    
    0.3
    
    
    
    (0.01
    )
    
    
    Difference with foreign tax rates
    
    
    8.10
    
    
    
    (2.6
    )
    
    
    (0.64
    )
    
    
    1.8Tax benefit arising from a financing structure
    
    
    44.46
    
    
    
    (14.2
    )
    
    
    3.24
    
    
    
    (9.0
    )Non-deductible items
    
    
    (9.72
    )
    
    
    3.1
    
    
    
    (36.82
    )
    
    
    102.3Non-taxable items
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    Investment tax credits
    
    
    4.24
    
    
    
    (1.3
    )
    
    
    0.60
    
    
    
    (1.6
    )State taxes
    
    
    (0.34
    )
    
    
    0.1
    
    
    
    1.43
    
    
    
    (4.0
    )Valuation allowance
    
    
    (2.30
    )
    
    
    0.7
    
    
    
    
    
    
    
    Other
    
    
    (3.22
    )
    
    
    1.0
    
    
    
    (1.09
    )
    
    
    3.075.31
    
    
    
    (24.1
    )
    
    
    2.05
    
    
    
    (5.7
    )
 Net income
  Balance sheets as at September 30, 2009, and September 30, 2008
  As at September 30,(in millions of U.S. dollars)
    
    2009
    
    
    2008
    
    
    Change$
    
    
    $
    
    
    $
    
    
    %Cash and cash equivalents
    
    
    126.4
    
    
    
    56.1
    
    
    
    70.3
    
    
    
    125.3Current assets
    
    
    250.7
    
    
    
    177.0
    
    
    
    73.7
    
    
    
    41.6Total assets
    
    
    914.6
    
    
    
    944.8
    
    
    
    (30.2
    )
    
    
    (3.2
    )Current liabilities
    
    
    121.0
    
    
    
    99.3
    
    
    
    21.7
    
    
    
    21.9Long-term debt
    
    
    582.6
    
    
    
    611.2
    
    
    
    (28.6
    )
    
    
    (4.7
    )Total liabilities
    
    
    750.8
    
    
    
    779.1
    
    
    
    (28.3
    )
    
    
    (3.6
    )Shareholders equity
    
    
    163.8
    
    
    
    165.7
    
    
    
    (1.9
    )
    
    
    (1.1
    )Working capital
    
    
    129.7
    
    
    
    77.7
    
    
    
    52.0
    
    
    
    66.9
   -67-




---



##### 



Selected quarterly financial data
  For the quarters endedSeptember 30,
    
    
    June 30,
    
    
    March 31,
    
    
    December 31,(in millions of U.S. dollars)
    
    2010
    
    
    2010
    
    
    2010
    
    
    2009$
    
    
    $
    
    
    $
    
    
    $Net product sales b)
    
    
    69.6
    
    
    
    80.5
    
    
    
    94.4
    
    
    
    110.1Cost of goods sold a) b)
    
    
    15.3
    
    
    
    20.8
    
    
    
    68.2
    
    
    
    26.6Selling and administration expenses a) b)
    
    
    27.0
    
    
    
    27.4
    
    
    
    28.4
    
    
    
    32.2Management fees
    
    
    1.9
    
    
    
    0.6
    
    
    
    1.0
    
    
    
    0.9Research and development expenses a)
    
    
    7.0
    
    
    
    8.6
    
    
    
    7.7
    
    
    
    8.4Acquired in-process research
    
    
    
    
    
    
    8.0
    
    
    
    
    
    
    
    -Depreciation and amortization
    
    
    15.2
    
    
    
    15.1
    
    
    
    14.0
    
    
    
    16.7Impairment of intangible assets and goodwill
b)
    
    
    
    
    
    
    
    
    
    
    107.2
    
    
    
    -Total operating expenses
    
    
    66.4
    
    
    
    80.5
    
    
    
    226.5
    
    
    
    84.8Operating income (loss)
    
    
    3.2
    
    
    
    
    
    
    
    (132.1
    )
    
    
    25.3Financial expenses
    
    
    16.2
    
    
    
    16.3
    
    
    
    16.3
    
    
    
    16.2Interest income
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    (0.1
    )Other income
    
    
    (2.0
    )
    
    
    
    
    
    
    (7.7
    )
    
    
    Loss (gain) on foreign currencies
    
    
    0.6
    
    
    
    (0.8
    )
    
    
    1.4
    
    
    
    Total other expenses
    
    
    14.6
    
    
    
    15.3
    
    
    
    9.8
    
    
    
    16.1Income (loss) before income taxes
    
    
    (11.4
    )
    
    
    (15.3
    )
    
    
    (141.9
    )
    
    
    9.2Income taxes expense (benefit)
    
    
    (5.2
    )
    
    
    (5.4
    )
    
    
    21.8
    
    
    
    (0.2
    )Net income (loss)
    
    
    (6.2
    )
    
    
    (9.9
    )
    
    
    (163.7
    )
    
    
    9.4EBITDA c)
    
    
    19.8
    
    
    
    15.9
    
    
    
    (111.8
    )
    
    
    42.0Adjusted EBITDA (c)
    
    
    24.5
    
    
    
    41.7
    
    
    
    50.0
    
    
    
    46.2
 For the quarters endedSeptember 30,
    
    
    June 30,
    
    
    March 31,
    
    
    December 31,(in millions of U.S. dollars)
    
    2009
    
    
    2009
    
    
    2009
    
    
    2008$
    
    
    $
    
    
    $
    
    
    $Net product sales
    
    
    84.2
    
    
    
    100.9
    
    
    
    120.6
    
    
    
    104.1Other revenue
    
    
    1.9
    
    
    
    5.2
    
    
    
    
    
    
    
    Total revenue
    
    
    86.1
    
    
    
    106.1
    
    
    
    120.6
    
    
    
    104.1Cost of goods sold (a)
    
    
    26.0
    
    
    
    22.1
    
    
    
    29.4
    
    
    
    25.5Selling and administration
expenses (a)
    
    
    30.5
    
    
    
    28.6
    
    
    
    31.8
    
    
    
    32.0Management fees
    
    
    0.5
    
    
    
    4.7
    
    
    
    
    
    
    
    0.2Research and development
expenses (a)
    
    
    9.2
    
    
    
    10.7
    
    
    
    9.1
    
    
    
    7.0Depreciation and amortization
    
    
    16.5
    
    
    
    14.8
    
    
    
    14.5
    
    
    
    14.5Partial write-down of intangible
assets
    
    
    
    
    
    
    55.7
    
    
    
    
    
    
    
    Total operating expenses
    
    
    82.7
    
    
    
    136.6
    
    
    
    84.8
    
    
    
    79.2Operating income (loss)
    
    
    3.4
    
    
    
    (30.5
    )
    
    
    35.8
    
    
    
    24.9Financial expenses
    
    
    16.8
    
    
    
    16.7
    
    
    
    17.0
    
    
    
    19.3Interest income
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.2
    )Other income
    
    
    
    
    
    
    (3.5
    )
    
    
    
    
    
    
    Loss (gain) on foreign currency
    
    
    0.8
    
    
    
    (0.8
    )
    
    
    (0.4
    )
    
    
    0.1Total other expenses
    
    
    17.5
    
    
    
    12.4
    
    
    
    16.5
    
    
    
    19.2Income (loss) before income taxes
    
    
    (14.1
    )
    
    
    (42.9
    )
    
    
    19.3
    
    
    
    5.7Income taxes expense (benefit)
    
    
    (5.4
    )
    
    
    (21.5
    )
    
    
    2.2
    
    
    
    0.6Net income (loss)
    
    
    (8.7
    )
    
    
    (21.4
    )
    
    
    17.1
    
    
    
    5.1EBITDA c)
    
    
    19.1
    
    
    
    (11.4
    )
    
    
    50.7
    
    
    
    39.3Adjusted EBITDA c)
    
    
    21.2
    
    
    
    55.6
    
    
    
    54.1
    
    
    
    41.9
 
 a)
    
    Exclusive of depreciation and amortizationb)
    
    Including one time charges related to the unapproved PEPs event -68-




---



##### 



c)
    
    A reconciliation of net income to EBITDA (a-non U.S. GAAP measure) and from EBITDA to
Adjusted EBITDA (a-non U.S. GAAP measure) for each of the quarters ended in 2010 and 2009 is
as follows: For the quarters endedSeptember 30,
    
    
    June 30,
    
    
    March 31,
    
    
    December 31,(in millions of U.S. dollars)
    
    2010
    
    
    2010
    
    
    2010
    
    
    2009$
    
    
    $
    
    
    $
    
    
    $Net income (loss)
    
    
    (6.2
    )
    
    
    (9.9
    )
    
    
    (163.7
    )
    
    
    9.4Financial expenses
    
    
    16.2
    
    
    
    16.3
    
    
    
    16.3
    
    
    
    16.2Interest income
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    (0.1
    )Income taxes expense (benefit)
    
    
    (5.2
    )
    
    
    (5.4
    )
    
    
    21.8
    
    
    
    (0.2
    )Depreciation and amortization
    
    
    15.2
    
    
    
    15.1
    
    
    
    14.0
    
    
    
    16.7EBITDA h)
    
    
    19.8
    
    
    
    15.9
    
    
    
    (111.8
    )
    
    
    42.0Transaction, integration, refinancing costs and payments to third parties a)
    
    
    3.5
    
    
    
    1.1
    
    
    
    2.6
    
    
    
    1.8Management fees b)
    
    
    1.9
    
    
    
    0.6
    
    
    
    1.0
    
    
    
    0.9Stock-based compensation expense excluding impact of the unapproved PEPs event
c)
    
    
    (0.7
    )
    
    
    1.2
    
    
    
    2.5
    
    
    
    1.5Impairment of intangible assets and goodwill related to the unapproved PEPs eventd)
    
    
    
    
    
    
    
    
    
    
    107.2
    
    
    
    Other adjustments related to the unapproved PEP event f)
    
    
    
    
    
    
    14.9
    
    
    
    48.5
    
    
    
    Acquired in-process research g)
    
    
    
    
    
    
    8.0
    
    
    
    
    
    
    
    Adjusted EBITDA h)
    
    
    24.5
    
    
    
    41.7
    
    
    
    50.0
    
    
    
    46.2
 For the quarters endedSeptember 30,
    
    
    June 30,
    
    
    March 31,
    
    
    December 31,(in millions of U.S. dollars)
    
    2009
    
    
    2009
    
    
    2009
    
    
    2008$
    
    
    $
    
    
    $
    
    
    $Net income (loss)
    
    
    (8.7
    )
    
    
    (21.4
    )
    
    
    17.1
    
    
    
    5.1Financial expenses
    
    
    16.8
    
    
    
    16.7
    
    
    
    17.0
    
    
    
    19.3Interest income
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.2
    )Income taxes expense (benefit)
    
    
    (5.4
    )
    
    
    (21.5
    )
    
    
    2.2
    
    
    
    0.6Depreciation and amortization
    
    
    16.5
    
    
    
    14.8
    
    
    
    14.5
    
    
    
    14.5EBITDA h)
    
    
    19.1
    
    
    
    (11.4
    )
    
    
    50.7
    
    
    
    39.3Transaction, integration, refinancing costs and
payments to third parties a)
    
    
    0.9
    
    
    
    5.0
    
    
    
    0.8
    
    
    
    1.1Management fees b)
    
    
    0.5
    
    
    
    4.7
    
    
    
    
    
    
    
    0.2Stock-based compensation expense c)
    
    
    0.7
    
    
    
    1.6
    
    
    
    2.6
    
    
    
    1.3Partial write-down of intangible assets e)
    
    
    
    
    
    
    55.7
    
    
    
    
    
    
    
    Adjusted EBITDA h)
    
    
    21.2
    
    
    
    55.6
    
    
    
    54.1
    
    
    
    41.9
 
 a)
    
    Represents integration and refinancing costs as well as due diligence costs related
to certain non-recurring transactions, payments to third parties in respect of research and
development milestones and other progress payments as defined within our credit agreement.b)
    
    Represents management fees and other charges associated with the Management Services
Agreement with TPG.c)
    
    Represents stock-based employee compensation expense under the provisions of FASB
guidance, excluding the impact of the unapproved PEPs event.d)
    
    Intangible assets and goodwill impairment charges related to the unapproved PEPs
event.e)
    
    Partial write-down of intangible assets related to URSOproducts.f)
    
    Adjustments and other charges related to the unapproved PEPs event, including an
additional product returns and other sales deduction provision of $23.4 million during the
fiscal year ended September 30, 2010, inventory net realizable value and accrual for purchases
and other materials and supply commitments of $44.9 million during the fiscal year ended September
30, 2010, and a stock-based compensation recovery of $4.9 million during the fiscal year ended
September 30, 2010. -69-




---



##### 



g)
    
    Represents the acquired in-process research.h)
    
    EBITDA and Adjusted EBITDA are both non-U.S. GAAP financial measures and are
presented in this report because our management considers them important supplemental measures
of our performance and believes that they are frequently used by interested parties in the
evaluation of companies in the industry. EBITDA, as we use it, is net income before financial
expenses, interest income, income taxes and depreciation and amortization. We believe that the
presentation of EBITDA enhances an investors understanding of our financial performance. We
believe that EBITDA is a useful financial metric to assess our operating performance from
period to period by excluding certain items that we believe are not representative of our core
business. The term EBITDA is not defined under U.S. GAAP, and EBITDA is not a measure of net
income, operating income or any other performance measure derived in accordance with U.S.
GAAP, and is subject to important limitations. Adjusted EBITDA, as we use it, is EBITDA
adjusted to exclude certain non-cash charges, unusual or non-recurring items and other
adjustments set forth below. Adjusted EBITDA is calculated in the same manner as EBITDA and
Consolidated EBITDA as those terms are defined under the indentures governing our notes and
Credit Facility further described in the section Liquidity and Capital Resources-Long-term
Debt and New Senior Secured Credit Facility. We believe that the inclusion of supplementary
adjustments applied to EBITDA in presenting Adjusted EBITDA are appropriate to provide
additional information to investors about certain material non-cash items and unusual or
non-recurring items that we do not expect to continue in the future and to provide additional
information with respect to our ability to meet our future debt service and to comply with
various covenants in our indentures and Credit Facility. Adjusted EBITDA is not a measure of
net income, operating income or any other performance measure derived in accordance with U.S.
GAAP, and is subject to important limitations. EBITDA and Adjusted EBITDA have limitations as
an analytical tool, and they should not be considered in isolation, or as substitutes for
analysis of our results as reported under U.S. GAAP. Some of these limitations are: 
    
    EBITDA and Adjusted EBITDA do not reflect all cash expenditures, future requirements for
capital expenditures, or contractual commitments;
    
    EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working
capital needs;
    
    EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments, on our debt;
    
    Although depreciation and amortization are non-cash charges, the assets being depreciated
and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA
do not reflect any cash requirements for such replacements;
    
    Adjusted EBITDA reflects additional adjustments as provided in the indentures governing
our secured and unsecured notes and new senior secured credit facilities; and
    
    Other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than
we do, limiting its usefulness as a comparative measure.
  Liquidity and Capital Resources
 Cash requirements
  
   -70-




---



##### 



Contractual obligations and other commitments
  For the fiscal years ending September 30,Less than
    
    
    
    
    
    
    
    
    
    
    More than(in millions of U.S. dollars)
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    5 years$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Long-term debt
    
    
    601.8
    
    
    
    13.2
    
    
    
    75.3
    
    
    
    278.3
    
    
    
    235.0Operating leases
    
    
    5.7
    
    
    
    2.4
    
    
    
    2.7
    
    
    
    0.6
    
    
    
    Other commitments
    
    
    4.3
    
    
    
    3.9
    
    
    
    0.3
    
    
    
    0.1
    
    
    
    Interest on long-term debt
    
    
    271.6
    
    
    
    56.1
    
    
    
    112.3
    
    
    
    90.7
    
    
    
    12.5883.4
    
    
    
    75.6
    
    
    
    190.6
    
    
    
    369.7
    
    
    
    247.5
    Long-term debt and Credit Facility
  -71-




---



##### 



Year
    
    %2011
    
    
    106.9382012
    
    
    104.6252013
    
    
    102.3132014 and thereafter
    
    
    100.000
     Year
    
    %2012
    
    
    106.3752013
    
    
    103.1882014 and thereafter
    
    
    100.000
   -72-




---



##### 



Operating leases
  Other commitments
  Related party transactions
    Balance sheet arrangements
  Cash flows
  (in millions of U.S. dollars)
    
    For the fiscal years ended September 30,2010
    
    
    2009
    
    
    2008CombinedPredecessor/Successor
    
    
    Successor
    
    
    Successor$
    
    
    $
    
    
    $Net cash provided by operating activities
    
    
    63.1
    
    
    
    92.4
    
    
    
    25.7Net cash used by investing activities
    
    
    (6.1
    )
    
    
    (10.6
    )
    
    
    (834.9
    )Net cash provided (used) by financing activities
    
    
    (21.3
    )
    
    
    (11.6
    )
    
    
    1,034.8
   -73-




---



##### 



Significant accounting policies
  Use of estimates
   a)
    
    The quantity and expiration dates of PEPs inventory in the distribution channel;b)
    
    Short-term prescription demand during the period of time during which the products continued
to be available at the pharmacy-level;c)
    
    Assumptions regarding the probability of obtaining an eventual NDA approval for our PEPs and
the time required for such approval;d)
    
    Assumptions regarding market share growth after an eventual re-launch of our PEPs; ande)
    
    Other factors.
  Revenue recognition
  -74-




---



##### 



Reservesrelated to theProduct
    
    
    Contract
    
    
    Charge-
    
    
    DSA
    
    
    Discounts
    
    
    unapproved(in millions of U.S. dollars)
    
    returns
    
    
    rebates
    
    
    backs
    
    
    fees
    
    
    and other
    
    
    PEPs event
    
    
    Total$
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Balance as at September 30, 2009
    
    
    17.2
    
    
    
    9.8
    
    
    
    9.0
    
    
    
    1.0
    
    
    
    0.7
    
    
    
    
    
    
    
    37.7Provisions
    
    
    9.3
    
    
    
    36.3
    
    
    
    37.3
    
    
    
    5.6
    
    
    
    8.1
    
    
    
    23.4
    
    
    
    120.0Settlements
    
    
    (13.1
    )
    
    
    (40.0
    )
    
    
    (38.2
    )
    
    
    (5.3
    )
    
    
    (8.6
    )
    
    
    (12.4
    )
    
    
    (117.6
    )Balance as at September 30, 2010
    
    
    13.4
    
    
    
    6.1
    
    
    
    8.1
    
    
    
    1.3
    
    
    
    0.2
    
    
    
    11.0
    
    
    
    40.1
 Product returns
   
    
    past product returns activity;
    
    the duration of time taken for products to be returned;
    
    the estimated level of inventory in the distribution channels;
    
    product recalls and discontinuances;
    
    the shelf life of products;
    
    the launch of new drugs or new formulations; and
    
    the loss of patent protection or new competition.
      Rebates, chargebacks and other sales deduction
   -75-




---



##### 



Intangible assets and goodwill
   Intangibleassets
    
    
    Goodwill$
    
    
    $Balance as at September 30, 2009
    
    
    421.3
    
    
    
    165.8Depreciation and amortization
    
    
    (52.4
    )
    
    
    Partial write-down of intangible assets
    
    
    (15.8
    )
    
    
    (91.4
    )Foreign exchange translation adjustments
    
    
    (5.1
    )
    
    
    (0.9
    )Balance as at September 30, 2010
    
    
    348.0
    
    
    
    73.5
 Research and development expenses
  Income taxes
   -76-




---



##### 



Changes in accounting standards
         -77-




---



##### 



Subsequent Events
  -78-




---



##### 



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Quantitative and Qualitative Disclosure about Market Risk
  Foreign Currency Risk
   Interest Rate Risk
    -79-




---



##### 



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 AXCAN
INTERMEDIATE HOLDINGS INC. (Successor)
 and
 AXCAN
PHARMA INC. (Predecessor)
 INDEX
 Report Of Independent Registered Public Accounting FirmTo The Board Of Directors And Shareholder Of Axcan Intermediate Holdings Inc.
    
