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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 year ended December 31, 2009.
 Or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to .
 Commission file number 001-14471
 MEDICIS PHARMACEUTICAL CORPORATION
  Delaware
    
    52-1574808(State or other jurisdiction 
of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 7720 N. Dobson Road, Scottsdale, Arizona
    
    85256-2740(Address of principal executive office)
    
    (Zip Code)Registrants telephone number, including area code:  (602)808-8800
  Title of each class
    
    Name of each exchange on which registeredClass A common stock, $0.014 par value
    
    New York Stock ExchangePreference Share Purchase Rights
  þ o
 o þ
 þ o
 o o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
(do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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TABLE OF CONTENTS
 PART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    16Item 1B. Unresolved Staff Comments
    
    
    43Item 2. Properties
    
    
    43Item 3. Legal Proceedings
    
    
    44Item 4. Reserved
    
    
    48PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    48Item 6. Selected Financial Data
    
    
    50Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    55Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    83Item 8. Financial Statements and Supplementary Data
    
    
    84Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    84Item 9A. Controls and Procedures
    
    
    84Item 9B. Other Information
    
    
    87PART IIIItem 10. Directors and Executive Officers and Corporate Governance
    
    
    87Item 11. Executive Compensation
    
    
    87Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    87Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    87Item 14. Principal Accounting Fees and Services
    
    
    87PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    88EX-10.70EX-10.71EX-10.72EX-10.73EX-10.74EX-10.75EX-12EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2




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PART I
 
 Item 1. Business
 The Company
  TM
  TM TM ® ® ® ® ® ®
  Product Category
    
    
    2009
    
    
    2008
    
    
    2007Acne and acne-related dermatological products
    
    
    69.7
    %
    
    
    62.8
    %
    
    
    53.2
    %Non-acne dermatological products
    
    
    23.4
    %
    
    
    28.6
    %
    
    
    37.8
    %Non-dermatological products (including
contract revenues)
    
    
    6.9
    %
    
    
    8.6
    %
    
    
    9.0
    %
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TM
 Our Products
  Brand
    
    Treatment
    
    U.S. Market ImpactDYSPORTTM
    
    Temporary improvement in the
appearance of moderate to severe
glabellar lines in adults younger
than 65 years of age
    
    Launched in June 2009 following U.S. Food and
Drug Administration (FDA) approval on April 29,
2009LIPOSONIXTM
    
    Uses high intensity focused ultrasound
to permanently destroy targeted fat just
beneath the skin (subcutaneous adipose
tissue) in the treatment of the anterior
abdomen as a non-invasive, nonsurgical
approach to aesthetic body sculpting
    
    Acquired with the acquisition of LipoSonix in July
2008; cleared for sale and use in European Union in
2008 and Canada in 2009; not currently approved
or cleared for sale in the U.S; anticipated filing
for FDA approval for sale and use in U.S. in 2010PERLANE®
    
    Implantation into the deep dermis to
superficial subcutis for the correction
of moderate to severe facial wrinkles
and folds, such as nasolabial folds
    
    Launched in May 2007 following FDA approval on
May 2, 2007; PERLANE-LTM was approved
by the FDA on January 29, 2010RESTYLANE®
    
    Implantation into the mid to deep
dermis for the correction of moderate
to severe facial wrinkles and folds,
such as nasolabial folds
    
    The first hyaluronic acid dermal filler approved in the
U.S., and the #1-selling and most-studied
dermal filler in the world; launched in January 2004
following FDA approval on December 12, 2003;
RESTYLANE-LTM was approved by the FDA on
January 29, 2010SOLODYN®
    
    Once daily dosage for the treatment of
inflammatory lesions of non-nodular
moderate to severe acne vulgaris in
patients 12 years of age and older
    
    The #1 dermatology product by dollars in the U.S.;
launched in July 2006 following FDA approval
on May 8, 2006TRIAZ®

VANOS®
    
    Topical treatment of acne vulgaris

Super-high potency topical corticosteroid
for the relief of the inflammatory and
pruritic manifestations of corticosteroid
responsive dermatoses (e.g. psoriasis) in
patients 12 years of age or older
    
    The #1 single-agent branded benzoyl peroxide
product in the market; launched during fiscal 1996
Launched in April 2005 following FDA
approval on February 11, 2005ZIANA®
    
    Once daily topical treatment of acne
vulgaris in patients 12 years of age
and older
    
    First commercial sales to wholesalers in December
2006 and launched in January 2007 following FDA
approval on November 7, 2006
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Facial Aesthetic Products
  DYSPORT TM TM TM TM
 RESTYLANE ® ,
RESTYLANE-L TM , PERLANE ® ,
PERLANE-L TM ,
RESTYLANE FINE LINES TM RESTYLANE SUBQ TM ® TM TM ® ® ® TM TM TM TM ® ® TM TM TM TM
 Non-Invasive Body Sculpting Technology
 LIPOSONIX TM TM TM TM
 Prescription Pharmaceuticals
  SOLODYN ® ® ® ® ® ® ® ® ®
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® ®
 TRIAZ ® ® ® ® ® ®
 VANOS ® ® ® ® ® ®
 ZIANA ® ® ® ® ® ® ®
 Sale of Medicis Pediatrics
  Research and Development
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TM
  ® ®
  ® ®
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TM ® TM TM TM
    Sales and Marketing
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Warehousing and Distribution
  Customers
  2009
    
    
    2008
    
    
    2007McKesson
    
    
    40.8
    %
    
    
    45.8
    %
    
    
    52.2
    %Cardinal
    
    
    37.1
    %
    
    
    21.2
    %
    
    
    16.9
    %
 ® ® TM
 Third-Party Reimbursement
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TM ® ®
 Seasonality
  Manufacturing
 TM
   ® ® ®
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® ®
 TM
 ® ®
 Raw Materials
  License and Royalty Agreements
  Trademarks, Patents and Proprietary Rights
  ® ® ® ® ® TM ® ® ® TM TM
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® ® ®
  Competition
    TM ®
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® ® ® ® ® ® TM ® ® ® ®
 Government Regulation
  TM ® ® ® ® ® ® ® ® ®
 ® ® ® ® ® ® ® ®
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® ® ® ® ® ®
 ® ®
 ®
  Our History
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Change in Fiscal Year
  Employees
  Available Information
  
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Risks Related To Our Business
 Certain of our primary products could lose patent protection in the near future and become subject
to competition from generic forms of such products. If that were to occur, sales of those products
would decline significantly and such decline could have a material adverse effect on our results of
operations.
  ® ® ® ® ® ®
 SOLODYN ® faced generic competition during 2009 and may face additional generic
competition in the near future.
 ® ® ® ® ® ® ® ® ® ® ®
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® ® ® ®
 ® Submission of Patent Information for Certain Old Antibiotics ®
 ®
 ®
 ®
 ® ®
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® ®
 ® ® ® ® ® ® ® ® ® ®
 ® ® ® ® ® ® ® ® ®
 ® ® ®
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®
 ® ® ® ® ® ® ®
 ® ® ®
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®
 In addition to SOLODYN ® ,
 our other prescription products, including VANOS ® ® , are or may be subject to generic competition in the near future.
 ® ® ® ® ® ® ® ®
 ® ® ® ® ® ® ® ®
 ®
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® ® ® ® ®
 ® ® ®
 ® ®
  If we are unable to secure and protect our intellectual property and proprietary rights, or if our
intellectual property rights are found to infringe upon the intellectual property rights of other
parties, our business could suffer.
   Certain of our primary products could lose patent
protection in the near future and become subject to competition from generic forms of such
products. If that were to occur, sales of those products would decline significantly and such
decline could have a material adverse effect on our results of operations,
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We depend on licenses from others, and any loss of such licenses could harm our business, market
share and profitability.
    Obtaining FDA and other regulatory approvals is time consuming, expensive and uncertain.
  