    
    81Report Of Independent Registered Public Accounting FirmTo The Board Of Directors And Shareholder Of Axcan Pharma Inc.
    
    
    82Consolidated Balance Sheets as of September 30, 2010 and September 30, 2009
    
    
    83Consolidated Statements Of Operations for the twelve-month periods ended September 30, 2010 and September 30, 2009 and
for the period from February 26, 2008 to September 30, 2008 (Successor), the period from October 1, 2007 to February 25, 2008
    
    
    84Consolidated Shareholders Equity (Deficiency) And Comprehensive Income (Loss) for the twelve-month
periods
ended September 30, 2010 and September 30, 2009 and for the period from February 26, 2008 to
September 30, 2008 (Successor),
the period from October 1, 2007 to February 25, 2008
    
    
    85Consolidated Cash Flows for the twelve-month periods ended September 30, 2010 and September 30, 2009 and for
the period from February 26, 2008 to September 30, 2008 (Successor), the period from October 1, 2007 to February 25, 2008
    
    
    86Notes To Consolidated Financial Statements
    
    
    87
 -80-




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF AXCAN INTERMEDIATE HOLDINGS INC.
    1
    
 1
    
    Chartered Accountant Auditor permit No. 10019 -81-




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF AXCAN PHARMA INC.
    
   -82-




---



##### 



(in thousands of U.S. dollars, except share related data)
 September 30,
    
    
    September 30,2010
    
    
    2009$
    
    
    $AssetsCurrent assetsCash and cash equivalents
    
    
    161,503
    
    
    
    126,435Accounts receivable, net (Note 5)
    
    
    32,379
    
    
    
    57,124Accounts receivable from the parent company (Note 18)
    
    
    487
    
    
    
    306Income taxes receivable
    
    
    2,906
    
    
    
    3,391Inventories, net (Note 6)
    
    
    23,866
    
    
    
    44,706Prepaid expenses and deposits
    
    
    3,277
    
    
    
    2,868Deferred income taxes, net (Note 7)
    
    
    2,331
    
    
    
    15,852Total current assets
    
    
    226,749
    
    
    
    250,682Property, plant and equipment, net (Note 8)
    
    
    35,777
    
    
    
    39,344Intangible assets, net (Note 9)
    
    
    347,962
    
    
    
    421,290Goodwill, net (Note 9)
    
    
    73,540
    
    
    
    165,823Deferred debt issue expenses, net of accumulated amortization of $14,136 ($9,168 as at September 30, 2009)
    
    
    20,443
    
    
    
    25,411Deferred income taxes, net (Note 7)
    
    
    8,706
    
    
    
    12,052Total assets
    
    
    713,177
    
    
    
    914,602LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities (Note 10)
    
    
    94,673
    
    
    
    87,684Income taxes payable (Note 7)
    
    
    3,446
    
    
    
    2,493Installments on long-term debt (Note 11)
    
    
    13,163
    
    
    
    30,708Deferred income taxes (Note 7)
    
    
    47
    
    
    
    137Total current liabilities
    
    
    111,329
    
    
    
    121,022Long-term debt (Note 11)
    
    
    581,312
    
    
    
    582,586Other long-term liabilities
    
    
    10,028
    
    
    
    9,448Deferred income taxes (Note 7)
    
    
    31,540
    
    
    
    37,782Total liabilities
    
    
    734,209
    
    
    
    750,838Commitments and contingencies (Note 19)Shareholders Equity (Deficiency)Capital Stock (Note 12)Common shares, par value $0.001; 100 shares authorized: 100 issued and outstanding as at September 30,
2010, and September 30, 2009
    
    
    1
    
    
    
    1Deficit
    
    
    (468,152
    )
    
    
    (297,658
    )9.05% Note receivable from the parent company (Note 18)
    
    
    (133,154
    )
    
    
    (133,154
    )Additional paid-in capital
    
    
    614,113
    
    
    
    619,053Accumulated other comprehensive loss
    
    
    (33,840
    )
    
    
    (24,478
    )Total shareholders equity (deficiency)
    
    
    (21,032
    )
    
    
    163,764Total liabilities and shareholders equity (deficiency)
    
    
    713,177
    
    
    
    914,602
 The accompanying notes are an integral part of the consolidated financial statements.
 -83-




---



##### 



(in thousands of U.S. dollars)
 Successor

    
    
    PredecessorFor the
    
    
    For the
    
    
    For the
    
    
    For thetwelve-month
    
    
    twelve-month
    
    
    seven-month
    
    
    five-monthperiod ended
    
    
    period ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    February 25,2010
    
    
    2009
    
    
    2008
    
    
    2008$
    
    
    $
    
    
    $
    
    
    $Net product sales
    
    
    354,587
    
    
    
    409,826
    
    
    
    223,179
    
    
    
    158,579Other revenue
    
    
    
    
    
    
    7,113
    
    
    
    
    
    
    
    Total revenue
    
    
    354,587
    
    
    
    416,939
    
    
    
    223,179
    
    
    
    158,579Cost of goods sold (a) (Note 2)
    
    
    130,915
    
    
    
    103,023
    
    
    
    77,227
    
    
    
    38,739Selling and administrative expenses (a)(Note 13)
    
    
    115,033
    
    
    
    122,942
    
    
    
    88,246
    
    
    
    76,198Management fees (Note 18)
    
    
    4,412
    
    
    
    5,351
    
    
    
    99
    
    
    
    Research and development expenses (a)
    
    
    31,715
    
    
    
    36,037
    
    
    
    17,768
    
    
    
    10,256Acquired in-process research (Note 4)
    
    
    7,948
    
    
    
    
    
    
    
    272,400
    
    
    
    Depreciation and amortization (Note 13)
    
    
    61,011
    
    
    
    60,305
    
    
    
    35,579
    
    
    
    9,595Impairment of intangible assets and goodwill (Note 9)
    
    
    107,158
    
    
    
    55,665
    
    
    
    
    
    
    
    Total operating expenses
    
    
    458,192
    
    
    
    383,323
    
    
    
    491,319
    
    
    
    134,788Operating income (loss)
    
    
    (103,605
    )
    
    
    33,616
    
    
    
    (268,140
    )
    
    
    23,791Financial expenses (Note 13)
    
    
    64,956
    
    
    
    69,809
    
    
    
    41,513
    
    
    
    262Interest income
    
    
    (688
    )
    
    
    (389
    )
    
    
    (808
    )
    
    
    (5,440
    )Other income (Note 19)
    
    
    (9,704
    )
    
    
    (3,500
    )
    
    
    
    
    
    
    Loss (gain) on foreign currencies
    
    
    1,247
    
    
    
    (328
    )
    
    
    (1,841
    )
    
    
    (198
    )Total other expenses (income)
    
    
    55,811
    
    
    
    65,592
    
    
    
    38,864
    
    
    
    (5,376
    )Income (loss) before income taxes
    
    
    (159,416
    )
    
    
    (31,976
    )
    
    
    (307,004
    )
    
    
    29,167Income taxes expense (benefit) (Note 7)
    
    
    10,950
    
    
    
    (24,082
    )
    
    
    (17,740
    )
    
    
    12,042Net income (loss)
    
    
    (170,366
    )
    
    
    (7,894
    )
    
    
    (289,264
    )
    
    
    17,125
 
 (a)
    
    Excluding depreciation and amortization The accompanying notes are an integral part of the consolidated financial statements.
 -84-




---



##### 



(in thousands of U.S. dollars, except share related data)
 Successor
    
    
    PredecessorFor the
    
    
    For the
    
    
    For the
    
    
    For thetwelve-month
    
    
    twelve-month
    
    
    seven-month
    
    
    five-monthperiod ended
    
    
    period ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    February 25,2010
    
    
    2009
    
    
    2008
    
    
    2008Common shares (number)Balance, beginning of period
    
    
    100
    
    
    
    100
    
    
    
    
    
    
    
    55,359,652Shares issued for cash
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    Shares issued pursuant to stock incentive plans for cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,299Balance, end of period
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    55,376,951$
    
    
    
    $
    
    
    
    $
    
    
    
    $Common sharesBalance, beginning of period
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    395,888Shares issued for cash
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Stock-based compensation on exercised options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Shares issued pursuant to stock incentive plans for cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    224Balance, end of period
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    396,153Retained earnings (deficit)Balance, beginning of period
    
    
    (297,658
    )
    
    
    (289,264
    )
    
    
    
    
    
    
    249,371Stock-based compensation cancellation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,821
    )Dividends paid
    
    
    (128
    )
    
    
    (500
    )
    
    
    
    
    
    
    Net income (loss)
    
    
    (170,366
    )
    
    
    (7,894
    )
    
    
    (289,264
    )
    
    
    17,125Balance, end of period
    
    
    (468,152
    )
    
    
    (297,658
    )
    
    
    (289,264
    )
    
    
    257,675Additional paid-in capitalBalance, beginning of period
    
    
    619,053
    
    
    
    617,255
    
    
    
    
    
    
    
    9,089Shares issued for cash
    
    
    
    
    
    
    
    
    
    
    608,154
    
    
    
    Stock-based compensation expense (recovery)
    
    
    (378
    )
    
    
    6,172
    
    
    
    7,443
    
    
    
    7,474Stock-based compensation on exercised options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41
    )Stock-based compensation plan redemptions and
settlements
    
    
    (345
    )
    
    
    (157
    )
    
    
    
    
    
    
    (16,395
    )Income tax deductions on stock options exercise
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (127
    )Provision on interest receivable from the parent company
    
    
    (12,050
    )
    
    
    (12,050
    )
    
    
    (3,028
    )
    
    
    Interest income from the parent company (net of taxes
of $4, 217, $4,217 and $2,524)
    
    
    7,833
    
    
    
    7,833
    
    
    
    4,686
    
    
    
    Balance, end of period
    
    
    614,113
    
    
    
    619,053
    
    
    
    617,255
    
    
    
    9.05% Note receivable from the parent companyBalance, beginning of period
    
    
    (133,154
    )
    
    
    (133,154
    )
    
    
    
    
    
    
    Issue of notes
    
    
    
    
    
    
    
    
    
    
    (133,154
    )
    
    
    Balance, end of period
    
    
    (133,154
    )
    
    
    (133,154
    )
    
    
    (133,154
    )
    
    
    Accumulated other comprehensive income (loss)Balance, beginning of period
    
    
    (24,478
    )
    
    
    (29,168
    )
    
    
    
    
    
    
    35,849Hedging contract fair value adjustments (net of taxes
of $4,$155, and ($159))
    
    
    (7
    )
    
    
    (288
    )
    
    
    295
    
    
    
    Foreign currency translation adjustments
    
    
    (9,355
    )
    
    
    4,978
    
    
    
    (29,463
    )
    
    
    5,724Balance, end of period
    
    
    (33,840
    )
    
    
    (24,478
    )
    
    
    (29,168
    )
    
    
    41,573Total shareholders equity (deficiency)
    
    
    (21,032
    )
    
    
    163,764
    
    
    
    165,670
    
    
    
    695,401Comprehensive income (loss)Other comprehensive income (loss)
    
    
    (9,362
    )
    
    
    4,690
    
    
    
    (29,168
    )
    
    
    5,724Net income (loss)
    
    
    (170,366
    )
    
    
    (7,894
    )
    
    
    (289,264
    )
    
    
    17,125Total comprehensive income (loss)
    
    
    (179,728
    )
    
    
    (3,204
    )
    
    
    (318,432
    )
    
    
    22,849Accumulated other comprehensive income (loss)Amounts related to foreign currency translation
adjustments
    
    
    (33,840
    )
    
    
    (24,485
    )
    
    
    (29,463
    )
    
    
    41,573Amounts related to hedging contract fair value
adjustments
    
    
    
    
    
    
    7
    
    
    
    295
    
    
    
    Accumulated other comprehensive income (loss)
    
    
    (33,840
    )
    
    
    (24,478
    )
    
    
    (29,168
    )
    
    
    41,573
 The accompanying notes are an integral part of the consolidated financial statements.
 -85-




---



##### 



(in thousands of U.S. dollars)
 Successor
    
    
    PredecessorFor the
    
    
    For the
    
    
    For the
    
    
    For thetwelve-month
    
    
    twelve-month
    
    
    seven-month
    
    
    five-monthperiod ended
    
    
    period ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    February 25,2010
    
    
    2009
    
    
    2008
    
    
    2008$
    
    
    $
    
    
    $
    
    
    $Cash flows from operating activitiesNet income (loss)
    
    
    (170,366
    )
    
    
    (7,894
    )
    
    
    (289,264
    )
    
    
    17,125Adjustments to reconcile net income to cash flows from
operating activitiesNon-cash financial expenses
    
    
    7,014
    
    
    
    7,028
    
    
    
    5,352
    
    
    
    Inventories stepped-up value expensed
    
    
    
    
    
    
    
    
    
    
    22,714
    
    
    
    Depreciation and amortization
    
    
    61,011
    
    
    
    60,305
    
    
    
    35,579
    
    
    
    9,595Acquired in-process research
    
    
    
    
    
    
    
    
    
    
    272,400
    
    
    
    Stock-based compensation expense (recovery) (Note 13)
    
    
    (378
    )
    
    
    6,172
    
    
    
    7,443
    
    
    
    7,474Impairment of intangible assets and goodwill (Note 9)
    
    
    107,158
    
    
    
    55,665
    
    
    
    
    
    
    
    Loss on disposal and write-down of assets
    
    
    128
    
    
    
    196
    
    
    
    
    
    
    
    Non-cash loss (gain) on foreign exchange
    
    
    240
    
    
    
    2,110
    
    
    
    (3,302
    )
    
    
    (67
    )Change in fair value of derivatives
    
    
    (621
    )
    
    
    734
    
    
    
    5
    
    
    
    Deferred income taxes (Note 7)
    
    
    5,616
    
    
    
    (35,573
    )
    
    
    (25,367
    )
    
    
    432Other non-cash adjustments related to unapproved PEPs
    
    
    68,335
    
    
    
    
    
    
    
    
    
    
    
    Changes in working capital itemsAccounts receivable
    
    
    23,437
    
    
    
    (14,268
    )
    
    
    6,343
    
    
    
    (12,340
    )Accounts receivable from the parent company
    
    
    (181
    )
    
    
    681
    
    
    
    (987
    )
    
    
    Income taxes receivable
    
    
    61
    
    
    
    13,936
    
    
    
    3,097
    
    
    
    (5,929
    )Inventories
    
    
    (9,572
    )
    
    
    (7,721
    )
    
    
    (6,818
    )
    
    
    (3,803
    )Prepaid expenses and deposits
    
    
    (431
    )
    
    
    428
    
    
    
    (149
    )
    
    
    (49
    )Accounts payable and accrued liabilities
    
    
    (30,361
    )
    
    
    9,056
    
    
    
    (71,205
    )
    
    
    67,865Income taxes payable
    
    
    2,030
    
    
    
    1,527
    
    
    
    (3,353
    )
    
    
    (7,058
    )Net cash provided by (used in) operating activities
    
    
    63,120
    
    
    
    92,382
    
    
    
    (47,512
    )
    
    
    73,245Cash flows from investing activitiesDisposal of short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129,958Acquisition of property, plant and equipment
    
    
    (6,058
    )
    
    
    (10,590
    )
    
    
    (3,061
    )
    
    
    (3,314
    )Acquisition of intangible assets
    
    
    
    
    
    
    (10
    )
    
    
    (32
    )
    
    
    (14
    )Net cash used for the Acquisition
    
    
    
    
    
    
    
    
    
    
    (958,463
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    (6,058
    )
    
    
    (10,600
    )
    
    
    (961,556
    )
    
    
    126,630Cash flows from financing activitiesIssuance of long-term debt
    
    
    
    
    
    
    
    
    
    
    634,120
    
    
    
    Repayment of long-term debt
    
    
    (20,865
    )
    
    
    (10,937
    )
    
    
    (10,890
    )
    
    
    (221
    )Advances from the parent company
    
    
    
    
    
    
    
    
    
    
    4,182
    
    
    
    Deferred debt issue expenses
    
    
    
    
    
    
    
    
    
    
    (36,360
    )
    
    
    (889
    )Stock-based compensation plan redemptions and settlements
    
    
    (345
    )
    
    
    (157
    )
    
    
    
    
    
    
    (30,357
    )Issue of shares
    
    
    
    
    
    
    
    
    
    
    475,001
    
    
    
    224Dividends paid
    
    
    (128
    )
    
    
    (500
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (21,338
    )
    
    
    (11,594
    )
    
    
    1,066,053
    
    
    
    (31,243
    )Foreign exchange gain (loss) on cash held in foreign currencies
    
    
    (656
    )
    
    
    142
    
    
    
    (880
    )
    
    
    487Net increase in cash and cash equivalents
    
    
    35,068
    
    
    
    70,330
    
    
    
    56,105
    
    
    
    169,119Cash and cash equivalents, beginning of period
    
    
    126,435
    
    
    
    56,105
    
    
    
    
    
    
    
    179,672Cash and cash equivalents, end of period
    
    
    161,503
    
    
    
    126,435
    
    
    
    56,105
    
    
    
    348,791Additional informationInterest received
    
    
    689
    
    
    
    424
    
    
    
    918
    
    
    
    4,507Interest paid
    
    
    57,366
    
    
    
    60,496
    
    
    
    31,599
    
    
    
    11Income taxes received
    
    
    2,602
    
    
    
    16,761
    
    
    
    
    
    
    
    Income taxes paid
    
    
    5,452
    
    
    
    13,883
    
    
    
    8,954
    
    
    
    24,080
 The accompanying notes are an integral part of the consolidated financial statements.
 -86-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 1. Governing Statutes, Description of Business and Basis of Presentation
   2. Significant Accounting Policies
 Use of estimates
  Principles of consolidation
  Revenue recognition
   -87-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 
 
  Cash and cash equivalents
  Short-term investments
    -88-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 Accounts receivable
  Inventory valuation
    Research and development
  In-process research and development
  Depreciation and amortization
  Buildings
    
    10 to 25 yearsFurniture and equipment
    
    5 to 10 yearsComputer equipment and software
    
    2 to 5 yearsLeasehold and building improvements
    
    5 to 10 yearsTrademarks, trademark licenses and manufacturing rights
    
    6 months to 20 years
  -89-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 Impairment of long lived-assets and goodwill
     Income taxes
   Selling and administrative expenses
  Foreign currency translation
   -90-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 Deferred debt issue expenses
  Derivative instruments and hedging activities
   Stock incentive plans
  3. Recently Issued Accounting Standards
     -91-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
       -92-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
   .
 4. Acquisition
  -93-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
  $Cash
    
    
    348,791Inventories a)
    
    
    54,055Other current assets
    
    
    91,951Property, plant and equipment
    
    
    36,912Intangible assets
    
    
    581,653Acquired in-process research b)
    
    
    272,400Goodwill
    
    
    169,625Deferred debt issue expenses
    
    
    889Deferred income taxes assets
    
    
    7,246Current liabilities
    
    
    (174,554
    )Long-term debt
    
    
    (68
    )Deferred income taxes liabilities
    
    
    (81,646
    )Total
    
    
    1,307,254
 a)
    
    As part of the purchase price allocation for the acquisition, the carrying value of
inventory acquired was stepped-up to fair value by $22,714,000 as at February 25, 2008. The
stepped-up value is recorded as a charge to cost of goods sold as acquired inventory is sold.b)
    