    
    determination by the FDA that the product is not safe and effective;
    
    a different interpretation of preclinical and clinical data by FDA;
    
    failure to obtain approval of the manufacturing process or facilities;
    
    results of post-marketing studies;
    
    changes in FDA policy or regulations related to product approvals; and
    
    failure to comply with applicable regulatory requirements.
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
    
    testing and surveillance to monitor the product and its continued compliance with
regulatory requirements, including cGMPs for drug and biologic products and the QSRs
for medical device products;
    
    submitting products, facilities and records for inspection and, if any inspection
reveals that the product is not in compliance, prohibiting the sale of all products
from the same lot;
    
    suspending manufacturing;
    
    switching status from prescription to over-the-counter drug;
    
    completion of post-marketing studies;
    
    changes to approved product labeling;
    
    advertising or marketing restrictions, including direct-to-consumer advertising;
    
    REMS;
    
    recalling products; and
    
    withdrawing marketing clearance.
  
    
    incurring substantial expenses, including fines, penalties, legal fees and costs to
comply with the FDAs requirements;
    
    changes in the methods of marketing and selling products;
    
    taking FDA-mandated corrective action, which may include placing advertisements or
sending letters to physicians rescinding previous advertisements or promotion; and
    
    disruption in the distribution of products and loss of sales until compliance with
the FDAs position is obtained.
  If we market products in a manner that violates health care fraud and abuse laws, we may be subject
to civil or criminal penalties.
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® ®
  ® ®
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Our corporate compliance program cannot guarantee that we are in compliance with all potentially
applicable U.S. federal and state regulations and all potentially applicable foreign regulations.
  We depend on a limited number of customers for a substantial portion of our revenues, and if we
lose any of them, our business could be harmed.
 ® ® TM
 The consolidation of drug wholesalers could increase competition and pricing pressures throughout
the pharmaceutical industry.
  We derive a majority of our sales revenue from our primary products, and any factor adversely
affecting sales of these products would harm our business, financial condition and results of
operations.
 ® ® ® TM ® ®
 TM ®
 ® ® ® ® ® TM ® ®
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® ®
 ® ® Certain of our primary products could lose patent protection in the near future and become subject
to competition from generic forms of such products. If that were to occur, sales of those products
would decline significantly and such decline could have a material adverse effect on our results of
operations,
 ® ® ® TM ® ®
 
    
    manufacturing or supply interruptions;
    
    the development of new competitive pharmaceuticals and technological advances to
treat the conditions addressed by our primary products, including the introduction of
new products into the marketplace;
    
    generic competition;
    
    marketing or pricing actions by one or more of our competitors;
    
    regulatory action by the FDA and other government regulatory agencies;
    
    importation of other dermal fillers;
    
    changes in the prescribing or procedural practices of dermatologists and/or plastic
surgeons;
    
    changes in the reimbursement or substitution policies of third-party payors or
retail pharmacies;
    
    product liability claims;
    
    the outcome of disputes relating to trademarks, patents, license agreements and
other rights;
    
    changes in state and federal law that adversely affect our ability to market our
products to dermatologists and/or plastic surgeons;
    
    restrictions on travel affecting the ability of our sales force to market to
prescribing physicians and plastic surgeons in person; and
    
    restrictions on promotional activities.
 Our continued growth depends upon our ability to develop new products.
  We may not be able to identify and acquire products, technologies and businesses on acceptable
terms, if at all, which may constrain our growth.
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Our products may not gain market acceptance.
  Our operating results and financial condition may fluctuate.
  
    
    development and launch of new competitive products, including OTC or generic
competitor products;
    
    the timing and receipt of FDA approvals or lack of approvals;
    
    the timing and receipt of patent claim issuances or lack of issuances or rejections
in prosecution or reexamination proceedings before the USPTO;
    
    changes in the amount we spend to develop, acquire or license new products,
technologies or businesses;
    
    costs related to business development transactions;
    
    untimely contingent research and development payments under our third-party product
development agreements;
    
    changes in the amount we spend to promote our products;
    
    delays between our expenditures to acquire new products, technologies or businesses
and the generation of revenues from those acquired products, technologies or
businesses;
    
    changes in treatment practices of physicians that currently prescribe our products;
    
    changes in reimbursement policies of health plans and other similar health insurers,
including changes that affect newly developed or newly acquired products;
    
    increases in the cost of raw materials used to manufacture our products;
    
    manufacturing and supply interruptions, including failure to comply with
manufacturing specifications;
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
    
    changes in prescription levels and the effect of economic changes in hurricane and
other natural disaster-affected areas;
    
    the impact on our employees, customers, patients, manufacturers, suppliers, vendors,
and other companies we do business with and the resulting impact on the results of
operations associated with the possible mutation of the avian form of influenza from
birds or other animal species to humans, current human morbidity, and mortality levels
persist following such potential mutation;
    
    the mix of products that we sell during any time period;
    
    lower than expected demand for our products;
    
    our responses to price competition;
    
    expenditures as a result of legal actions, including the defense of our patents and
other intellectual property;
    
    market acceptance of our products;
    
    the impairment and write-down of goodwill or other intangible assets;
    
    implementation of new or revised accounting or tax rules or policies;
    
    disposition of primary products, technologies and other rights;
    
    termination or expiration of, or the outcome of disputes relating to, trademarks,
patents, license agreements and other rights;
    
    increases in insurance rates for existing products and the cost of insurance for new
products;
    
    general economic and industry conditions, including changes in interest rates
affecting returns on cash balances and investments that affect customer demand, and our
ability to recover quickly from such economic and industry conditions;
    
    seasonality of demand for our products;
    
    our level of research and development activities;
    
    new accounting standards and/or changes to existing accounting standards that would
have a material effect on our consolidated financial position, results of operations or
cash flows;
    
    costs and outcomes of any tax audits or any litigation involving intellectual
property, customers or other issues;
    
    failure by us or our contractors to comply with all applicable FDA and other
regulatory requirements;
    
    the imposition of a REMS program requirement on any of our products;
    
    adverse decisions by FDA advisory committees related to any of our products; and
    
    timing of payments and/or revenue recognition related to licensing agreements and/or
strategic collaborations.
  We face significant competition within our industry.
  
    
    developing and bringing new products to market before others;
    
    developing new technologies to improve existing products;
    
    developing new products to provide the same benefits as existing products at less
cost; and
    
    developing new products to provide benefits superior to those of existing products.
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® ®
 Our investments in other companies and our collaborations with companies could adversely affect our
results of operations and financial condition.
  Our profitability is impacted by our continued participation in governmental pharmaceutical pricing
programs.
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Our profitability may be impacted by our ongoing review of our prior reports under certain Federal
pharmaceutical pricing programs.
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We will be unable to meet our anticipated development and commercialization timelines if clinical
trials for our products are unsuccessful, delayed, or additional information is required by the
FDA.
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
    
    lack of efficacy during the clinical trials;
    
    unforeseen safety issues;
    
    severe or harmful side effects;
    
    failure to obtain necessary proprietary rights;
    
    shortage or lack of supply sufficient to complete studies;
    
    the decision to modify the product;
    
    lack of economical pathway to manufacture and commercialize product;
    
    cost-effectiveness of continued product development;
    
    slower than expected patient recruitment;
    
    failure of Medicis, investigators, or other contractors to strictly adhere to
federal regulations governing the conduct and data collection procedures involved in
clinical trials;
    
    development of issues that might delay or impede performance by a contractor;
    
    errors in clinical documentation or at the clinical locations;
    
    non-acceptance by the FDA of our NDAs, ANDAs or BLAs;
    
    government or regulatory delays; and
    
    unanticipated requests from the FDA for new or additional information.
  Downturns in general economic conditions may adversely affect our financial condition, results of
operations and cash flows.
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The current condition of the credit markets may not allow us to secure financing for potential
future activities on satisfactory terms, or at all.
  Negative conditions in the credit markets may impair the liquidity of a portion of our short-term
and long-term investments.
  If Q-Med is unable to protect its intellectual property and proprietary rights with respect to our
dermal filler products, our business could suffer.
 ® TM ® TM TM TM
 We depend upon our key personnel and our ability to attract, train, and retain employees.
  We may acquire technologies, products and companies in the future and these acquisitions could
disrupt our business and harm our financial condition and results of operations. In addition, we
may not obtain the benefits that the acquisitions were intended to create.
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We may not realize all of the anticipated benefits of our acquisition of LipoSonix.
  