    Represents the estimated fair value of acquired in-process R&D projects that had not
yet reached technological feasibility and had no alternative future use. Accordingly, this
amount was immediately expensed upon the acquisition date. The value assigned to purchased
in-process technology is mainly attributable to the following projects: CANASA MAX 002,
pancreatic enzymes, PYLERA in the European Union, AGI 010 and Cx401.  For thetwelve-monthperiod endedSeptember 30, 2008(unaudited)$Revenue
    
    
    381,758Income before income taxes a)
    
    
    259Net income a)
    
    
    3,964
 a)
    
    The pro-forma financial information for the fiscal year ended September 30, 2008, has
not been adjusted for the acquired in-process research of $272,400,000 and inventory
stepped-up value adjustments of $22,714,000, which form part of the purchase price allocation,
transaction and integration costs of $37,569,000 because they are non-recurring in nature.  -94-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 Product acquisitions
  5. Accounts receivable
 September 30,
    
    
    September 30,2010
    
    
    2009$
    
    
    $Trade
accounts, net of allowance for doubtful amounts of $117 ($117 in 2009)
a)
    
    
    31,404
    
    
    
    54,094Taxes receivable
    
    
    364
    
    
    
    612Other
    
    
    611
    
    
    
    2,41832,379
    
    
    
    57,124
  a)
    
    As at September 30, 2010, the accounts receivable include amounts receivable from
three major customers which represent approximately 42% (57% as at September 30, 2009) of the
Companys total accounts receivable (Note 14).
 6. Inventories
 September 30,
    
    
    September 30,2010
    
    
    2009$
    
    
    $Raw material and packaging material
    
    
    10,316
    
    
    
    8,416Work in progress
    
    
    595
    
    
    
    886Finished goods net of reserve for obsolescence of $758 ($4,159 as at September 30, 2009)
    
    
    12,955
    
    
    
    35,40423,866
    
    
    
    44,706
 
 -95-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 7. Income Taxes
  Successor
    
    
    PredecessorFor the
    
    
    For the
    
    
    For the
    
    
    For thetwelve-month
    
    
    twelve-month
    
    
    seven-month
    
    
    five-monthperiod ended
    
    
    period ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    February 25,2010
    
    
    2009
    
    
    2008
    
    
    2008$
    
    
    $
    
    
    $
    
    
    $Current
    
    
    5,334
    
    
    
    11,491
    
    
    
    7,627
    
    
    
    11,888DeferredCreation and reversal of temporary differences
    
    
    5,638
    
    
    
    (35,863
    )
    
    
    (25,367
    )
    
    
    154Change in promulgated rates
    
    
    (22
    )
    
    
    290
    
    
    
    
    
    
    
    5,616
    
    
    
    (35,573
    )
    
    
    (25,367
    )
    
    
    15410,950
    
    
    
    (24,082
    )
    
    
    (17,740
    )
    
    
    12,042DomesticCurrent
    
    
    274
    
    
    
    7,430
    
    
    
    4,057
    
    
    
    (4,264
    )Deferred
    
    
    10,945
    
    
    
    (37,510
    )
    
    
    (10,461
    )
    
    
    1,97711,219
    
    
    
    (30,080
    )
    
    
    (6,404
    )
    
    
    (2,287
    )ForeignCurrent
    
    
    5,060
    
    
    
    4,061
    
    
    
    3,570
    
    
    
    16,152Deferred
    
    
    (5,329
    )
    
    
    1,937
    
    
    
    (14,906
    )
    
    
    (1,823
    )(269
    )
    
    
    5,998
    
    
    
    (11,336
    )
    
    
    14,32910,950
    
    
    
    (24,082
    )
    
    
    (17,740
    )
    
    
    12,042
  Successor
    
    
    PredecessorFor the
    
    
    For the
    
    
    For the
    
    
    For thetwelve-month
    
    
    twelve-month
    
    
    seven-month
    
    
    five-monthperiod ended
    
    
    period ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    February 25,2010
    
    
    2009
    
    
    2008
    
    
    2008%
    
    
    
    $
    
    
    %
    
    
    
    $
    
    
    %
    
    
    
    $
    
    
    %
    
    
    
    $Combined statutory rate applied to pre-tax
income (loss)
    
    
    35.00
    
    
    
    (55,796
    )
    
    
    35.00
    
    
    
    (11,192
    )
    
    
    35.00
    
    
    
    (107,451
    )
    
    
    31.83
    
    
    
    9,284Increase (decrease) in taxes resulting from:Change in promulgated rates
    
    
    0.01
    
    
    
    (22
    )
    
    
    (0.91
    )
    
    
    290
    
    
    
    
    
    
    
    
    
    
    
    0.15
    
    
    
    42Difference with foreign tax rates
    
    
    1.70
    
    
    
    (2,717
    )
    
    
    8.10
    
    
    
    (2,591
    )
    
    
    (1.12
    )
    
    
    3,428
    
    
    
    (5.63
    )
    
    
    (1,643
    )Tax benefit arising from a financing structure
    
    
    11.18
    
    
    
    (17,824
    )
    
    
    44.46
    
    
    
    (14,218
    )
    
    
    2.94
    
    
    
    (9,014
    )
    
    
    
    
    
    
    Non-deductible items
    
    
    (21.89
    )
    
    
    34,892
    
    
    
    (9.72
    )
    
    
    3,108
    
    
    
    (31.81
    )
    
    
    97,647
    
    
    
    15.91
    
    
    
    4,641Non-taxable items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.06
    )
    
    
    (17
    )Investment tax credits
    
    
    0.96
    
    
    
    (1,524
    )
    
    
    4.24
    
    
    
    (1,355
    )
    
    
    0.29
    
    
    
    (885
    )
    
    
    (2.72
    )
    
    
    (793
    )State taxes
    
    
    1.95
    
    
    
    (3,107
    )
    
    
    (0.34
    )
    
    
    110
    
    
    
    1.29
    
    
    
    (3,974
    )
    
    
    
    
    
    
    Change in valuation allowance
    
    
    (36.09
    )
    
    
    57,544
    
    
    
    (2.30
    )
    
    
    736
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    0.31
    
    
    
    (496
    )
    
    
    (3.22
    )
    
    
    1,030
    
    
    
    (0.81
    )
    
    
    2,509
    
    
    
    1.81
    
    
    
    528(6.87
    )
    
    
    10,950
    
    
    
    75.31
    
    
    
    (24,082
    )
    
    
    5.78
    
    
    
    (17,740
    )
    
    
    41.29
    
    
    
    12,042
  -96-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
  September 30,
    
    
    September 30,2010
    
    
    2009$
    
    
    $AssetsInventories
    
    
    2,897
    
    
    
    3,519Accounts payable and accrued liabilities
    
    
    12,257
    
    
    
    12,464Intangible assets
    
    
    7,849
    
    
    
    Research and development tax credits
    
    
    2,022
    
    
    
    2,355Deferred debt issue expenses
    
    
    2,332
    
    
    
    1,812Unused tax losses
    
    
    42,046
    
    
    
    20,983Financing expenses
    
    
    1,038
    
    
    
    736Stock-based compensation
    
    
    2,123
    
    
    
    1,984Other
    
    
    176
    
    
    
    485LiabilitiesPrepaid expenses and deposits
    
    
    (832
    )
    
    
    (786
    )Property, plant and equipment
    
    
    (1,183
    )
    
    
    (1,305
    )Intangible assets
    
    
    (32,915
    )
    
    
    (45,312
    )Sub Part F income
    
    
    
    
    
    
    (3,660
    )Undistributed earnings of foreign subsidiaries
    
    
    
    
    
    
    (2,097
    )Other
    
    
    (80
    )
    
    
    (457
    )37,730
    
    
    
    (9,279
    )Valuation allowance
    
    
    (58,280
    )
    
    
    (736
    )Net deferred income tax liabilities
    
    
    (20,550
    )
    
    
    (10,015
    )
  September 30,
    
    
    September 30,2010
    
    
    2009$
    
    
    $Deferred
income tax assets  Current
    
    
    2,331
    
    
    
    15,852Deferred income tax assets  Non-current
    
    
    8,706
    
    
    
    12,052Deferred income tax liabilities  Current
    
    
    (47
    )
    
    
    (137
    )Deferred income tax liabilities  Non-Current
    
    
    (31,540
    )
    
    
    (37,782
    )Net deferred income tax liabilities
    
    
    (20,550
    )
    
    
    (10,015
    )
  -97-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
  Operating losses
    
    
    Tax credits$
    
    
    $2028
    
    
    4,046
    
    
    
    3432029
    
    
    2,302
    
    
    
    1,4572030
    
    
    26,998
    
    
    
    1,232Indefinitely
    
    
    8,700
    
    
    
    
     Successor
    
    
    PredecessorFor the
    
    
    For the
    
    
    For the
    
    
    For thetwelve-month
    
    
    twelve-month
    
    
    seven-month
    
    
    five-monthperiod ended
    
    
    period ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    February 25,2010
    
    
    2009
    
    
    2008
    
    
    2008$
    
    
    $
    
    
    $
    
    
    $Balance, beginning of period
    
    
    10,409
    
    
    
    10,446
    
    
    
    2,015
    
    
    
    1,245Additions based on tax positions related
to the current year
    
    
    31
    
    
    
    31
    
    
    
    249
    
    
    
    904Additions for tax positions of prior years
    
    
    1,179
    
    
    
    279
    
    
    
    8,182
    
    
    
    15Reductions for tax positions of prior years
    
    
    (134
    )
    
    
    (347
    )
    
    
    
    
    
    
    (149
    )Balance, end of period
    
    
    11,485
    
    
    
    10,409
    
    
    
    10,446
    
    
    
    2,015
 -98-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
    8. Property, Plant and Equipment
 September 30, 2010AccumulatedCost
    
    
    depreciation
    
    
    Net$
    
    
    $
    
    
    $Land
    
    
    2,240
    
    
    
    
    
    
    
    2,240Buildings
    
    
    23,252
    
    
    
    4,490
    
    
    
    18,762Furniture and equipment
    
    
    8,534
    
    
    
    3,515
    
    
    
    5,019Computer equipment and software
    
    
    18,419
    
    
    
    9,588
    
    
    
    8,831Leasehold and building improvements
    
    
    1,220
    
    
    
    295
    
    
    
    92553,665
    
    
    
    17,888
    
    
    
    35,777
 September 30, 2009AccumulatedCost
    
    
    depreciation
    
    
    Net$
    
    
    $
    
    
    $Land
    
    
    2,276
    
    
    
    
    
    
    
    2,276Buildings
    
    
    22,739
    
    
    
    2,931
    
    
    
    19,808Furniture and equipment
    
    
    8,321
    
    
    
    2,598
    
    
    
    5,723Computer equipment and software
    
    
    15,218
    
    
    
    4,805
    
    
    
    10,413Leasehold and building improvements
    
    
    1,181
    
    
    
    57
    
    
    
    1,12449,735
    
    
    
    10,391
    
    
    
    39,344
   -99-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 9. Impairment of Long-Lived Assets, Including Goodwill
 Goodwill
 
  Income approach
     September 30,
    
    
    September 30,2010
    
    
    2009$
    
    
    $Balance, beginning of period
    
    
    165,823
    
    
    
    165,014Impairment
    
    
    (91,400
    )
    
    
    Foreign exchange
    
    
    (883
    )
    
    
    809Balance, end of period
    
    
    73,540
    
    
    
    165,823
 -100-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 Intangible assets
    Trademarks, trademark licenses and manufacturing rights with a finite life
 September 30, 2010AccumulatedCost
    
    
    amortization
    
    
    Net$
    
    
    $
    
    
    $Balance, beginning of period
    
    
    491,411
    
    
    
    70,121
    
    
    
    421,290Impairment
    
    
    (26,400
    )
    
    
    (10,642
    )
    
    
    (15,758
    )Amortization
    
    
    
    
    
    
    52,465
    
    
    
    (52,465
    )Foreign exchange
    
    
    (5,804
    )
    
    
    (699
    )
    
    
    (5,105
    )Balance, end of period
    
    
    459,207
    
    
    
    111,245
    
    
    
    347,962
 September 30, 2009AccumulatedCost
    
    
    amortization
    
    
    Net$
    
    
    $
    
    
    $Balance, beginning of period
    
    
    559,146
    
    
    
    30,770
    
    
    
    528,376Acquisition
    
    
    10
    
    
    
    
    
    
    
    10Impairment
    
    
    (70,857
    )
    
    
    (15,192
    )
    
    
    (55,665
    )Amortization
    
    
    
    
    
    
    53,936
    
    
    
    (53,936
    )Foreign exchange
    
    
    3,112
    
    
    
    607
    
    
    
    2,505Balance, end of period
    
    
    491,411
    
    
    
    70,121
    
    
    
    421,290
   $2011
    
    
    44,4972012
    
    
    40,4092013
    
    
    32,2692014
    
    
    26,4552015
    
    
    26,455
 -101-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 10. Accounts Payable and Accrued Liabilities
 September 30,
    
    
    September 30,2010
    
    
    2009$
    
    
    $Accounts payable
    
    
    18,677
    
    
    
    20,781Accounts payable to a shareholding company
    
    
    1,574
    
    
    
    436Contract rebates, product returns and accrued chargebacks
    
    
    29,039
    
    
    
    38,189Accrued interest on long-term debt
    
    
    4,254
    
    
    
    4,377Accrued royalty fees
    
    
    4,010
    
    
    
    6,516Accrued salaries
    
    
    4,790
    
    
    
    5,502Accrued bonuses
    
    
    6,695
    
    
    
    6,649Accrued research and development expenses
    
    
    853
    
    
    
    308Accrued liability related to Unapproved Peps
    
    
    18,607
    
    
    
    Other accrued liabilities
    
    
    6,174
    
    
    
    4,92694,673
    
    
    
    87,684
 11. Long-term Debt
 September 30,
    
    
    September 30,2010
    
    
    2009$
    
    
    $Senior notes secured by substantially all of the present and future assets
of the Company, bearing interest at 9.25% and maturing in March 2015
    
    
    226,171
    
    
    
    225,764Term loans of $138,823 at September 30, 2010, ($159,688 at September 30,
2009), of which $138,823 ($109,668 at September 30, 2009) bearing interest
at the one-month British Banker Association LIBOR (0.26% as at September 30,
2010, and 0.25% as at September 30, 2009), and $0 ($50,000 at September 30,
2009) bearing interest at the three-month British Banker Association LIBOR
(0.28% as at September 30, 2009), plus the applicable rate based on the
consolidated total leverage ratio of the Company and certain of its
subsidiaries for the preceding twelve months, secured by substantially all
of the present and future assets of the Company, payable in quarterly
installments, maturing in February 2014.
    
    
    135,210
    
    
    
    154,779Senior unsecured notes, bearing interest at 12.75% and maturing in March 2016
    
    
    233,094
    
    
    
    232,751594,475
    
    
    
    613,294Installments due within one year
    
    
    13,163
    
    
    
    30,708581,312
    
    
    
    582,586
 -102-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
  :
 SeniorSecured Notes%2011
    
    
    106.9382012
    
    
    104.6252013
    
    
    102.3132014 and thereafter
    
    
    100.000
    -103-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
  SeniorUnsecured Notes%2012
    
    
    106.3752013
    
    
    103.1882014 and thereafter
    
    
    100.000
   $2011
    
    
    13,1632012
    
    
    14,0982013
    
    
    61,2502014
    
    
    50,3122015
    
    
    228,000Thereafter
    
    
    235,000601,823Unamortized original issuance discount
    
    
    7,348594,475
 -104-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 12. Capital Stock
 Stock incentive plans
 Predecessor
     For the five-month periodended February 25, 2008WeightedaverageNumber of
    
    
    exerciseoptions
    
    
    price$Balance, beginning of period
    
    
    2,684,835
    
    
    
    13.61Exercised
    
    
    (17,299
    )
    
    
    12.72Expired
    
    
    (4,000
    )
    
    
    11.99Forfeited
    
    
    (47,710
    )
    
    
    14.62Settled upon consummation of the Acquisition
    
    
    (2,615,826
    )
    
    
    13.85Balance, end of period
    
    
    
    
    
    
    Options exercisable at the end of the period
    
    
    
    
    
    
    
 -105-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
  WeightedaverageNumber of
    
    
    grant dateoptions
    
    
    fair value$Balance, beginning of period
    
    
    1,238,064
    
    
    
    6.26Vested (1)
    
    
    (1,190,354
    )
    
    
    6.25Forfeited
    
    
    (47,710
    )
    
    
    6.44Balance, end of period
    
    
    
    
    
    
    
 (1)
    
    Upon consummation of the Acquisition, all non-vested stock options became vested; as
a result, the Predecessor recorded $2,572,085 in share-based compensation expense for the
five-month period ended February 25, 2008, $8,821,215 in reduction of retained earnings and
$16,394,611 in reduction of additional paid-in capital.    Successor
 Management equity incentive plan
  -106-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
  For the
    
    
    For the
    
    
    For thetwelve-month
    
    
    twelve-month
    
    
    seven-monthperiod ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2008Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    average
    
    
    Number
    
    
    average
    
    
    Number
    
    
    averageof
    
    
    exercise
    
    
    of
    
    
    exercise
    
    
    of
    
    
    exerciseoptions
    
    
    price
    
    
    options
    
    
    price
    
    
    options
    
    
    price$
    
    
    
    
    
    
    $
    
    
    
    
    
    
    $Balance, beginning of period
    
    
    3,724,375
    
    
    
    10.34
    
    
    
    3,648,000
    
    
    
    10.00
    
    
    
    
    
    
    
    Granted
    
    
    190,000
    
    
    
    12.31
    
    
    
    197,000
    
    
    
    12.40
    
    
    
    3,723,000
    
    
    
    10.00Exercised
    
    
    (18,750
    )
    
    
    10.33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (253,375
    )
    
    
    10.27
    
    
    
    (120,625
    )
    
    
    10.16
    
    
    
    (75,000
    )
    
    
    10.00Balance, end of period
    
    
    3,642,250
    
    
    
    10.69
    
    
    
    3,724,375
    
    
    
    10.34
    
    
    
    3,648,000
    
    
    
    10.00Options exercisable at end of year
    
    
    1,021,012
    
    
    
    10.70
    
    
    
    526,450
    
    
    
    10.31
    
    
    
    
    
    
    
    
  Options outstanding
    
    
    Options exercisableWeighted
    
    
    
    
    
    
    
    
    
    
    Weightedaverage
    
    
    Weighted
    
    
    
    
    
    
    average
    
    
    Weightedremaining
    
    
    average
    
    
    
    
    
    
    remaining
    
    
    averageNumber
    
    
    contractual
    
    
    exercise
    
    
    Number
    
    
    contractual
    
    
    exerciseof options
    
    
    life
    
    
    price
    
    
    of options
    
    
    life
    
    
    priceExercise price
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    $$10.00 - $11.00
    
    
    2,537,750
    
    
    
    7.59
    
    
    
    10.01
    
    
    
    693,612
    
    
    
    7.59
    
    
    
    10.01$11.01 - $12.53
    
    
    1,104,500
    
    
    
    8.08
    
    
    
    12.26
    
    
    
    327,400
    
    
    
    7.67
    
    
    
    12.173,642,250
    
    
    
    7.74
    
    
    
    10.69
    
    
    
    1,021,012
    
    
    
    7.62
    
    
    
    10.70
  Options outstanding
    
    
    Options exercisableWeighted
    
    
    
    
    
    
    
    
    
    
    Weightedaverage
    
    
    Weighted
    
    
    
    
    
    
    average
    
    
    Weightedremaining
    
    
    average
    
    
    
    
    
    
    remaining
    
    
    averageNumber
    
    
    contractual
    
    
    exercise
    
    
    Number
    
    
    contractual
    
    
    exerciseof options
    
    
    life
    
    
    price
    
    
    of options
    
    
    life
    
    
    priceExercise price
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    $$10.00 - $11.00
    
    
    3,544,375
    
    
    
    8.58
    
    
    
    10.23
    
    
    
    526,450
    
    
    
    8.59
    
    
    
    10.31$11.01 - $12.53
    
    
    180,000
    
    
    
    9.64
    
    
    
    12.53
    
    
    
    
    
    
    
    
    
    
    
    3,724,375
    
    
    
    8.63
    
    
    
    10.34
    
    
    
    526,450
    
    
    
    8.59
    
    
    
    10.31
 -107-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
  September 30, 2010
    
    
    September 30, 2009Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    averageNumber of
    
    
    grant date
    
    
    Number of
    
    
    grant dateoptions
    
    
    fair value
    
    
    options
    
    
    fair value$
    
    
    
    
    
    
    $Balance, beginning of period
    
    
    3,197,925
    
    
    
    3.52
    
    
    
    3,648,000
    
    
    
    3.43Granted
    
    
    190,000
    
    
    
    5.18
    
    
    
    197,000
    
    
    
    5.12Vested
    
    
    (513,312
    )
    
    
    3.59
    
    
    
    (526,450
    )
    
    
    3.45Forfeited
    
    
    (253,375
    )
    
    
    3.37
    
    
    
    (120,625
    )
    
    
    3.52Balance, end of period
    
    
    2,621,238
    
    
    
    3.63
    
    
    
    3,197,925
    
    
    
    3.52
    For the
    
    
    For the
    
    
    For thetwelve-month
    
    
    twelve-month
    
    
    seven-monthperiod ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2008Expected term of options (years)
    
    
    5.50
    
    
    
    5.40
    
    
    
    4.15Expected stock price volatility
    
    
    58.4
    %
    
    
    57.6
    %
    
    
    46.0
    %Risk-free interest rate
    
    
    2.34
    %
    
    
    2.38
    %
    
    
    2.80
    %Expected dividend
    
    
    
    
    
    
    
    
    
    
    
 -108-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 Special equity grant
  ,
  Annual grant
    -109-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 13. Financial Information Included in the Consolidated Operations
 a) Financial expenses
 Successor
    
    
    PredecessorFor the
    
    
    For the
    
    
    For the
    
    
    For thetwelve-month
    
    
    twelve-month
    
    
    seven-month
    
    
    five-monthperiod ended
    
    
    period ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    February 25,2010
    
    
    2009
    
    
    2008
    
    
    2008$
    
    
    $
    
    
    $
    
    
    $Interest on long-term debt (including
amortization of original issuance discount
of $2,046, $2,061 in 2009 and $1,150 for
the seven-month period ended September 30,
2008)
    
    
    58,609
    
    
    
    61,821
    
    
    
    36,631
    
    
    
    14Interest and bank charges
    
    
    806
    
    
    
    444
    
    
    
    207
    
    
    
    76Interest rate swaps (Note 16)
    
    
    17
    
    
    
    1,531
    
    
    
    5
    
    
    
    Financing fees
    
    
    556
    
    
    
    1,046
    
    
    
    469
    
    
    
    172Amortization of deferred debt issue expenses
    
    
    4,968
    
    
    
    4,967
    
    
    
    4,201
    
    
    
    64,956
    
    
    
    69,809
    
    
    
    41,513
    
    
    
    262
 b) Other information
 Successor
    
    
    PredecessorFor the
    
    
    For the
    
    
    For the
    
    
    For thetwelve-month
    
    
    twelve-month
    
    
    seven-month
    
    
    five-monthperiod ended
    
    
    period ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    February 25,2010
    
    
    2009
    
    
    2008
    
    
    2008$
    
    
    $
    
    
    $
    
    
    $Rental expenses
    
    
    3,724
    
    
    
    2,881
    
    
    
    1,831
    
    
    
    1,052Shipping and handling expenses
    
    
    6,308
    
    
    
    7,066
    
    
    
    3,748
    
    
    
    2,263Advertizing expenses
    
    
    9,847
    
    
    
    16,449
    
    
    
    8,803
    
    
    
    4,628Depreciation of property, plant and equipment
    
    
    8,546
    
    
    
    6,369
    
    
    
    3,824
    
    
    
    2,526Amortization of intangible assets
    
    
    52,465
    
    
    
    53,936
    
    
    
    31,755
    
    
    
    7,069Stock-based compensation expense
    
    
    (378
    )
    
    
    6,172
    
    
    
    7,443
    
    
    
    10,046Transaction and integration costs
    
    
    5,602
    
    
    
    2,871
    
    
    
    11,780
    
    
    
    26,489
 -110-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 14. Segmented Information
   Successor
    
    
    PredecessorFor the
    
    
    For the
    
    
    For the
    
    
    For thetwelve-month
    
    
    twelve-month
    
    
    seven-month
    
    
    five-monthperiod ended
    
    
    period ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    February 25,2010
    
    
    2009
    
    
    2008
    
    
    2008%
    
    
    %
    
    
    %
    
    
    %Customer A
    
    
    29.9
    
    
    
    30.4
    
    
    
    43.7
    
    
    
    32.4Customer B
    
    
    28.1
    
    
    
    37.4
    
    
    
    24.3
    
    
    
    29.8Customer C
    
    
    12.2
    
    
    
    11.7
    
    
    
    9.1
    
    
    
    12.070.2
    
    
    
    79.5
    
    
    
    77.1
    
    
    
    74.2
    Successor
    
    
    PredecessorFor the
    
    
    For the
    
    
    For the
    
    
    For thetwelve-month
    
    
    twelve-month
    
    
    seven-month
    
    
    five-monthperiod ended
    
    
    period ended
    
    
    period ended
    
    
    period endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    February 25,2010
    
    
    2009
    
    
    2008
    
    
    2008$
    
    
    $
    
    
    $
    
    
    $Total RevenueUnited StatesDomestic sales
    
    
    255,506
    
    
    
    314,783
    
    
    
    162,908
    
    
    
    112,146Foreign sales
    
    
    3,513
    
    
    
    4,821
    
    
    
    3,076
    
    
    
    2,221CanadaDomestic sales
    
    
    31,867
    
    
    
    30,755
    
    
    
    19,614
    
    
    
    15,302Foreign sales
    
    
    522
    
    
    
    165
    
    
    
    
    
    
    
    European UnionDomestic sales
    
    
    52,253
    
    
    
    58,634
    
    
    
    33,082
    
    
    
    24,608Foreign sales
    
    
    10,911
    
    
    
    7,168
    
    
    
    4,258
    
    
    
    4,093Other
    
    
    15
    
    
    
    613
    
    
    
    241
    
    
    
    209354,587
    
    
    
    416,939
    
    
    
    223,179
    
    
    
    158,579
 -111-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
  September 30,
    
    
    September 30,2010
    
    
    2009$
    
    
    $Property, plant, equipment and intangible assetsCanada
    
    
    299,180
    
    
    
    333,001United States
    
    
    13,906
    
    
    
    44,448European Union
    
    
    70,653
    
    
    
    83,185383,739
    
    
    
    460,634
 September 30,
    
    
    September 30,2010
    
    
    2009$
    
    
    $GoodwillCanada
    
    
    61,887
    
    
    
    61,887United States
    
    
    
    
    
    
    91,400European Union
    
    
    11,653
    
    
    
    12,53673,540
    
    
    
    165,823
 15. Financial Instruments
 Interest rate risk
  Currency risk
  Credit risk
  -112-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 Fair value of the financial instruments on the balance sheet
  September 30, 2010
    
    
    September 30, 2009Fair
    
    
    Carrying
    
    
    Fair
    
    
    Carryingvalue
    
    
    amount
    
    
    value
    
    
    amount$
    
    
    $
    
    
    $
    
    
    $AssetsCash and cash equivalents
    
    
    161,503
    
    
    
    161,503
    
    
    
    126,435
    
    
    
    126,435Accounts receivable from the parent company
    
    
    487
    
    
    
    487
    
    
    
    306
    
    
    
    306Accounts receivable, net
    
    
    32,015
    
    
    
    32,015
    
    
    
    56,511
    
    
    
    56,511LiabilitiesAccounts payable and accrued liabilities
    
    
    94,673
    
    
    
    94,673
    
    
    
    87,684
    
    
    
    87,684Long-term debt
    
    
    608,535
    
    
    
    594,475
    
    
    
    649,689
    
    
    
    613,294
  a) Financial instruments for which fair value is deemed equivalent to carrying amount
  b) Long-term debt
  16. Derivatives and Hedging Activities
 Risk management objective of using derivatives
  Cash flow hedges of interest rate risk
    -113-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
   Tabular disclosure of fair values of derivative instruments
 Liability DerivativesSuccessor
    
    
    SuccessorSeptember 30, 2010
    
    
    September 30, 2009Balance sheet location
    
    
    Fair value
    
    
    Fair value$
    
    
    $Derivatives designated as hedging instrumentsInterest rate swaps
    
    Other long-term liabilities
    
    
    
    
    
    
    
    610Total derivatives designated as hedging instruments
    
    
    
    
    
    
    
    
    
    
    610
  Tabular disclosure of the effect of derivative instruments for the twelve-month period ended
September 30, 2010, and 2009
 For the
    
    
    For theLocation in the
    
    
    twelve-month
    
    
    twelve-monthConsolidated
    
    
    period ended
    
    
    period endedFinancial
    
    
    September 30,
    
    
    September 30,Statements
    
    
    2010
    
    
    2009$
    
    
    $Interest rate swaps in cash flow hedging relationshipsLoss recognized in other comprehensive income on
derivatives (effective portion), net of tax of $166 ($330
in 2009)
    
    OCI
    
    
    
    (309
    )
    
    
    (612
    )Loss reclassified from accumulated comprehensive income
into income (effective portion)
    
    Financial expenses
    
    
    
    (464
    )
    
    
    (499
    )Gain recognized in income on derivatives (ineffective
portion and amount excluded from effectiveness testing)
    
    Financial expenses
    
    
    
    447
    
    
    
    Interest rate swaps not designated as hedging instrumentsLoss recognized in income on derivatives
    
    Financial expenses
    
    
    
    
    
    
    
    (1,032
    )
 -114-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
 17. Fair Value Measurements
  Level 1
 Level 2
 Level 3
   Quoted prices inactive markets
    
    
    Significantfor identical
    
    
    other
    
    
    Significantassets and
    
    
    observable
    
    
    unobservable
    
    
    Balance as atliabilities
    
    
    inputs
    
    
    inputs
    
    
    September 30,(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    2010$
    
    
    $
    
    
    $
    
    
    $LiabilitiesDerivative financial instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Quoted prices inactive markets for
    
    
    
    
    
    
    Significantidentical assets
    
    
    Significant other
    
    
    unobservable
    
    
    Balance as atand liabilities
    
    
    observable inputs
    
    
    inputs
    
    
    September 30,(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    2009$
    
    
    $
    
    
    $
    
    
    $LiabilitiesDerivative financial instruments
    
    
    
    
    
    
    610
    
    
    
    
    
    
    
    610
   18. Related Party Transactions
  -115-




---



##### 



(amounts in the tables are stated in thousands of U.S. dollars, except share related data)
    19. Commitments and Contingencies
 a) Commitments
   For the  years ending September 30,2015 and(in millions of U.S. dollars)
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    thereafter
    
    
    Total$
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Operating leases
    
    
    2,356
    
    
    
    1,532
    
    
    
    1,189
    
    
    
    613
    
    
    
    8
    
    
    
    5,698Other commitments
    
    
    3,907
    
    
    
    165
    
    
    
    103
    
    
    
    103
    
    
    
    
    
    
    
    4,2786,263
    
    
    
    1,697
    
    
    
    1,292
    
    
    
    716
    
    
    
    8
    
    
    
    9,976
 b) Licensing agreements
    -116-




---



##### 



(amounts in the tables are stated in thousands of U.S .dollars, except share related data)
 c) Royalties
   d) Contingencies
   e) Employee benefit plan
  f) Litigation settlement
  20. Condensed Consolidated Financial Information
   -117-




---



##### 



(amounts in the tables are stated in thousands of U.S .dollars, except share related data)
  Axcan
    
    
    
    
    
    
    SubsidiaryIntermediate
    
    
    Subsidiary
    
    
    non-Holdings Inc.
    
    
    guarantors
    
    
    guarantors
    
    
    Eliminations
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $AssetsCurrent assetsCash and cash equivalents
    
    
    864
    
    
    
    104,608
    
    
    
    56,031
    
    
    
    
    
    
    
    161,503Accounts receivable, net
    
    
    
    
    
    
    19,262
    
    
    
    13,117
    
    
    
    
    
    
    
    32,379Accounts receivable from the parent company
    
    
    50
    
    
    
    437
    
    
    
    
    
    
    
    
    
    
    
    487Intercompany receivables
    
    
    11,092
    
    
    
    1,618
    
    
    
    4,265
    
    
    
    (16,975
    )
    
    
    Income taxes receivable
    
    
    
    
    
    
    2,906
    
    
    
    
    
    
    
    
    
    
    
    2,906Inventories, net
    
    
    
    
    
    
    17,697
    
    
    
    6,563
    
    
    
    (394
    )
    
    
    23,866Prepaid expenses and deposits
    
    
    48
    
    
    
    2,385
    
    
    
    844
    
    
    
    
    
    
    
    3,277Deferred income taxes
    
    
    
    
    
    
    1,355
    
    
    
    857
    
    
    
    119
    
    
    
    2,331Total current assets
    
    
    12,054
    
    
    
    150,268
    
    
    
    81,677
    
    
    
    (17,250
    )
    
    
    226,749Property, plant and equipment, net
    
    
    
    
    
    
    27,383
    
    
    
    8,394
    
    
    
    
    
    
    
    35,777Intangible assets, net
    
    
    
    
    
    
    285,703
    
    
    
    62,259
    
    
    
    
    
    
    
    347,962Investments in subsidiaries
    
    
    (354,104
    )
    
    
    830,813
    
    
    
    78,175
    
    
    
    (554,884
    )
    
    
    Intercompany advances
    
    
    826,431
    
    
    
    91,811
    
    
    
    679,391
    
    
    
    (1,597,633
    )
    
    
    Goodwill, net
    
    
    
    
    
    
    61,887
    
    
    
    11,653
    
    
    
    
    
    
    
    73,540Deferred debt issue expenses, net
    
    
    18,021
    
    
    
    2,422
    
    
    
    
    
    
    
    
    
    
    
    20,443Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    8,706
    
    
    
    
    
    
    
    8,706Total assets
    
    
    502,402
    
    
    
    1,450,287
    
    
    
    930,255
    
    
    
    (2,169,767
    )
    
    
    713,177LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities
    
    
    5,975
    
    
    
    77,887
    
    
    
    10,811
    
    
    
    
    
    
    
    94,673Income taxes payable
    
    
    
    
    
    
    1,938
    
    
    
    1,508
    
    
    
    
    
    
    
    3,446Short-term intercompany payables
    
    
    449
    
    
    
    15,340
    
    
    
    1,186
    
    
    
    (16,975
    )
    
    
    Installments on long-term debt
    
    
    5,546
    
    
    
    7,617
    
    
    
    
    
    
    
    
    
    
    
    13,163Deferred income taxes
    
    
    
    
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    47Total current liabilities
    
    
    11,970
    
    
    
    102,829
    
    
    
    13,505
    
    
    
    (16,975
    )
    
    
    111,329Long-term debt
    
    
    510,663
    
    
    
    70,649
    
    
    
    
    
    
    
    
    
    
    
    581,312Intercompany advances
    
    
    801
    
    
    
    1,512,092
    
    
    
    84,740
    
    
    
    (1,597,633
    )
    
    
    Other long-term liabilities
    
    
    
    
    
    
    10,028
    
    
    
    
    
    
    
    
    
    
    
    10,028Deferred income taxes
    
    
    
    
    
    
    30,618
    
    
    
    922
    
    
    
    
    
    
    
    31,540Total liabilities
    
    
    523,434
    
    
    
    1,726,216
    
    
    
    99,167
    
    
    
    (1,614,608
    )
    
    
    734,209Shareholders Equity (Deficiency)Capital stockCommon shares
    
    
    1
    
    
    
    21,020
    
    
    
    735,742
    
    
    
    (756,762
    )
    
    
    1Preferred shares
    
    
    
    
    
    
    78,175
    
    
    
    
    
    
    
    (78,175
    )
    
    
    Retained earnings (deficit)
    
    
    (468,152
    )
    
    
    (354,020
    )
    
    
    98,657
    
    
    
    255,363
    
    
    
    (468,152
    )9.05% Note receivable from the parent company
    
    
    (133,154
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (133,154
    )Additional paid-in capital
    
    
    614,113
    
    
    
    12,736
    
    
    
    689
    
    
    
    (13,425
    )
    
    
    614,113Accumulated other comprehensive loss
    
    
    (33,840
    )
    
    
    (33,840
    )
    
    
    (4,000
    )
    
    
    37,840
    
    
    
    (33,840
    )Total shareholders equity (deficiency)
    
    
    (21,032
    )
    
    
    (275,929
    )
    
    
    831,088
    
    
    
    (555,159
    )
    
    
    (21,032
    )Total liabilities and shareholders equity (deficiency)
    
    
    502,402
    
    
    
    1,450,287
    
    
    
    930,255
    
    
    
    (2,169,767
    )
    
    
    713,177
 -118-




---



##### 



(amounts in the tables are stated in thousands of U.S .dollars, except share related data)
  AxcanIntermediate
    
    
    Subsidiary
    
    
    SubsidiaryHoldings Inc.
    
    
    guarantors
    
    
    non-guarantors
    
    
    Eliminations
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $AssetsCurrent assetsCash and cash equivalents
    
    
    702
    
    
    
    41,859
    
    
    
    83,874
    
    
    
    
    
    
    
    126,435Accounts receivable, net
    
    
    
    
    
    
    41,151
    
    
    
    15,973
    
    
    
    
    
    
    
    57,124Accounts receivable from the parent company
    
    
    42
    
    
    
    264
    
    
    
    
    
    
    
    
    
    
    
    306Short-term intercompany receivables
    
    
    5,857
    
    
    
    5,803
    
    
    
    364
    
    
    
    (12,024
    )
    
    
    Income taxes receivable
    
    
    
    
    
    
    3,383
    
    
    
    8
    
    
    
    
    
    
    
    3,391Inventories, net
    
    
    
    
    
    
    39,162
    
    
    
    5,688
    
    
    
    (144
    )
    
    
    44,706Prepaid expenses and deposits
    
    
    
    
    
    
    2,289
    
    
    
    579
    
    
    
    
    
    
    
    2,868Deferred income taxes
    
    
    588
    
    
    
    14,960
    
    
    
    304
    
    
    
    
    
    
    
    15,852Total current assets
    
    
    7,189
    
    
    
    148,871
    
    
    
    106,790
    
    
    
    (12,168
    )
    
    
    250,682Property, plant and equipment, net
    
    
    
    
    
    
    29,846
    
    
    
    9,498
    
    
    
    
    
    
    
    39,344Intangible assets, net
    
    
    
    
    
    
    347,604
    
    
    
    73,686
    
    
    
    
    
    
    
    421,290Investments in subsidiaries
    
    
    (231,940
    )
    
    
    782,206
    
    
    
    
    
    
    
    (550,266
    )
    
    
    Intercompany advances
    
    
    898,272
    
    
    
    128,793
    
    
    
    669,195
    
    
    
    (1,696,260
    )
    
    
    Goodwill, net
    
    
    
    
    
    
    153,287
    
    
    
    12,536
    
    
    
    
    
    
    
    165,823Deferred debt issue expenses, net
    
    
    23,371
    
    
    
    2,040
    
    
    
    
    
    
    
    
    
    
    
    25,411Deferred income taxes
    
    
    3,962
    
    
    
    4,653
    
    
    
    3,437
    
    
    
    
    
    
    