    
    our ability to attain regulatory approvals, both in the United States and worldwide,
and the timing of such approvals;
    
    our compliance with existing and future legal and regulatory requirements, both in
the United States and worldwide;
    
    the efficacy of the LIPOSONIXTM system;
    
    market acceptance of the LIPOSONIXTM system;
    
    increases or decreases in the expected costs to be incurred in connection with the
research and development, clinical trials, regulatory approvals, commercialization and
marketing of the LIPOSONIXTM system;
    
    the costs associated with investment in new infrastructure to support worldwide
operations;
    
    the strength of our intellectual property portfolio related to the
LIPOSONIXTM system;
    
    the ability of other companies to design around the proprietary technology in the
LIPOSONIXTM system;
    
    the anticipated pricing, margins, size of the markets and demand related to the
LIPOSONIXTM system;
    
    the challenges associated with using distributors or finding new distributors for
marketing and sales of the LIPOSONIXTM system;
    
    the challenges associated with advertisement and promotion related to the
LIPOSONIXTM system, which is dynamic and varies according to jurisdiction
and distribution channel mode;
    
    the possibility of adverse patient events pertaining to the LIPOSONIXTM
system;
    
    risks inherent to operations outside of the United States, including foreign
currency exchange rate fluctuations;
    
    our ability to integrate the operations of LipoSonix with our operations;
    
    our ability to retain key personnel of LipoSonix; and
    
    our ability to effectively compete in the fat removal marketplace.
 We rely on third parties to conduct business operations outside of the U.S., and we may be
adversely affected if they act in violation of the U.S. Foreign Corrupt Practices Act or other
anti-bribery laws.
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Our success depends on our ability to manage our growth.
  We rely on others to manufacture our products.
  
    
    delays, warning letters, and fines;
    
    product recalls or seizures;
    
    injunctions on sales;
    
    refusal of FDA to review pending applications;
    
    total or partial suspension of production;
    
    withdrawal of prior marketing approvals or clearances; and
    
    civil penalties and criminal prosecutions.
   ® ®
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We and our third-party manufacturers rely on a limited number of suppliers of the raw materials of
our products. A disruption in supply of raw material would be disruptive to our inventory supply.
  We could experience difficulties in obtaining supplies of RESTYLANE ® ,
RESTYLANE-L TM , PERLANE ® , PERLANE-L TM , RESTYLANE FINE
LINES TM and RESTYLANE SUBQ TM .
 ® TM ® TM TM TM ® TM ® TM TM TM
 ® TM ® TM TM TM ® ® TM ® TM TM TM
 Supply interruptions may disrupt our inventory levels and the availability of our products.
  
    
    timing, scheduling and prioritization of production by our contract manufacturers;
    
    labor interruptions;
    
    changes in our sources for manufacturing;
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
    
    the timing and delivery of domestic and international shipments;
    
    our failure to locate and obtain replacement manufacturers as needed on a timely basis;
    
    conditions affecting the cost and availability of raw materials; and
    
    hurricanes and other natural disasters.
     Fluctuations in demand for our products create inventory maintenance uncertainties.
  We selectively outsource certain non-sales and non-marketing services, and cannot assure you that
we will be able to obtain adequate supplies of such services on acceptable terms.
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Importation of products from Canada and other countries into the United States may lower the prices
we receive for our products.
    If we become subject to product liability claims, our earnings and financial condition could
suffer.
   If we suffer negative publicity concerning the safety of our products, our sales may be harmed and
we may be forced to withdraw products.
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Rising insurance costs could negatively impact profitability.
  DYSPORT TM ,
RESTYLANE ® PERLANE® are consumer products and as
such, are susceptible to changes in popular trends and applicable laws, which could adversely
affect sales or product margins of DYSPORT TM , RESTYLANE ® and
PERLANE ® .
 TM ® ® TM ® ® TM ® ®
 TM ® ® TM ® ®
 The restatement of our consolidated financial statements has subjected us to a number of additional
risks and uncertainties, including increased costs for accounting and legal fees and the increased
possibility of legal proceedings.
 Revenue Recognition When Right of Return Exists Revenue Recognition
 