    12,052Total assets
    
    
    700,854
    
    
    
    1,597,300
    
    
    
    875,142
    
    
    
    (2,258,694
    )
    
    
    914,602LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities
    
    
    5,091
    
    
    
    71,305
    
    
    
    11,432
    
    
    
    (144
    )
    
    
    87,684Income taxes payable
    
    
    3,425
    
    
    
    (940
    )
    
    
    8
    
    
    
    
    
    
    
    2,493Short-term intercompany payables
    
    
    4,795
    
    
    
    6,206
    
    
    
    1,023
    
    
    
    (12,024
    )
    
    
    Installments on long-term debt
    
    
    12,939
    
    
    
    17,769
    
    
    
    
    
    
    
    
    
    
    
    30,708Deferred income taxes
    
    
    588
    
    
    
    257
    
    
    
    (708
    )
    
    
    
    
    
    
    137Total current liabilities
    
    
    26,838
    
    
    
    94,597
    
    
    
    11,755
    
    
    
    (12,168
    )
    
    
    121,022Long-term debt
    
    
    510,755
    
    
    
    71,831
    
    
    
    
    
    
    
    
    
    
    
    582,586Intercompany advances
    
    
    19,224
    
    
    
    1,593,115
    
    
    
    83,921
    
    
    
    (1,696,260
    )
    
    
    Other long-term liabilities
    
    
    262
    
    
    
    9,186
    
    
    
    
    
    
    
    
    
    
    
    9,448Deferred income taxes
    
    
    (19,989
    )
    
    
    60,511
    
    
    
    (2,740
    )
    
    
    
    
    
    
    37,782Total liabilities
    
    
    537,090
    
    
    
    1,829,240
    
    
    
    92,936
    
    
    
    (1,708,428
    )
    
    
    750,838Shareholders Equity (Deficiency)Capital stockCommon shares
    
    
    1
    
    
    
    21,034
    
    
    
    745,398
    
    
    
    (766,432
    )
    
    
    1Retained earnings (deficit)
    
    
    (297,658
    )
    
    
    (242,700
    )
    
    
    37,332
    
    
    
    205,368
    
    
    
    (297,658
    )9.05% Note receivable from the parent company
    
    
    (133,154
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (133,154
    )Additional paid-in capital
    
    
    619,053
    
    
    
    14,204
    
    
    
    611
    
    
    
    (14,815
    )
    
    
    619,053Accumulated other comprehensive loss
    
    
    (24,478
    )
    
    
    (24,478
    )
    
    
    (1,135
    )
    
    
    25,613
    
    
    
    (24,478
    )Total shareholders equity (deficiency)
    
    
    163,764
    
    
    
    (231,940
    )
    
    
    782,206
    
    
    
    (550,266
    )
    
    
    163,764Total liabilities and shareholders equity (deficiency)
    
    
    700,854
    
    
    
    1,597,300
    
    
    
    875,142
    
    
    
    (2,258,694
    )
    
    
    914,602
 -119-




---



##### 



(amounts in the tables are stated in thousands of U.S .dollars, except share related data)
  AxcanIntermediate
    
    
    Subsidiary
    
    
    SubsidiaryHoldings Inc.
    
    
    guarantors
    
    
    non-guarantors
    
    
    Eliminations
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Net product sales
    
    
    
    
    
    
    292,422
    
    
    
    63,957
    
    
    
    (1,792
    )
    
    
    354,587Cost of goods sold
    
    
    
    
    
    
    108,723
    
    
    
    23,803
    
    
    
    (1,611
    )
    
    
    130,915Selling and administrative expenses
    
    
    5,446
    
    
    
    82,664
    
    
    
    26,923
    
    
    
    
    
    
    
    115,033Management fees
    
    
    4,412
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,412Research and development expenses
    
    
    
    
    
    
    26,908
    
    
    
    4,807
    
    
    
    
    
    
    
    31,715Acquired in-process research
    
    
    
    
    
    
    7,948
    
    
    
    
    
    
    
    
    
    
    
    7,948Depreciation and amortization
    
    
    
    
    
    
    53,290
    
    
    
    7,721
    
    
    
    
    
    
    
    61,011Impairment of intangible assets and goodwill
    
    
    
    
    
    
    107,158
    
    
    
    
    
    
    
    
    
    
    
    107,158Total operating expenses
    
    
    9,858
    
    
    
    386,691
    
    
    
    63,254
    
    
    
    (1,611
    )
    
    
    458,192Operating income (loss)
    
    
    (9,858
    )
    
    
    (94,269
    )
    
    
    703
    
    
    
    (181
    )
    
    
    (103,605
    )Financial expenses
    
    
    59,757
    
    
    
    112,719
    
    
    
    7,155
    
    
    
    (114,675
    )
    
    
    64,956Interest income
    
    
    (48,961
    )
    
    
    (7,591
    )
    
    
    (58,811
    )
    
    
    114,675
    
    
    
    (688
    )Other income
    
    
    
    
    
    
    (9,704
    )
    
    
    
    
    
    
    
    
    
    
    (9,704
    )Loss (gain) on foreign currencies
    
    
    21,318
    
    
    
    (13,293
    )
    
    
    (75
    )
    
    
    (6,703
    )
    
    
    1,247Total other expenses (income)
    
    
    32,114
    
    
    
    82,131
    
    
    
    (51,731
    )
    
    
    (6,703
    )
    
    
    55,811Income (loss) before income taxes
    
    
    (41,972
    )
    
    
    (176,400
    )
    
    
    52,434
    
    
    
    6,522
    
    
    
    (159,416
    )Income taxes expense (benefit)
    
    
    15,184
    
    
    
    (1,919
    )
    
    
    (2,261
    )
    
    
    (54
    )
    
    
    10,950Equity in earnings (loss) in subsidiaries
    
    
    (113,210
    )
    
    
    61,271
    
    
    
    
    
    
    
    51,939
    
    
    
    Net income (loss)
    
    
    (170,366
    )
    
    
    (113,210
    )
    
    
    54,695
    
    
    
    58,515
    
    
    
    (170,366
    )
 -120-




---



##### 



(amounts in the tables are stated in thousands of U.S .dollars, except share related data)
  AxcanIntermediate
    
    
    Subsidiary
    
    
    SubsidiaryHoldings Inc.
    
    
    guarantors
    
    
    non-guarantors
    
    
    Eliminations
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Net product sales
    
    
    
    
    
    
    350,623
    
    
    
    61,020
    
    
    
    (1,817
    )
    
    
    409,826Other revenue
    
    
    
    
    
    
    
    
    
    
    7,113
    
    
    
    
    
    
    
    7,113Total revenue
    
    
    
    
    
    
    350,623
    
    
    
    68,133
    
    
    
    (1,817
    )
    
    
    416,939Cost of goods sold
    
    
    
    
    
    
    79,620
    
    
    
    24,728
    
    
    
    (1,325
    )
    
    
    103,023Selling and administrative expenses
    
    
    7,893
    
    
    
    88,087
    
    
    
    27,134
    
    
    
    (172
    )
    
    
    122,942Management fees
    
    
    5,351
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,351Research and development expenses
    
    
    
    
    
    
    34,161
    
    
    
    2,196
    
    
    
    (320
    )
    
    
    36,037Depreciation and amortization
    
    
    
    
    
    
    52,352
    
    
    
    7,953
    
    
    
    
    
    
    
    60,305Partial write-down of intangible assets
    
    
    
    
    
    
    55,414
    
    
    
    251
    
    
    
    
    
    
    
    55,665Total operating expenses
    
    
    13,244
    
    
    
    309,634
    
    
    
    62,262
    
    
    
    (1,817
    )
    
    
    383,323Operating income (loss)
    
    
    (13,244
    )
    
    
    40,989
    
    
    
    5,871
    
    
    
    
    
    
    
    33,616Financial expenses
    
    
    62,034
    
    
    
    110,810
    
    
    
    5,750
    
    
    
    (108,785
    )
    
    
    69,809Interest income
    
    
    (45,755
    )
    
    
    (5,911
    )
    
    
    (57,508
    )
    
    
    108,785
    
    
    
    (389
    )Other income
    
    
    
    
    
    
    (3,500
    )
    
    
    
    
    
    
    
    
    
    
    (3,500
    )Loss (gain) on foreign currencies
    
    
    (12,464
    )
    
    
    (703
    )
    
    
    78
    
    
    
    12,761
    
    
    
    (328
    )Total other expenses (income)
    
    
    3,815
    
    
    
    100,696
    
    
    
    (51,680
    )
    
    
    12,761
    
    
    
    65,592Income (loss) before income taxes
    
    
    (17,059
    )
    
    
    (59,707
    )
    
    
    57,551
    
    
    
    (12,761
    )
    
    
    (31,976
    )Income taxes benefit
    
    
    (7,104
    )
    
    
    (16,848
    )
    
    
    (130
    )
    
    
    
    
    
    
    (24,082
    )Equity in earnings in subsidiaries
    
    
    2,061
    
    
    
    44,920
    
    
    
    
    
    
    
    (46,981
    )
    
    
    Net income (loss)
    
    
    (7,894
    )
    
    
    2,061
    
    
    
    57,681
    
    
    
    (59,742
    )
    
    
    (7,894
    )
 -121-




---



##### 



(amounts in the tables are stated in thousands of U.S .dollars, except share related data)
  AxcanIntermediate
    
    
    Subsidiary
    
    
    SubsidiaryHoldings Inc.
    
    
    guarantors
    
    
    non-guarantors
    
    
    Eliminations
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Net product sales
    
    
    
    
    
    
    185,600
    
    
    
    45,310
    
    
    
    (7,731
    )
    
    
    223,179Cost of goods sold
    
    
    
    
    
    
    66,857
    
    
    
    18,359
    
    
    
    (7,989
    )
    
    
    77,227Selling and administrative expenses
    
    
    9,297
    
    
    
    59,353
    
    
    
    19,565
    
    
    
    31
    
    
    
    88,246Management fees
    
    
    99
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99Research and development expenses
    
    
    
    
    
    
    15,520
    
    
    
    2,279
    
    
    
    (31
    )
    
    
    17,768Acquired in-process research
    
    
    
    
    
    
    272,400
    
    
    
    
    
    
    
    
    
    
    
    272,400Depreciation and amortization
    
    
    
    
    
    
    31,876
    
    
    
    3,703
    
    
    
    
    
    
    
    35,579Total operating expenses
    
    
    9,396
    
    
    
    446,006
    
    
    
    43,906
    
    
    
    (7,989
    )
    
    
    491,319Operating income (loss)
    
    
    (9,396
    )
    
    
    (260,406
    )
    
    
    1,404
    
    
    
    258
    
    
    
    (268,140
    )Financial expenses
    
    
    36,723
    
    
    
    41,521
    
    
    
    87
    
    
    
    (36,818
    )
    
    
    41,513Interest income (expense)
    
    
    (41,459
    )
    
    
    42,775
    
    
    
    (38,942
    )
    
    
    36,818
    
    
    
    (808
    )Loss (gain) on foreign currencies
    
    
    52,151
    
    
    
    (87,691
    )
    
    
    41,692
    
    
    
    (7,993
    )
    
    
    (1,841
    )Total other expenses (income)
    
    
    47,415
    
    
    
    (3,395
    )
    
    
    2,837
    
    
    
    (7,993
    )
    
    
    38,864Loss before income taxes
    
    
    (56,811
    )
    
    
    (257,011
    )
    
    
    (1,433
    )
    
    
    8,251
    
    
    
    (307,004
    )Income taxes expense (benefit)
    
    
    (16,250
    )
    
    
    2,473
    
    
    
    (3,966
    )
    
    
    3
    
    
    
    (17,740
    )Equity in earnings (loss) in subsidiaries
    
    
    (248,703
    )
    
    
    10,781
    
    
    
    
    
    
    
    237,922
    
    
    
    Net income (loss)
    
    
    (289,264
    )
    
    
    (248,703
    )
    
    
    2,533
    
    
    
    246,170
    
    
    
    (289,264
    )
 -122-




---



##### 



(amounts in the tables are stated in thousands of U.S .dollars, except share related data)
  AxcanIntermediateHoldings
    
    
    Subsidiary
    
    
    SubsidiaryInc.
    
    
    guarantors
    
    
    non-guarantors
    
    
    Eliminations
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Net product sales
    
    
    
    
    
    
    129,669
    
    
    
    38,142
    
    
    
    (9,232
    )
    
    
    158,579Cost of goods sold
    
    
    
    
    
    
    37,346
    
    
    
    10,869
    
    
    
    (9,476
    )
    
    
    38,739Selling and administrative expenses
    
    
    
    
    
    
    65,595
    
    
    
    10,581
    
    
    
    22
    
    
    
    76,198Research and development expenses
    
    
    
    
    
    
    7,826
    
    
    
    2,452
    
    
    
    (22
    )
    
    
    10,256Depreciation and amortization
    
    
    
    
    
    
    2,952
    
    
    
    6,643
    
    
    
    
    
    
    
    9,595Total operating expenses
    
    
    
    
    
    
    113,719
    
    
    
    30,545
    
    
    
    (9,476
    )
    
    
    134,788Operating income
    
    
    
    
    
    
    15,950
    
    
    
    7,597
    
    
    
    244
    
    
    
    23,791Financial expenses
    
    
    
    
    
    
    3,238
    
    
    
    41
    
    
    
    (3,017
    )
    
    
    262Interest income
    
    
    
    
    
    
    (5,096
    )
    
    
    (3,361
    )
    
    
    3,017
    
    
    
    (5,440
    )Loss (gain) on foreign currencies
    
    
    
    
    
    
    8,267
    
    
    
    76
    
    
    
    (8,541
    )
    
    
    (198
    )Total other expenses (income)
    
    
    
    
    
    
    6,409
    
    
    
    (3,244
    )
    
    
    (8,541
    )
    
    
    (5,376
    )Income before income taxes
    
    
    
    
    
    
    9,541
    
    
    
    10,841
    
    
    
    8,785
    
    
    
    29,167Income taxes expense
    
    
    
    
    
    
    11,682
    
    
    
    297
    
    
    
    63
    
    
    
    12,042Equity in earnings in subsidiaries
    
    
    
    
    
    
    19,266
    
    
    
    
    
    
    
    (19,266
    )
    
    
    Net income
    
    
    
    
    
    
    17,125
    
    
    
    10,544
    
    
    
    (10,544
    )
    
    
    17,125
 -123-




---



##### 



(amounts in the tables are stated in thousands of U.S .dollars, except share related data)
  AxcanIntermediateHoldings
    
    
    Subsidiary
    
    
    SubsidiaryInc.
    
    
    guarantors
    
    
    non-guarantors
    
    
    Eliminations
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Cash flows from operating activitiesNet cash provided by (used in) operating activities
    
    
    (70,250
    )
    
    
    91,150
    
    
    
    42,220
    
    
    
    
    
    
    
    63,120Cash flows from investing activitiesAcquisition of property, plant and equipment
    
    
    
    
    
    
    (4,705
    )
    
    
    (1,353
    )
    
    
    
    
    
    
    (6,058
    )Intercompany advances
    
    
    7,408
    
    
    
    (72,268
    )
    
    
    
    
    
    
    64,860
    
    
    
    Investments in subsidiaries
    
    
    
    
    
    
    
    
    
    
    (68,000
    )
    
    
    68,000
    
    
    
    Net cash provided by (used in) investing activities
    
    
    7,408
    
    
    
    (76,973
    )
    
    
    (69,353
    )
    
    
    132,860
    
    
    
    (6,058
    )Cash flows from financing activitiesRepayment of long-term debt
    
    
    (8,791
    )
    
    
    (12,074
    )
    
    
    
    
    
    
    
    
    
    
    (20,865
    )Stock-based compensation plan redemptions
    
    
    (345
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (345
    )Intercompany advances
    
    
    72,268
    
    
    
    (7,408
    )
    
    
    
    
    
    
    (64,860
    )
    
    
    Issue of shares
    
    
    
    
    
    
    68,000
    
    
    
    
    
    
    
    (68,000
    )
    
    
    Dividends paid
    
    
    (128
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (128
    )Net cash provided by (used in) financing activities
    
    
    63,004
    
    
    
    48,518
    
    
    
    
    
    
    
    (132,860
    )
    
    
    (21,338
    )Foreign exchange gain (loss) on cash held in foreign currencies
    
    
    
    
    
    
    54
    
    
    
    (710
    )
    
    
    
    
    
    
    (656
    )Net increase (decrease) in cash and cash equivalents
    
    
    162
    
    
    
    62,749
    
    
    
    (27,843
    )
    
    
    
    
    
    
    35,068Cash and cash equivalents, beginning of period
    
    
    702
    
    
    
    41,859
    
    
    
    83,874
    
    
    
    
    
    
    
    126,435Cash and cash equivalents, end of period
    
    
    864
    
    
    
    104,608
    
    
    
    56,031
    
    
    
    
    
    
    
    161,503
 -124-




---



##### 



(amounts in the tables are stated in thousands of U.S .dollars, except share related data)
  AxcanIntermediateHoldings
    
    
    Subsidiary
    
    
    SubsidiaryInc.
    
    
    guarantors
    
    
    non-guarantors
    
    
    Eliminations
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Cash flows from operating activitiesNet cash provided by (used in) operating activities
    
    
    (13,820
    )
    
    
    124,804
    
    
    
    (18,602
    )
    
    
    
    
    
    
    92,382Cash flows from investing activitiesAcquisition of property, plant and equipment
    
    
    
    
    
    
    (8,861
    )
    
    
    (1,729
    )
    
    
    
    
    
    
    (10,590
    )Acquisition of intangible assets
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    (10
    )Intercompany advances
    
    
    540
    
    
    
    (95,914
    )
    
    
    2,505
    
    
    
    92,869
    
    
    
    Net cash provided by (used in) investing activities
    
    
    540
    
    
    
    (104,775
    )
    
    
    766
    
    
    
    92,869
    
    
    
    (10,600
    )Cash flows from financing activitiesRepayment of long-term debt
    
    
    (4,608
    )
    
    
    (6,329
    )
    
    
    
    
    
    
    
    
    
    
    (10,937
    )Stock-based compensation plan redemptions
    
    
    (157
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157
    )Intercompany advances
    
    
    19,226
    
    
    
    2,129
    
    
    
    71,514
    
    
    
    (92,869
    )
    
    
    Dividends paid
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )Net cash provided by (used in) financing activities
    
    
    13,961
    
    
    
    (4,200
    )
    
    
    71,514
    
    
    
    (92,869
    )
    
    
    (11,594
    )Foreign exchange gain (loss) on cash held in foreign currencies
    
    
    
    
    
    
    (151
    )
    
    
    293
    
    
    
    
    
    
    
    142Net increase in cash and cash equivalents
    
    
    681
    
    
    
    15,678
    
    
    
    53,971
    
    
    
    
    
    
    
    70,330Cash and cash equivalents, beginning of period
    
    
    21
    
    
    
    26,181
    
    
    
    29,903
    
    
    
    
    
    
    
    56,105Cash and cash equivalents, end of period
    
    
    702
    
    
    
    41,859
    
    
    
    83,874
    
    
    
    
    
    
    
    126,435
 -125-




---



##### 



(amounts in the tables are stated in thousands of U.S .dollars, except share related data)
  AxcanIntermediateHoldings
    
    
    Subsidiary
    
    
    SubsidiaryInc.
    
    
    guarantors
    
    
    non-guarantors
    
    
    Eliminations
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $Cash flows from operating activitiesNet cash provided by (used in) operating activities
    
    
    (53,068
    )
    
    
    (21,846
    )
    
    
    27,402
    
    
    
    
    
    
    
    (47,512
    )Cash flows from investing activitiesAcquisition of property, plant and equipment
    
    
    
    
    
    
    (2,029
    )
    
    
    (1,032
    )
    
    
    
    
    
    
    (3,061
    )Acquisition of intangible assets
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    (32
    )Net cash used for the acquisition
    
    
    
    
    
    
    (958,463
    )
    
    
    
    
    
    
    
    
    
    
    (958,463
    )Intercompany advances
    
    
    (898,816
    )
    
    
    (32,878
    )
    
    
    (671,702
    )
    
    
    1,603,396
    
    
    
    Investments in subsidiaries
    
    
    (21,020
    )
    
    
    (663,674
    )
    
    
    
    
    
    
    684,694
    
    
    
    Net cash used in investing activities
    
    
    (919,836
    )
    
    
    (1,657,044
    )
    
    
    (672,766
    )
    
    
    2,288,090
    
    
    
    (961,556
    )Cash flows from financing activitiesIssuance of long-term debt
    
    
    538,120
    
    
    
    96,000
    
    
    
    
    
    
    
    
    
    
    
    634,120Repayment of long-term debt
    
    
    (10,457
    )
    
    
    (164
    )
    
    
    (269
    )
    
    
    
    
    
    
    (10,890
    )Intercompany advances
    
    
    
    
    
    
    1,590,988
    
    
    
    12,408
    
    
    
    (1,603,396
    )
    
    
    Advances from the parent company
    
    
    4,182
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,182Deferred debt issue expenses
    
    
    (33,921
    )
    
    
    (2,439
    )
    
    
    
    
    
    
    
    
    
    
    (36,360
    )Issue of shares
    
    
    475,001
    
    
    
    21,020
    
    
    
    663,674
    
    
    
    (684,694
    )
    
    
    475,001Net cash provided by financing activities
    
    
    972,925
    
    
    
    1,705,405
    
    
    
    675,813
    
    
    
    (2,288,090
    )
    
    
    1,066,053Foreign exchange loss on cash held in foreign currencies
    
    
    
    
    
    
    (334
    )
    
    
    (546
    )
    
    
    
    
    
    
    (880
    )Net increase in cash and cash equivalents
    
    
    21
    
    
    
    26,181
    
    
    
    29,903
    
    
    
    
    
    
    
    56,105Cash and cash equivalents, beginning and end of period
    
    
    21
    
    
    
    26,181
    
    
    
    29,903
    
    
    
    
    
    
    
    56,105
 -126-




---



##### 



(amounts in the tables are stated in thousands of U.S .dollars, except share related data)
  AxcanIntermediateHoldings
    
    
    Subsidiary
    
    
    SubsidiaryInc.
    
    
    guarantors
    
    
    non-guarantors
    
    
    Eliminations
    
    
    Consolidated$
    
    
    $
    
    
    $
    
    
    $Cash flows from operating activitiesNet cash provided by (used in) operating activities
    
    
    
    
    
    
    77,714
    
    
    
    (4,469
    )
    
    
    
    
    
    
    73,245Cash flows from investing activitiesDisposal of short-term investments
    
    
    
    
    
    
    129,958
    
    
    
    
    
    
    
    
    
    
    
    129,958Intercompany advances
    
    
    
    
    
    
    4,500
    
    
    
    
    
    
    
    (4,500
    )
    
    
    Acquisition of property, plant and equipment
    
    
    
    
    
    
    (3,063
    )
    
    
    (251
    )
    
    
    
    
    
    
    (3,314
    )Acquisition of intangible assets
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    
    
    
    
    (14
    )Net cash provided by (used in) investing activities
    
    
    
    
    
    
    131,395
    
    
    
    (265
    )
    
    
    (4,500
    )
    
    
    126,630Cash flows from financing activitiesRepayment of long-term debt
    
    
    
    
    
    
    (101
    )
    
    
    (120
    )
    
    
    
    
    
    
    (221
    )Intercompany advances
    
    
    
    
    
    
    
    
    
    
    (4,500
    )
    
    
    4,500
    
    
    
    Deferred debt issue expenses
    
    
    
    
    
    
    (889
    )
    
    
    
    
    
    
    
    
    
    
    (889
    )Stock-based compensation plan redemptions
    
    
    
    
    
    
    (29,219
    )
    
    
    (1,138
    )
    
    
    
    
    
    
    (30,357
    )Issue of shares
    
    
    
    
    
    
    224
    
    
    
    
    
    
    
    
    
    
    
    224Net cash used in financing activities
    
    
    
    
    
    
    (29,985
    )
    
    
    (5,758
    )
    
    
    4,500
    
    
    
    (31,243
    )Foreign exchange gain on cash held in foreign currencies
    
    
    
    
    
    
    64
    
    
    
    423
    
    
    
    
    
    
    
    487Net increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    179,188
    
    
    
    (10,069
    )
    
    
    
    
    
    
    169,119Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    150,856
    
    
    
    28,816
    
    
    
    
    
    
    
    179,672Cash and cash equivalents, end of period
    
    
    
    
    
    
    330,044
    
    
    
    18,747
    
    
    
    
    
    
    
    348,791
 21. Subsequent events
  -127-




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##### 



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  ITEM 9A. CONTROLS AND PROCEDURES
 (a) Evaluation of disclosure controls and procedures.
  (b) Changes in internal control over financial reporting.
  (c) Managements report on internal control over financial reporting.
    ITEM 9B. OTHER INFORMATION
  -128-




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##### 



PART III
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Directors and Executive Officers
   Name
    
    Age
    
    PositionFrank Verwiel, M.D.
    
    
    48
    
    
    President and Chief Executive Officer; Director, Axcan Intermediate Holdings Inc. and
Axcan Holdings Inc.David Mims
    
    
    47
    
    
    Executive Vice President and Chief Operating Officer; Director, Axcan Intermediate Holdings Inc.Steve Gannon
    
    
    49
    
    
    Senior Vice President, Chief Financial Officer and Treasurer; Director, Axcan Intermediate Holdings Inc.Alexandre LeBeaut, M.D.
    
    
    53
    
    
    Senior Vice President and Chief Scientific OfficerNicholas Franco
    
    
    48
    
    
    Senior Vice President, International Commercial OperationsTheresa Stevens, Esq.
    
    
    49
    
    
    Senior Vice President, Business DevelopmentRichard DeVleeschouwer
    
    
    53
    
    
    Senior Vice President, Human Resources and Assistant Secretary; Director, Axcan Intermediate Holdings Inc.Richard Tarte, Esq.
    
    
    47
    
    
    Vice President, Corporate Development, General Counsel and SecretaryFred Cohen, M.D., D. Phil
    
    
    54
    
    
    Director, Axcan Holdings Inc.Heather Preston, M.D.
    
    
    44
    
    
    Director, Axcan Holdings Inc.Todd Sisitsky
    
    
    39
    
    
    Director, Axcan Holdings Inc.
 Frank Verwiel, M.D.,
 David Mims
 -129-




---



##### 



Steve Gannon
 Alexandre LeBeaut, M.D.,
 Nicholas Franco
 Theresa Stevens, Esq., cum laude summa cum laude magna cum laude
 Richard Tarte, Esq.,
 Richard DeVleeschouwer
 Fred Cohen, M.D., D. Phil., magna cum laude
 Heather Preston, M.D.,
 -130-




---



##### 



Todd Sisitsky summa cum laude.
 Corporate Governance
  Section 16(a) Compliance
  Audit Committee
  -131-




---



##### 



Compensation Committee
  Compensation Committee Interlocks and Insider Participation
  Code of Ethics
 http://www.axcan.com
 ITEM 11. EXECUTIVE COMPENSATION
 Introduction
  Compensation Discussion and Analysis
 Overview
    -132-




---



##### 



Executive Compensation Philosophy and Objectives
   The Holdings Board and Holdings Compensation Committee, when making compensation decisions in
fiscal year 2010, followed these four principles:
 
    
    Performance-based:Executive compensation levels were intended to reflect both
company and individual results based on specific quantitative and qualitative
objectives established at the start of each fiscal year in keeping with AIHs
short-term, mid-term and long-term strategic objectives.
    
    Aligned with shareholder interests:AIH sought to align the interests of the named executive
officers with
the interests of its investors by evaluating executive performance on the basis of key
financial measurements which were believed to be closely correlated to long-term
shareholder value. Key elements of compensation that were meant to align the interests of
the named executive officers with shareholders included:
 
    
    AIHs Annual Incentive Compensation Plan, which offered performance-based
cash incentives and used adjusted EBITDA and net sales as measures of corporate
performance; and
    
    Axcan Holdings Inc. Management Equity Incentive Plan, or the Management
Equity Incentive Plan, which provides for the grant of options to executives with
the intention of encouraging them to increase shareholder value.
 
    
    Market competitive:AIHs total direct compensation for executives was
designed to be competitive with total direct compensation of executives of
comparable peer companies and to consider company and business unit results
relative to the results of peers. See Compensation Methodology-Benchmarking
Practices below.
    
    Individual considerations:AIHs compensation levels were also designed to
reflect individual factors such as scope of responsibility, experience and
performance against individual objectives.
 Compensation Methodology
  Benchmarking Practices
  -133-




---



##### 



Compensation Elements
  Base Salary
  Percentage of Base Salary AdjustmentExecutive Officer
    
    in Fiscal Year 2010Dr. Frank Verwiel
    
    
    0.00
    %President and Chief Executive OfficerDavid Mims
    
    
    0.00
    %Executive Vice President and Chief Operating OfficerSteve Gannon
    
    
    10.00
    %Senior Vice President and Chief Financial OfficerDr. Alexandre LeBeaut
    
    
    0.00
    %Senior Vice President and Chief Scientific OfficerNicholas Franco
    
    
    0.00
    %Senior Vice President, International Commercial Operations
  Performance-Based Cash Incentives
 corporate individual performance
 
    
    Corporate performance, a measure of adjusted EBITDA and corporate net sales; and
    
    Individual performance, determined by means of an evaluation under AIHs formal
performance management program and general discharge of duties.
   
    
    Reduce plan complexity and provide transparency in calculations;
    
    Streamline the incentive administration processes;
    
    Apply more leverage (differentiation) to reinforce pay for performance  higher
potential upside gain for top performers and larger downside risk for poor performance;
and
    
    Increase individual accountability at all levels.
 -134-




---



##### 



Annual Incentive
    
    CorporateTarget
    
    PerformanceName and Principal Position
    
    (as % of Base Salary)
    
    WeightingDr. Frank Verwiel
    
    
    60
    %(1)
    
    
    100
    %President and Chief Executive OfficerDavid Mims
    
    
    50
    %
    
    
    90
    %Executive Vice President and Chief Operating OfficerSteve Gannon
    
    
    50
    %
    
    
    85
    %Senior Vice President and Chief Financial OfficerDr. Alexandre LeBeaut
    
    
    50
    %
    
    
    85
    %Senior Vice President and Chief Scientific OfficerNicholas Franco
    
    
    45
    %
    
    
    85
    %Senior Vice President, International Commercial Operations
 
 (1)
    
    Does not include Match Payment related to supplemental
retirement plan replacement.  Individual PerformanceCorporate Goal Attainment
    
    Corporate Performance Factor
    
    Evaluation Received
    
    Individual Performance Factor140% of target or more
    
    200% of target
    
    Excellent
    
    126% to 150% of target100% of target
    
    100% of target
    
    Exceeds Expectations
    
    106% to 125% of targetFully Effective
    
    95% to 105% of targetLess than 80% of target
    
    0% of target
    
    Needs Improvement
    
    0% to 84% of targetFar Below Expectations
    
    0% of target
  -135-




---



##### 



Long-Term Equity Incentives
   The Axcan Holdings Inc. Management Equity Incentive Plan
     Additional Equity Grants Following the February 2008 Transactions
  -136-




---



##### 



Other Benefits and Perquisites
 Benefits
  Perquisites
  Retirement Plans
   Compensation Committee Report
       Executive Compensation Tables
  -137-




---



##### 



Summary Compensation Table
  Non-EquityRestricted
    
    Option
    
    Incentive Plan
    
    All other
    
    TotalFiscal
    
    Salary
    
    Bonus
    
    Stock Awards
    
    Awards
    
    Compensation
    
    Compensation
    
    CompensationName and Principal Position
    
    Year
    
    ($)
    
    ($)(2)
    
    ($)(3)
    
    ($)(4)
    
    ($)(5)
    
    ($)(7)
    
    ($)Dr. Frank Verwiel
    
    
    2010
    
    
    $
    645,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    290,250
    
    
    $
    257,439
    
    
    $
    1,192,689President
and Chief Executive Officer
    
    
    2009
    
    
    
    645,000
    (1)
    
    
    
    
    
    
    1,555,103
    
    
    
    
    
    
    
    406,350
    
    
    
    367,971
    
    
    
    2,974,4242008
    
    
    
    645,000
    
    
    
    750,000
    
    
    
    777,562
    
    
    
    2,192,000
    
    
    
    580,500
    
    
    
    6,150,326
    
    
    
    11,095,388David Mims
    
    
    2010
    
    
    
    399,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159,366
    
    
    
    36,905
    
    
    $
    595.320Executive Vice President
and Chief Operating Officer
    
    
    2009
    
    
    
    399,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205,392
    
    
    
    29,847
    
    
    
    634,2882008
    
    
    
    387,426
    
    
    
    75,000
    
    
    
    1,084,694
    
    
    
    1,404,250
    
    
    
    262,123
    
    
    
    4,084,610
    
    
    
    7,298,103Steve Gannon
    
    
    2010
    
    
    
    365,382
    (6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163,648
    
    
    
    29,467
    
    
    $
    558,497Senior Vice President
and Chief Financial Officer
    
    
    2009
    
    
    
    296,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182,210
    
    
    
    26,487
    
    
    
    504,6972008
    
    
    
    336,364
    
    
    
    60,000
    
    
    
    963,396
    
    
    
    1,147,375
    
    
    
    182,276
    
    
    
    766,140
    
    
    
    3,455,545Dr. Alexandre LeBeaut
    
    
    2010
    
    
    
    382,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    40,795
    
    
    $
    422,795Senior Vice President
and Chief Scientific Officer
    
    
    2009
    
    
    
    382,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205,215
    
    
    
    32,120
    
    
    
    619,3352008
    
    
    
    2,938
    
    
    
    
    
    
    
    
    
    
    
    787,750
    
    
    
    
    
    
    
    127,000
    
    
    
    917,688Nicholas Franco
    
    
    2010
    
    
    
    340,468
    (6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,348
    
    
    
    66,995
    
    
    $
    531,811Senior Vice President, International
    
    
    2009
    
    
    
    338,495
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182,036
    
    
    
    63,705
    
    
    $
    584,236Commercial Operations
    
    
    2008
    
    
    
    368,476
    
    
    
    40,000
    
    
    
    
    
    
    
    787,750
    
    
    
    177,851
    
    
    
    265,865
    
    
    
    1,639,942
 
 (1)
    
    Dr. Verwiels annual base salary is USD$645,000.
Through June 30, 2009, he was
compensated in Canadian dollars. In fiscal year 2009, Dr. Verwiel was paid $490,807 in
Canadian dollars, $161,250 in U.S. dollars and a currency exchange adjustment of $99,018.29
in Canadian dollars.(2)
    
    Amounts set forth in the Bonus column represent a special one-time incentive bonus
paid to our named executive officers that related to their performance in fiscal year 2008.(3)
    
    Amounts set forth in the Restricted Stock Awards column represents the aggregate
grant date fair value of awards granted to the named executive officers during the fiscal
years ended September 30, 2010, 2009 and 2008 and calculated in accordance with the
guidance issued by the FASB on stock compensation. For a discussion of the assumptions used
in calculating award values for fiscal years 2010, 2009 and 2008, see Note 12 to our
audited consolidated financial statements for the fiscal year ended September 30, 2010
contained in this report. The value set forth in this column for Mr. Gannon represents
aggregate grant date fair value of our grant of penny options calculated in accordance with
the guidance issued by the FASB on stock compensation.(4)
    
    Amounts set forth in the Option Awards column represents the aggregate grant date
fair value of awards granted to the named executive officers during the fiscal years ended
September 30, 2010, 2009 and 2008 and calculated in accordance with the guidance issued by
the FASB on stock compensation. The fair value of the service based options was calculated
using a Black-Scholes option-pricing model. Values for awards subject to performance
conditions are calculated based upon the probable outcome of the performance condition as
of the grant date using a Monte Carlo simulation model. For a discussion of the assumptions
used in calculating award values for fiscal years 2010, 2009 and 2008, see Note 12 to our
audited consolidated financial statements for the fiscal year ended September 30, 2010
contained in this report. The estimated maximum potential value for the performance awards
for the 2008 awards, were $1,600,000 for Dr. Verwiel; $1,025,000 for Mr. Mims; $837,500 for
Mr. Gannon; $575,000 for Dr. LeBeaut; and $575,000 for Mr. Franco.(5)
    
    The values in this column represent, in U.S. dollars, incentive awards under the
Incentive Plan earned by the named executive officers in fiscal years 2010, 2009 and 2008,
but paid in fiscal years 2011, 2010 and 2009. Since the incentive award granted to Mr.
Gannon was paid in Canadian dollars and the incentive award granted to Mr. Franco was paid
in Euros, the values for such awards have been converted to U.S. dollars. For fiscal year
2010, an exchange rate of 1.0498 Canadian dollars to one U.S. dollar and 0.7376 Euros to -138-




---



##### 



one U.S. dollars was used for the conversion. For fiscal year 2009, an exchange rate of
1.0574 Canadian dollars to one U.S. dollar and 0.6670 Euros to one U.S. dollars was used
for the conversion. For fiscal year 2008, an exchange rate of 1.2372 Canadian dollars
to one U.S. Dollar and 0.7877 Euros to one U.S. dollar was used for the conversion.(6)
    
    These amounts represent, in U.S. dollars, salaries earned by Mr. Gannon and Mr.
Franco that were paid in local currency. The salary paid to Mr. Gannon was paid in Canadian
dollars and the salary paid to Mr. Franco was paid in Euros, the values for such salaries
have been converted to U.S. dollars.(7)
    
    All other compensation for FY2010 includes the compensation set forth in the table
below: CompanyCar Allowance
    
    Contributionsand/or
    
    to Defined
    
    InsuranceCompany-
    
    Contribution
    
    PremiumsName & Principal Position
    
    Fiscal Year
    
    Paid Car ($)
    
    Plans ($)(a)
    
    ($)(b)
    
    Other(c)
    
    Total ($)Dr. Frank VerwielPresident and Chief
ExecutiveOfficer
    
    
    2010
    
    
    $
    18,000
    
    
    $
    12,373
    
    
    $
    21,388
    
    
    $
    205,678
    
    
    $
    257,439David MimsExecutive Vice President
and
Chief Operating Officer
    
    
    2010
    
    
    
    10,200
    
    
    
    8,250
    
    
    
    18,455
    
    
    
    
    
    
    
    36,905Steve GannonSenior Vice President
and Chief
Financial Officer
    
    
    2010
    
    
    
    9,716
    
    
    
    17,311
    
    
    
    2,440
    
    
    
    
    
    
    
    29,467Dr. Alexandre LeBeautSenior Vice President
and Chief
Scientific Officer
    
    
    2010
    
    
    
    10,200
    
    
    
    11,000
    
    
    
    19,595
    
    
    
    
    
    
    
    40,795Nicholas FrancoSenior Vice President,
International
Commercial Operations
    
    
    2010
    
    
    
    25,565
    
    
    
    
    
    
    
    25,161
    
    
    
    16,269
    
    
    
    66,995
 
 (a)
    
    Company contributions to defined contribution plans include contributions to
RRSP/DPSP matching funds and 401(k) during fiscal year 2010.(b)
    
    This column includes payments for life and disability insurance, as well as
medical and dental benefits. In addition, $3,532 in fiscal year 2010 in additional life
insurance and long-term disability premiums was paid on behalf of Dr. Verwiel. A Payment
of $19,565 in fiscal year 2010 was made to maintain an unemployment insurance policy for
Mr. Franco since, in France, Mr. Francos country of residency, corporate officers who
become unemployed are generally not eligible for unemployment benefits.(c)
    