    
    We incurred substantial unanticipated costs for accounting and legal fees in
connection with the restatement. Although the restatement is complete, we expect to
continue to incur accounting and legal costs as noted below.
    
    As a result of the restatement, we have been named in a putative shareholder class
action complaint, as discussed in Item 3 of Part I of this report, Legal Proceedings
and Note 12, Commitments and Contingencies. The plaintiffs in this consolidated
lawsuit may make additional claims, expand existing claims and/or expand the time
periods covered by the complaints. Other plaintiffs may bring additional actions with
other claims, based on the restatement. If such events occur, we may incur substantial
defense costs regardless of the outcome of these actions and insurance and
indemnification may not be sufficient to cover the losses we may incur. Likewise, such
events might cause a diversion of our managements time and attention. If we do not
prevail in this action or other potential actions, we could be required to pay
substantial damages or settlement costs, which could adversely affect our business,
financial condition, results of operations and liquidity.
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
    
    On January 21, 2009, we received a letter from a stockholder demanding that our
Board of Directors take certain actions, including potentially legal action, in
connection with the restatement of our consolidated financial statements in 2008, and
threatening to pursue a derivative claim if our Board of Directors does not comply with
the stockholders demands. We may receive similar letters from other stockholders.
Our Board of Directors reviewed the letter during the course of 2009 and established a special committee
of the Board, comprised of directors who are independent and disinterested with respect
to the letter, (i) to assess whether there is any merit to the allegations contained in
the letter, (ii) if the special committee were to conclude that there may be merit to any
of the allegations contained in the letter, to further assess whether it is in our best
interest to pursue litigation or other action against any or all of the persons named
in the letter or any other persons not named in the letter, and (iii) to recommend to
the Board any other appropriate action to be taken. The special committee engaged
outside counsel to conduct an inquiry. The ultimate outcome of
these potential actions could have a material adverse effect on our business, financial
condition, results of operations, cash flows and the trading price for our securities.
 In 2008, management identified a material weakness in our internal control over financial reporting
with respect to our accounting for sales return reserves. Although as of December 31, 2008
management determined that the material weakness identified in 2008 had been remediated, management
may identify material weaknesses in the future that could adversely affect investor confidence,
impair the value of our common stock and increase our cost of raising capital.
    We may not be able to repurchase the Old Notes when required.
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Unanticipated changes in our tax rates or exposure to additional income tax liabilities could
affect our profitability.
  Risks Related to Our Industry
 The growth of managed care organizations, other third-party reimbursement policies, state
regulatory agencies and retailer fulfillment policies may harm our pricing, which may reduce our
market share and margins.
      We are subject to extensive governmental regulation.
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
    
    fines;
    
    changes to advertising;
    
    suspensions of regulatory approvals of products;
    
    product withdrawals and recalls;
    
    delays in product distribution, marketing and sale; and
    
    civil or criminal sanctions.
 ® ®
    
   
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Contingent Convertible Senior Notes and Other Long-Term Commitments
     
  ® ® ®
 ® ® ® ® ®
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® ®
 ® ® ® ® ® ®
 ® ® ®
 ® ® ® ® ® ® ® ®
 ®
 45




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##### Table of Contents



® ® ®
  ® ® ® ®
 ® ® ® ® ® ® ® ® ®
 46




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##### Table of Contents



®
 ®
   Contingencies
 47




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##### Table of Contents



Item 4.
    