    A cash payment of $145,125 in fiscal year 2010 was made to Dr. Verwiel by us
pursuant to the terms of his employment agreement as a Match Payment, or a payment equal to
one-half of the amount of Dr. Verwiels non-equity incentive award for fiscal year 2010. In
fiscal year 2010, $19,402 was paid for the preparation of Dr. Verwiels annual tax returns.
In fiscal year 2010, Dr. Verwiel received relocation expenses of $41,152.  -139-




---



##### 



Grants of Plan-Based Awards
  Estimated Future Payouts UnderNon-Equity Incentive Plan Awards (1)Estimated Future
    
    All Other Stock
    
    All Other OptionPayouts Under
    
    Awards: Number of
    
    Awards: Number of
    
    Exercise or
    
    Grant DateEquity Incentive
    
    Shares of Stock or
    
    Securities  Underlying
    
    Base Price of Option
    
    Fair Value of   Stock andName and Principal Position
    
    Grant Date
    
    Threshold
    
    Target
    
    Maximum
    
    Plan
    
    Units
    
    Options

    Awards
    
    Option AwardsDr. Frank Verwiel

 
    
    
    
    
    
    
    
    
    $
    387,000
    
    
    $
    774,000President and Chief
Executive OfficerDavid Mims
    
    
    
    
    
    
    
    
    
    
    199,524
    
    
    
    568,645Executive Vice President
and Chief Operating
OfficerSteve Gannon
    
    
    
    
    
    
    
    
    
    
    182,691
    
    
    
    506,967Senior Vice President
and Chief Financial
OfficerDr. Alexandre LeBeaut
    
    
    
    
    
    
    
    
    
    
    191,000
    
    
    
    530,025Senior Vice President
and Chief Scientific
OfficerNicholas Franco
    
    
    
    
    
    
    
    
    
    
    153,210
    
    
    
    425,159Senior Vice President,
International Commercial
Operations
 
 (1)
    
    This column shows the potential non-equity incentive awards that are possible under
the 2010 Incentive Plan, at the threshold, target and maximum levels of performance in
fiscal year 2010. As discussed above in Compensation Discussion and Analysis
Performance-Based Cash Incentives, no incentive payments were to be paid under the
Incentive Plan if both corporate fiscal and individual performance goals were not met. The
target payments are based on achieving the 100% target level of performance for both
corporate financial measures and individual performance measures. The maximum payments are
based on the maximum incentive payments available to our named executive officers under
the Incentive Plan as discussed above in Compensation Discussion and Analysis. According
to Dr. Verwiels employment contract, the maximum incentive payment is 120% of base salary
for high achievement. -140-




---



##### 



Outstanding Equity Awards at Fiscal Year-End
  Option Awards
    
    Stock AwardsEquityIncentivePlanAwards:Number of
    
    Number of
    
    Number of
    
    
    
    
    
    
    
    
    
    Number ofSecurities
    
    Securities
    
    Securities
    
    
    
    
    
    
    
    
    
    Shares orUnderlying
    
    Underlying
    
    Underlying
    
    
    
    
    
    
    
    
    
    Units
    
    Market Value ofUnexercised
    
    Unexercised
    
    Unexercised
    
    Option
    
    Option
    
    of Stock that
    
    Shares or Units ofOptions (#)
    
    Options (#)
    
    Unearned
    
    Exercise
    
    Expiration
    
    Have Not
    
    Stock that HaveName and Principal Position
    
    Exercisable
    
    Unexercisable
    
    Options
    
    Price ($)
    
    Date
    
    Vested (#)
    
    Not VestedDr. Frank Verwiel
    
    
    128,000
    (1)
    
    
    192,000
    (1)
    
    
    160,000
    (4)
    
    $
    10.00
    
    
    
    4/15/2018President and Chief
    
    
    64,000
    (2)
    
    
    96,000
    (2)
    
    
    
    
    
    $
    12.10
    (5)
    
    
    4/15/2018Executive OfficerDavid Mims
    
    
    82,000
    (1)
    
    
    123,000
    (1)
    
    
    102,500
    (4)
    
    $
    10.00
    
    
    
    4/15/2018Executive Vice President and
    
    
    41,000
    (2)
    
    
    61,500
    (2)
    
    
    
    
    
    $
    12.10
    (5)
    
    
    4/15/2018Chief
Operating OfficerSteve Gannon
    
    
    96,436
    (3)
    
    
    
    
    
    
    
    
    
    $
    0.01
    
    
    
    4/15/2018Senior Vice President and Chief
    
    
    67,000
    (1)
    
    
    100,500
    (1)
    
    
    83,750
    (4)
    
    $
    10.00
    
    
    
    4/15/2018Financial
Officer
    
    
    33,500
    (2)
    
    
    50,250
    (2)
    
    
    
    
    
    $
    12.10
    (5)
    
    
    4/15/2018Dr. Alexandre P. LeBeaut
    
    
    46,000
    (1)
    
    
    69,000
    (1)
    
    
    57,500
    (4)
    
    $
    10.00
    
    
    
    9/29/2018Senior Vice President and Chief
    
    
    23,000
    (2)
    
    
    34,500
    (2)
    
    
    
    
    
    $
    12.10
    (5)
    
    
    9/29/2018Scientific
OfficerNicholas Franco
    
    
    46,000
    (1)
    
    
    69,000
    (1)
    
    
    57,500
    (4)
    
    $
    10.00
    
    
    
    4/15/2018Senior Vice President,
    
    
    23,000
    (2)
    
    
    34,500
    (2)
    
    
    
    
    
    $
    10.00
    (5)
    
    
    4/15/2018International
CommercialOperations
 
 (1)
    
    These values reflect the number vested and unvested time-based options granted to our
named executive officers under the Management Equity Incentive Plan. Time-based options vest
ratably on each of the first through fifth anniversaries of the date of grant, subject to
the officers continued employment with us through each
anniversary. Dr. Verwiel, Mr. Mims, Mr. Gannon and
Mr. Francos option will fully vest on April 15, 2013;
Dr. LeBeauts option will fully vest on September 29,
2013.(2)
    
    These values reflect the number of vested and unvested premium options granted to our
named executive officers under the Management Equity Incentive Plan. Premium options vest
ratably on each of the first through fifth anniversaries of the date of grant, subject to
the officers continued employment with us through each anniversary. Dr. Verwiel, Mr. Mims, Mr. Gannon and
Mr. Francos option will fully vest on April 15, 2013;
Dr. LeBeauts option will fully vest on September 29,
2013.(3)
    
    This value represents the number of penny options, or options to purchase common stock of
Holdings for $0.01, granted to Mr. Gannon, who resides and works in Canada, pursuant to his
penny option grant agreement. Approximately one-third of the penny options immediately
vested upon grant on April 15, 2008, one-third vested on August 25, 2009, and the remainder
of the penny options vested on August 25, 2010.(4)
    
    These values represent the number of performance-based options granted to our named
executive officers under the Management Equity Incentive Plan. Under the terms of the
Management Equity Incentive Plan, the amount of performance- based options that will vest is
dependent upon the occurrence of a Liquidity Event (as defined in the Management Equity
Incentive Plan) and the realization of certain profits by the Sponsor Funds and/or their
affiliates as a result of such event(s), calculated by comparing the value of the cash or
certain securities obtained in exchange for the equity of Holdings held by the Sponsor Funds
and/or their affiliates to the Sponsor Funds initial investment in the February 2008
Transactions. Depending on these factors, all, none, or -141-




---



##### 



one-half of the performance-based options held by our named executive officers may vest upon
the occurrence of the Liquidity Event (as defined in the Management Equity Incentive Plan),
subject to the officers continued employment with us on the date of the liquidity event.(5)
    
    For the premium options granted under the Management Equity Incentive Plan to Dr. Verwiel,
Mr. Mims, Mr. Gannon and Dr. LeBeaut, the exercise price of these options increases at a
10.00% compound rate on each anniversary of the date of grant of such options until, with
certain exceptions, the earlier of: (a) the exercise of such option; (b) the fifth
anniversary of the grant date of such option; (c) a Liquidity Event (as defined in the
Management Equity Incentive Plan) or (d) the occurrence of a Change in Control (as defined
in the Management Equity Incentive Plan) of Axcan Holdings Inc. For Mr. Franco, any premium
options granted to him under the Management Equity Incentive Plan will be subject to the
terms of the French sub-plan, under which the premium options will not be subject to an
increasing exercise price over time. Rather, any vested premium options held by Mr. Franco
will be exercisable in a percentage equal to (i) the percentage of the premium options
exercisable under the terms of the Management Equity Incentive Plan multiplied by (ii) the
difference between the fair market value of one share of Holdings common stock on the
exercise date and the exercise price of the premium option to be exercised if it had
accreted in price under the terms of the Management Equity Incentive Plan divided by (iii)
the difference between the fair market value of the share and the exercise price of $10.00. Options Exercised and Stock Vested
  Stock AwardsNumber ofShares Acquired
    
    Value Realizedon Vesting
    
    on VestingName & Principal Position
    
    (#)(1)
    
    ($)(2)Dr. Frank Verwiel
    
    
    77,833
    
    
    $
    958,124President and Chief Executive OfficerDavid Mims
    
    
    36,194
    
    
    $
    445,548Executive Vice President and Chief Operating OfficerSteve Gannon
    
    
    
    
    
    
    Senior Vice President and Chief Financial OfficerDr. Alexandre LeBeaut
    
    
    
    
    
    
    Senior Vice President and Chief Scientific OfficerNicholas Franco
    
    
    
    
    
    
    Senior Vice President, International Commercial Operations
 
 (1)
    
    The values in this column reflect the number of RSUs granted to Dr. Verwiel on August 25,
2009 where one-half vested on August 25, 2010 and for Mr. Mims, the third vesting tranche of
his RSU grant awarded on April 15, 2008. These vested RSUs will not be settled in Holdings
common stock until the earlier of: (1) four years from the date of grant, or April 15, 2012;
(2) the termination of the officers employment; (3) a Liquidity Event (as defined in the
Management Equity Incentive Plan); and (4) a Change in Control (as defined in the Management
Equity Incentive Plan).(2)
    
    Represents the number of RSUs vested multiplied by $12.31, the fair market value of one
share of Holdings common stock as at December 31, 2009, being
the last valuation determination made by the Holdings Board prior to
the vesting date. Employment Agreements and Potential Payments upon Certain Terminations
  -142-




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##### 



Employment Agreement with Dr. Frank Verwiel
       
    
    An amount equal to Dr. Verwiels accrued but unused vacation and base salary
through the date of termination, or collectively, the accrued benefits.
    
    An amount equal to (a) two times his base salary in effect at the date of
termination, plus (b) two times the amount of his Target Annual Bonus, which is 60% of
Dr. Verwiels base salary. This amount will be paid in equal, ratable installments in
accordance with our regular payroll policies over the course of 24 months.
    
    Medical benefits which are substantially similar to the benefits provided to our
executive officers for 24 months after the date of termination. However, if Dr. Verwiel
becomes re-employed with another employer and is eligible to receive comparable
benefits, we shall cease to provide continued medical benefits.
   Employment Agreement with David Mims
   -143-




---



##### 




    
    An amount equal to Mr. Mims accrued but unused vacation and base salary
through the date of termination, or collectively, the accrued benefits.
    
    An amount equal to (a) two times his base salary in effect at the date of
termination, plus (b) two times the amount of his Target Annual Bonus, which is 50% of
Mr. Mims base salary. This amount will be paid in equal, ratable installments in
accordance with our regular payroll policies over the course of 24 months.
    
    Medical benefits which are substantially similar to the benefits provided to our
executive officers for 24 months after the date of termination. However, if Mr. Mims
becomes re-employed with another employer and is eligible to receive comparable benefits,
we shall cease to provide continued medical benefits.
   Employment Agreement with Steve Gannon
     -144-




---



##### 




    
    An amount equal to Mr. Gannons accrued but unused vacation and base salary
through the date of termination, or collectively, the accrued benefits.
    
    An amount equal to one-and-a-half times his base salary in effect at the date of
termination. This amount will be paid in equal, ratable installments in accordance
with our regular payroll policies over the course of 18 months.
    
    Medical benefits which are substantially similar to the benefits provided to our
executive officers for 18 months after the date of termination. However, if Mr. Gannon
becomes re-employed with another employer and is eligible to receive comparable
benefits, we shall cease to provide continued medical benefits.
   Employment Agreement with Dr. Alexandre LeBeaut
      
    
    An amount equal to Dr. LeBeauts accrued but unused vacation and base salary
through the date of termination, or collectively, the accrued benefits.
    
    An amount equal to one-and-a-half times his base salary in effect at the date of
termination. This amount will be paid in equal, ratable installments in accordance
with our regular payroll policies over the course of 18 months.
    
    Medical benefits which are substantially similar to the benefits provided to our
executive officers for 18 months after the date of termination. However, if Dr. LeBeaut
becomes re-employed with another employer and is eligible to receive
 -145-




---



##### 



comparable
benefits, we shall cease to provide continued medical benefits.
   Employment Agreement with Nicholas Franco
   Potential Payments upon Certain Terminations or a Change in Control
  -146-




---



##### 



Severance ArrangementsAssuming Termination of Service at the end of Fiscal year 2010Termination with Cause
    
    
    Termination without Cause
    
    
    Terminationor without
    
    
    or for Good
    
    
    due to Death
    
    
    Change inName & Principal
    
    
    
    
    
    Good Reason
    
    
    Reason(1)
    
    
    or Disability
    
    
    Control(2)Position
    
    Benefit Type
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Dr. Frank Verwiel
    
    Severance Payment
    
    
    
    
    
    $
    2,064,000
    
    
    
    
    
    
    $
    2,064,000President and Chief Executive Officer
    
    Bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefits
    
    
    
    
    
    
    34,248
    
    
    
    
    
    
    
    34,248Value of Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Award Acceleration(3)Total
    
    
    
    
    
    $
    2,098,248
    
    
    
    
    
    
    $
    2,098,248David Mims
    
    Severance Payment
    
    
    
    
    
    $
    1,197,146
    
    
    
    
    
    
    $
    1,197,146Executive Vice President and Chief Operating Officer
    
    Bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefits
    
    
    
    
    
    
    34,248
    
    
    
    
    
    
    
    34,248Value of Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Award Acceleration(3)Total
    
    
    
    
    
    $
    1,231,395
    
    
    
    
    
    
    $
    1,231,395Steve Gannon
    
    Severance Payment
    
    
    
    
    
    $
    548,073
    
    
    
    
    
    
    $
    548,073Senior Vice President and Chief Financial Officer
    
    Bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefits
    
    
    
    
    
    
    2,709
    
    
    
    
    
    
    
    2,709Value of Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Award Acceleration(3)Total
    
    
    
    
    
    $
    550,782
    
    
    
    
    
    
    $
    550,782Dr. Alexandre LeBeaut
    
    Severance Payment
    
    
    
    
    
    $
    573,000
    
    
    
    
    
    
    $
    573,000Senior Vice President and Chief Scientific Officer
    
    Bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefits
    
    
    
    
    
    
    25,686
    
    
    
    
    
    
    
    25,686Value of Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Award AccelerationTotal
    
    
    
    
    
    $
    598,686
    
    
    
    
    
    
    $
    598,686Nicholas Franco
    
    Severance Payment
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    340,468Senior Vice President, International Commercial
Operations
    
    Bonus
    
    
    
    
    
    $
    153,210
    
    
    
    
    
    
    
    Benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Value of Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Award AccelerationTotal
    
    
    
    
    
    $
    153,210
    
    
    
    
    
    
    $
    340,468
 
 (1)
    
    The severance payments set forth in this column would have been paid to Dr. Verwiel and
Mr. Mims, respectively, in equal installments over a period of 24 months in accordance with
our standard payroll procedures and any benefits would be provided over a period of 24
months. For Mr. Gannon and Dr. LeBeaut, the severance payments set forth in this column
would have been paid to him in equal installments over a period of 18 months in accordance
with our standard payroll procedures and any benefits would be provided over a period of 18
months.(2)
    
    The severance payments set forth in this column would have been paid immediately upon
termination to Dr. Verwiel, Mr. Mims, Mr. Gannon and Dr. LeBeaut. For Mr. Franco, the
severance payments set forth in this column would have been paid in one lump sum no later
than the March 15th following the year of termination. The determination of the form in
which benefits would be paid to Mr. Franco would have been at our discretion.(3)
    
    Upon any event of termination, the named executive officers were entitled to receive the
same treatment of their Holdings Options under the Management Equity Incentive Plan as any
other employee with the exception of the performance-based Holdings Options held by Dr.
Verwiel, Mr. Mims and Mr. Gannon. In the event one of these named executive officers were
terminated without cause or for good reason, any performance-based options that had not
vested as of the date of termination would remain outstanding for a 12-month period
following termination and if a liquidity event (as defined under the Management Equity
Incentive Plan) were to occur within such period, all unvested performance-based shares
would become -147-




---



##### 



vested and exercisable in accordance with the Management Equity Incentive
Plan. Otherwise, upon any event of termination of
a named executive officer, any unvested Holdings Options would be forfeited unless such
termination was without Cause (as defined in the Management Equity Incentive Plan) or by
the participant for Good Reason (as defined in the Management Equity Incentive Plan) and
occurred during the two-year period following a Change of Control (as defined in the
Management Equity Incentive Plan), in which case all unvested time-based and premium
Holdings Options would immediately vest and become exercisable as of the date of such
termination. Director Compensation
  -148-




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##### 



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
 Beneficial Ownership
     Beneficial Ownership
    
    
    PercentageName and Address of Beneficial Owner
    
    of Common Shares
    
    
    OwnedTPG Capital(1)
    
    
    69.91
    
    
    
    69.91
    %Banc of America Capital Investors V, L.P.(2)
    
    
    8.35
    
    
    
    8.35
    %Société Générale de Financement du Québec(3)
    
    
    6.26
    
    
    
    6.26
    %HSBC(4)
    
    
    5.22
    
    
    
    5.22
    %OMERS Capital Partners Inc.(5)
    
    
    5.22
    
    
    
    5.22
    %Alberta Investment Management Corp.(6)
    
    
    4.17
    
    
    
    4.17
    %Dr. Frank Verwiel
    
    
    *
    
    
    
    *David Mims
    
    
    *
    
    
    
    *Steve Gannon
    
    
    *
    
    
    
    *Nicholas Franco
    
    
    *
    
    
    
    *Richard Tarte
    
    
    *
    
    
    
    *Dr. Alexandre LeBeaut
    
    
    *
    
    
    
    *Dr. Fred Cohen(7)
    
    
    69.91
    
    
    
    69.91
    %Dr. Heather Preston(7)
    
    
    69.91
    
    
    
    69.91
    %Todd Sisitsky(7)
    
    
    69.91
    
    
    
    69.91
    %All executive officers and directors as a group (12 people)
    
    
    0.39
    
    
    
    0.39
    %
 
 *
    
    Represents less than one percent or one share, as applicable.(1)
    
    Axcan Intermediate Holdings Inc. shares shown as beneficially owned by TPG Capital
reflect an aggregate of the following record ownership: (i) 30,854,198.80 shares of
Holdings held by TPG Partners V, L.P., (ii) 80,715.00 shares of Holdings held by TPG FOF
V-A, L.P., (iii) 65,086.20 shares of Holdings held by TPG FOF V-B, L.P. and (iv)
2,500,000.00 shares of Holdings held by TPG Biotechnology Partners II, LP. The address of
TPG Capital is 301 Commerce Street, Suite 3300, Fort Worth, TX 76102.(2)
    
    Axcan Intermediate Holdings Inc. shares shown as beneficially owned by Banc of
America Capital Investors V, L.P. through its investment in TPG Axcan Co-Invest II, LLC
reflect the following record ownership: 4,000,000 shares of Holdings held by Banc of
America Capital Investors V, L.P. The address of Banc of America Capital Investors V,
L.P. is 100 North Tryon Street, 25th floor, Attention: Scott R. Poole, Charlotte, NC
28255.(3)
    
    Axcan Intermediate Holdings Inc. shares shown as beneficially owned by Société
Générale de Financement du Quebec through its investment in TPG Axcan Co-Invest, LLC
reflect the following record ownership: 3,000,000 shares of Holdings held by SGF
Bio-Pharma Capital Inc. The address of Société Générale de Financement du Québec is 600
de la Gauichetière West, Suite 1500, Montreal, Quebec, Canada, H3B 4L8.(4)
    
    Axcan Intermediate Holdings Inc. shares shown as beneficially owned by HSBC through
its investment in TPG Axcan Co- -149-




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##### 



Invest, LLC reflect an aggregate of the following record ownership:(i) 2,100,000 shares
held by HSBC Equity Partners USA, L.P. and (ii) 400,000 shares held by HSBC Private Equity
Partners II USA, LP. The address of HSBC is 452 Fifth Avenue, 14th floor, Attention:
Andrew Trigg, New York, NY 10018.(5)
    
    Axcan Intermediate Holdings Inc. shares shown as beneficially owned by OMERS Capital
Partners Inc. through its investment in TPG Axcan Co-Invest, LLC reflect the following
record ownership: 2,500,000 shares of Holdings held by OCP API Holdings, Inc. The
address of OMERS Capital Partners Inc. is Royal Bank Plaza, South Tower, Suite 2010, 200
Bay Street, Toronto, Ontario, Canada, M5J 2J2.(6)
    
    Axcan Intermediate Holdings Inc. shares shown as beneficially owned by Alberta
Investment Management Corp. through its investment in TPG Axcan Co-Invest, LLC reflect an
aggregate of the following record ownership: (i) 1,140,000 shares of Holdings held by
GP08GV (General) Ltd. and (ii) 860,000 shares of Holdings held by GP08PX (General) Ltd.
The address of Alberta Investment Management Corp. is 9515-107 Street, 340 Terrace
Building, Edmonton, Alberta, Canada, T5K 2C3.(7)
    
    Includes all shares held by TPG Partners V, L.P., TPG FOF V-A, L.P., TPG FOF V-B,
L.P., and TPG Biotechnology Partners II, LP. Each of Fred Cohen, Heather Preston and Todd
Sisitsky may be deemed to be a beneficial owner of these interests due to his or her
status as an employee of TPG Capital, and each such person disclaims beneficial ownership
of any such interests in which he or she does not have a pecuniary interest. The address
of each of Dr. Cohen, Dr. Preston and Mr. Sisitsky is c/o TPG Capital, 301 Commerce
Street, Suite 3300, Fort Worth, TX 76102. Securities Authorized for Issuance Under Equity
Compensation Plans
  Number of securitiesNumber of
    
    
    
    
    
    
    remaining available forsecurities to be
    
    
    Weighted-average
    
    
    future issuanceissued upon exercise
    
    
    exercise price of
    
    
    under equity compensationof outstanding
    
    
    outstanding
    
    
    plans (excludingoptions, warrants and
    
    
    options, warrants
    
    
    securitiesrights
    
    
    and rights
    
    
    reflected in first column)Plan CategoryEquity compensation plans
approved by security
holders
    
    
    
    
    
    
    
    
    
    
    Equity compensation plans
not approved by security
holders(1)
    
    
    4,814,646
    (2)
    
    $
    10.69
    (3)
    
    
    172,307Total
    
    
    4,814,646
    
    
    $
    10.69
    
    
    
    172,307
 
 (1)
    
    Since our indirect parent Holdings is owned primarily by the Sponsor and the majority
of members of the Holdings Board are affiliated with the Sponsor, the Holdings Board, and
not the Holdings stockholders, have approved all decisions related to equity-based
compensation, including the approval of the Management Equity Incentive Plan and individual
compensation arrangements with our executive officers.(2)
    
    This amount includes 3,642,250 shares of Holdings common stock issuable under the Management
Equity Incentive Plan, 719,836 shares of Holdings common stock issuable upon the settlement of
Restricted Stock Unit (RSUs) awards granted to certain of our employees and 452,560 shares of
Holdings common stock issuable upon the exercise of penny options, or options to purchase
Holdings Common Stock for $0.01, granted to certain of our employees.(3)
    
    The weighted-average exercise price reflects the exercise price of all options to purchase
Holdings common stock issued under the Management Equity Incentive Plan and does not
reflect the exercise price of the RSUs awards or penny option awards, which have exercise
prices of $0 and $0.01, respectively. -150-




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##### 



ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
 Review, Approval or Ratification of Transactions with Related Persons
  Stockholders Agreement
  Registration Rights Agreement
  Management Agreement
   Director Independence
  -151-




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##### 



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  Fiscal Year ended
    
    
    Fiscal Year endedSeptember 30, 2010
    
    
    September 30, 2009Audit Fees (1)
    
    $
    778,566
    
    
    $
    908,858Audit-Related Fees (2)
    
    
    42,811
    
    
    
    308,777Tax Fees (3)
    
    
    24,316
    
    
    
    244,003All Other Fees (4)
    
    
    
    
    
    
    21,451Total Fees
    
    $
    845,693
    
    
    $
    1,483,089
 
 (1)
    
    Audit Fees billed during the periods indicated represented fees for the
following services: audit of the Companys (or the predecessor companys) annual financial
statements, reviews of the Companys (or the predecessor companys) quarterly financial
statements, audit of the financial statements of certain subsidiaries and other services
normally provided in connection with statutory and regulatory filings.(2)
    
    Audit-Related Fees billed during the periods indicated represented fees for the following
services: issue of consent and comfort letters and other services provided in conjunction
with financing transactions and consultations on accounting matters.(3)
    
    Tax Fees billed during the periods indicated represented fees for the following services:
compliance, transfer-pricing studies and other tax consultation.(4)
    
    Performance of agreed-upon procedures with respect to a royalty sales schedule.  -152-




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##### 



PART IV
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    Financial StatementsThe financial statements are filed as part of this Annual Report on Form 10-K under Item
8-Financial Statements and Supplementary Data.
 (b)
    
    Financial Statement SchedulesFinancial statement schedules have been omitted because they are either not required,
not applicable, or the information is presented in the consolidated financial statements
and the notes thereto in Item 8 above.
 (c)
    
    ExhibitsRefer to the Index to Exhibits immediately following the signature page of this report.
 -153-




---



##### 



SIGNATURES
  AXCAN INTERMEDIATE HOLDINGS INC.By:
    /s/Name:
    Steve GannonTitle:
    Senior Vice President and 
Chief Financial Officer and Treasurer  Signature
    
    Title
    
    Date/s/

Frank Verwiel, M.D.
    
    President, Chief Executive Officer
and Director
(Principal Executive Officer)
    
    December 16, 2010/s/

Steve Gannon
    
    Senior Vice President and
Chief Financial Officer, Treasurer
and Director (Principal Financial
and Accounting Officer)
    
    December 16, 2010/s/

David W. Mims
    
    Executive Vice President, Chief
Operating Officer and Director
    
    December 16, 2010/s/

Richard DeVleeschouwer
    
    Senior Vice President, Human Resources,
Assistant Secretary and Director
    
    December 16, 2010
 -154-




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##### 



EXHIBIT INDEX
 Exhibit No.
    
    Exhibit3.1
    
    Certificate of Incorporation of Axcan Intermediate Holdings Inc. (f/k/a Atom Intermediate Holdings Inc.), as amended
(Exhibit 3.1 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).3.2
    
    By-laws of Axcan Intermediate Holdings Inc. (Exhibit 3.2 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).4.1
    
    Senior Secured Notes Indenture, dated as of February 25, 2008, between Axcan Intermediate Holdings Inc., the Guarantors
listed therein and The Bank of New York, as Trustee, relating to the 9.25% Senior Secured Notes due 2015 (Exhibit 4.1 to
Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).4.2
    
    Supplemental Indenture, dated as of December 19, 2008, among Axcan EU LLC and The Bank of New York Mellon, as trustee,
supplementing the Senior Secured Notes Indenture dated as of February 25, 2008 (Exhibit 4.1 to Axcan Intermediate Holdings
Inc. Form 10-Q filed February 13, 2009).4.3
    
    Senior Notes Indenture, dated as of May 6, 2008, between Axcan Intermediate Holdings Inc., the Guarantors listed therein and
The Bank of New York, as Trustee, relating to the 12.75% Senior Notes due 2016 (Exhibit 4.2 to Axcan Intermediate Holdings
Inc. Form S-4 filed October 7, 2008).4.4
    
    Supplemental Indenture, dated as of December 19, 2008, among Axcan EU LLC and The Bank of New York Mellon, as trustee,
supplementing the Senior Notes Indenture dated as of May 6, 2008 (Exhibit 4.2 to Axcan Intermediate Holdings Inc. Form 10-Q
filed February 13, 2009).4.5
    
    Form of 9.25% Senior Secured Notes due 2015 (included in the Senior Secured Notes Indenture filed as Exhibit 4.1 to Axcan
Intermediate Holdings Inc. Form S-4 filed October 7, 2008).4.6
    
    Form of 12.75% Senior Notes due 2016 (included in the Senior Notes Indenture filed as Exhibit 4.2 to Axcan Intermediate
Holdings Inc. Form S-4 filed October 7, 2008).4.7
    
    Registration Rights Agreement, dated as of February 25, 2008, by and between Axcan Intermediate Holdings Inc., the
Guarantors named therein and Banc of America Securities LLC, HSBC Securities (USA) Inc., RBC Capital Markets Corporation
(Exhibit 4.5 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).4.8
    
    Registration Rights Agreement, dated as of May 6, 2008, by and between Axcan Intermediate Holdings Inc., the Guarantors
named therein and Banc of America Securities LLC, HSBC Securities (USA) Inc., RBC Capital Markets Corporation (Exhibit 4.6
to Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).4.9
    
    Parallel Debt Agreement, dated as of February 25, 2008, between Axcan LuxCo 1 S.àr.l. and Axcan LuxCo 2 S.àr.l and The Bank
of New York, relating to the Senior Secured Notes Indenture (Exhibit 4.12 to Axcan Intermediate Holdings Inc. Form S-4 filed
October 7, 2008).4.10
    
    Parallel Debt Agreement, dated as of May 6, 2008, between Axcan LuxCo 2 S.àr.l. and Axcan LuxCo 2 S.àr.l and The Bank of New
York, relating to the Senior Notes Indenture (Exhibit 4.13 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7,
2008).4.11
    
    Pledge Agreement, dated as of February 25, 2008, between Axcan Intermediate Holdings Inc., as Pledgor, Bank of America,
N.A., as Administrative Agent and Collateral Agent, and Axcan LuxCo 1 S.àr.l., as Company (Exhibit 4.14 to Axcan
Intermediate Holdings Inc. Form S-4 filed October 7, 2008).4.12
    
    Pledge Agreement, dated as of February 25, 2008, between Axcan Intermediate Holdings Inc., as Pledgor, Bank of America,
N.A., as Administrative Agent and Collateral Agent, and Axcan LuxCo 2 S.àr.l., as Company (Exhibit 4.15 to Axcan
Intermediate Holdings Inc. Form S-4 filed October 7, 2008).4.13
    
    Deed of Pledge of Membership Rights, dated February 25, 2008, between Axcan Intermediate Holdings Inc. and Axcan US LLC, as
Pledgors, and Bank of America, N.A., as Pledgee, and Axcan Coöperatieve U.A., as Coop (Exhibit 4.16 to Axcan Intermediate
Holdings Inc. Form S-4 filed October 7, 2008).
 -155-




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##### 



Exhibit No.
    
    Exhibit4.14
    
    Pledge and Security Agreement, dated as of February 25, 2008, between certain subsidiaries of Axcan Intermediate Holdings
Inc. identified therein, as Grantors, and Bank of America, N.A., as Administrative Agent (Exhibit 4.17 to Axcan Intermediate
Holdings Inc. Form S-4 filed October 7, 2008).4.15
    
    Supplement No.1, dated as of December 5, 2008, to the Pledge and Security Agreement dated as of February 25, 2008 among
Axcan Intermediate Holdings Inc., as the Parent Borrower, Axcan US Partnership 1 LP, as the Co-Borrower, Axcan MidCo Inc.,
as Holdings, certain other Subsidiaries of Axcan Intermediate Holdings Inc. from time to time party thereto and Bank of
America, N.A., as Administrative Agent for the Secured Parties (as defined therein) (Exhibit 4.3 to Axcan Intermediate
Holdings Inc. Form 10-Q filed February 13, 2009).4.16
    
    Pledge Agreement, dated as of February 25, 2008, between Axcan LuxCo 2 S.àr.l., as Pledgor, Bank of America, N.A., as
Administrative and Collateral Agent, and Axcan Nova Scotia 1 ULC, as Company (Exhibit 4.18 to Axcan Intermediate Holdings
Inc. Form S-4 filed October 7, 2008).4.17
    
    Deed of Hypothec in favor of Bank of America, N.A., dated as of February 25, 2008 (Exhibit 4.19 to Axcan Intermediate
Holdings Inc. Form S-4 filed October 7, 2008).4.18
    
    Debenture, dated as of February 25, 2008 (Exhibit 4.20 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).4.19
    
    Pledge of Debentures, dated as of February 25, 2008, between Axcan Pharma Inc. and the Secured Parties (as defined therein)
(Exhibit 4.21 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).10.1
    
    Management Services Agreement, dated as of February 21, 2008, by and among Axcan Holdings Inc., Axcan Intermediate Holdings
Inc. and TPG Capital, L.P. (Exhibit 10.1 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).10.2
    
    Joinder to Management Services Agreement, dated as of February 25, 2008, by and among TPG Capital, L.P., Axcan Pharma Inc.
and Axcan US Partnership 1 LP (Exhibit 10.2 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).10.3+
    
    Exclusive Development/License/Supply Agreement, dated May 16, 2000, between Eurand S.p.A. (f/k/a Eurand International
S.p.A.) and Axcan Pharma US, Inc. (f/k/a Axcan Scandipharm Inc.), as amended by Amendment No. 1, dated March 23, 2007
(Exhibit 10.5 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).10.4+
    
    Finished Product Supply Agreement, dated October 8, 2003, by and between Sanofi-Aventis U.S. LLC (successor in interest of
Aventis Pharmaceuticals Inc.) and Axcan Pharma Inc., as amended by Amendment No. 1, dated August 2, 2008 (Exhibit 10.6 to
Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).10.5+
    
    Manufacturing Services Agreement, dated October 1, 2003, between Patheon Inc. and Axcan Pharma Inc. (Exhibit 10.7 to Axcan
Intermediate Holdings Inc. Form S-4 filed October 7, 2008).10.6+
    
    Supply Agreement, dated May 7, 2004, between Paddock Laboratories, Inc. and Axcan Pharma Inc. (Exhibit 10.8 to Axcan
Intermediate Holdings Inc. Form S-4 filed October 7, 2008).10.7
    
    Credit Agreement, dated as of February 25, 2008, between Axcan Intermediate Holdings Inc., as Parent Borrower, Axcan US
Partnership 1 LP, as Co-borrower, Axcan MidCo Inc., as Holdings, Bank of America, N.A., as Administrative Agent, Swing Line
Lender and L/C Issuer, and the other lenders from time to time party thereto (Exhibit 10.9 to Axcan Intermediate Holdings
Inc. Form S-4 filed October 7, 2008).10.8
    
    Guaranty, dated as of February 25, 2008, among Axcan MidCo Inc., Axcan Intermediate Holdings Inc., Axcan US Partnership 1
LP, certain other Subsidiaries of Axcan Intermediate Holdings Inc. from time to time party thereto and Bank of America,
N.A., as Administrative Agent (Exhibit 10.10 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).10.9
    
    Supplement No.1, dated as of December 5, 2008, to the Guaranty dated as of February 25, 2008 among Axcan MidCo Inc., Axcan
Intermediate Holdings Inc., Axcan US Partnership 1 LP, certain other Subsidiaries of Axcan Intermediate Holdings Inc. from
time to time party thereto and Bank of America, N.A., as Administrative Agent (Exhibit 10.1 to Axcan Intermediate Holdings
Inc. Form 10-Q filed February 13, 2009).
 -156-




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##### 



Exhibit No.
    
    Exhibit10.10
    
    Amendment and Restatement of Employment Agreement between Axcan Pharma Inc., Axcan Pharma US, Inc., Axcan Holdings Inc. and
Dr. Frank A.G.M. Verwiel, dated May 16, 2008 (Exhibit 10.11 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7,
2008).10.11
    
    Employment Agreement between Axcan Pharma Inc., Axcan Pharma US, Inc., Axcan Holdings Inc. and David Mims, dated June 3,
2008 (Exhibit 10.12 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).10.12
    
    Employment Agreement between Axcan Pharma Inc., Axcan Pharma US, Inc., Axcan Holdings Inc. and Steve Gannon, dated July 3,
2008 (Exhibit 10.13 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).10.13
    
    Employment Agreement between Axcan Pharma Inc., Axcan Pharma US, Inc., Axcan Holdings Inc. and Alexandre P. LeBeaut, dated
September 15, 2008 (Exhibit 10.14 to Axcan Intermediate Holdings Inc. Form S-4 filed October 7, 2008).10.14
    
    Employment Agreement between Axcan Pharma Inc. and Nicholas Franco, dated October 5, 2007 (Exhibit 10.15 to Axcan
Intermediate Holdings Inc. Form S-4/A filed November 7, 2008).10.15
    
    Axcan Pharma Inc. Severance Pay Plan (Exhibit 10.16 to Axcan Intermediate Holdings Inc. Form S-4/A filed November 12, 2008).10.16
    
    Axcan Holdings Inc. Management Equity Incentive Plan (Exhibit 10.17 to Axcan Intermediate Holdings Inc. Form S-4/A filed
November 12, 2008).10.17
    
    Axcan Pharma Inc. Incentive Compensation Plan for Executives (Exhibit 10.18 to Axcan Intermediate Holdings Inc. Form S-4/A
filed November 12, 2008).10.18
    
    Form of Axcan Holdings Inc. Management Stockholders Agreement (Exhibit 10.19 to Axcan Intermediate Holdings Inc. Form S-4
filed October 7, 2008).10.19
    
    Form of Restricted Stock Unit Grant Agreement between Axcan Holdings Inc. and U.S. Grantee (Exhibit 10.20 to Axcan
Intermediate Holdings Inc. Form S-4 filed October 7, 2008).10.20
    
    Form of Restricted Stock Unit Grant Agreement between Axcan Holdings Inc. and French Grantee (Exhibit 10.21 to Axcan
Intermediate Holdings Inc. Form S-4 filed October 7, 2008).10.21
    
    Form of Penny Option Grant Agreement between Axcan Holdings Inc. and Optionee (Exhibit 10.22 to Axcan Intermediate Holdings
Inc. Form S-4 filed October 7, 2008).10.22
    
    Axcan Holdings Inc. Employee Long Term Incentive Plan. (Exhibit 102.3 to Axcan Intermediate Holdings Inc. Form 10-K filed
December 22, 2008).12.1*
    
    Computation of Ratio of Earnings to Fixed Charges.21.1*
    
    Subsidiaries of Axcan Intermediate Holdings Inc.31.1*
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer 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 Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Exhibits marked with an asterisk (*) are filed herewith.+
    
    This Exhibit was filed separately with the Commission pursuant to an application for confidential treatment. The
confidential portions of the Exhibit have been omitted and have been marked by the following symbol: [ ** ].
    
    Denotes management contract or compensatory plan or arrangement -157-