    Reserved
 
 PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
 Description of Registrants Securities, Price Range of Common Stock and Dividends Declared
  HIGH
    
    LOW
    
    DIVIDENDS DECLAREDYEAR ENDED DECEMBER 31, 2009First Quarter
    
    $
    15.59
    
    
    $
    7.85
    
    
    $
    0.04Second Quarter
    
    
    16.74
    
    
    
    11.61
    
    
    
    0.04Third Quarter
    
    
    22.40
    
    
    
    14.70
    
    
    
    0.04Fourth Quarter
    
    
    27.82
    
    
    
    20.48
    
    
    
    0.04YEAR ENDED DECEMBER 31, 2008First Quarter
    
    $
    27.02
    
    
    $
    18.51
    
    
    $
    0.04Second Quarter
    
    
    24.49
    
    
    
    18.84
    
    
    
    0.04Third Quarter
    
    
    22.10
    
    
    
    13.60
    
    
    
    0.04Fourth Quarter
    
    
    15.19
    
    
    
    9.66
    
    
    
    0.04
  Dividend Policy
  48




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##### Table of Contents



Recent Sales of Unregistered Securities
  Equity Compensation Plan Information
  Number of securitiesremaining available forNumber of securities
    
    Weighted-average
    
    future issuance underto be issued upon
    
    exercise price
    
    equity compensationexercise of
    
    of outstanding
    
    plans (excludingoutstanding options,
    
    options, warrants
    
    securities reflected inwarrants and rights
    
    and rights
    
    column a)Plan Category
    
    Date
    
    (a)
    
    (b)
    
    (c)Plans approved by
stockholders (1)
    
    
    12/31/2009
    
    
    
    6,332,755
    
    
    $
    28.70
    
    
    
    2,818,071Plans not approved
by stockholders (2)
    
    
    12/31/2009
    
    
    
    2,921,092
    
    
    $
    30.40
    
    
    
    Total
    
    
    
    
    
    
    9,253,847
    
    
    $
    29.24
    
    
    
    2,818,071
 
 (1)
    
    Represents options outstanding and shares available for future issuance under
the 2006 Incentive Plan. Also includes options outstanding under the 2004, 1998, 1996, 1995
and 1992 Stock Option Plans, which have been terminated as to future grants.(2)
    
    Represents the 2002 Stock Option Plan, which was implemented by our board
in November 2002. The 2002 Plan was terminated on May 23, 2006 as part of the stockholders
approval of the 2006 Incentive Plan, and no options can be granted from the 2002 Plan after
May 23, 2006. Options previously granted from this plan remain outstanding and continue to be
governed by the rules of the plan. The 2002 Plan was a non-stockholder approved plan under
which non-qualified incentive options have been granted to our employees and key consultants
who are neither our executive officers nor our directors at the time of grant. The board
authorized 6,000,000 shares of common stock for issuance under the 2002 Plan. The option
price of the options is the fair market value, defined as the closing quoted selling price of
the common stock on the date of the grant. No option granted under the 2002 Plan has a term
in excess of ten years, and each will be subject to earlier termination within a specified
period following the optionees cessation of service with us. As of December 31, 2009, the
weighted average term to expiration of these options is 3.8 years. Each granted option vests
in one or more installments over a period of five years. However, the options will vest on an
accelerated basis in the event we experience a change of control (as defined in the 2002
Plan).  49




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##### Table of Contents



Item 6.
    
    Selected Financial Data
  Year
    
    
    Year
    
    
    Year
    
    
    YearEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedDec. 31, 2009
    
    
    Dec. 31, 2008
    
    
    Dec. 31, 2007
    
    
    Dec. 31, 2006(in thousands, except per share amounts)Statements of Operations Data:Net product revenues
    
    $
    561,761
    
    
    $
    500,977
    
    
    $
    441,868
    
    
    $
    377,548Net contract revenues
    
    
    10,154
    
    
    
    16,773
    
    
    
    15,526
    
    
    
    15,617Net revenues
    
    
    571,915
    
    
    
    517,750
    
    
    
    457,394
    
    
    
    393,165Gross profit (a)
    
    
    515,082
    
    
    
    479,036
    
    
    
    401,284
    
    
    
    347,059Operating expenses:Selling, general and administrative
    
    
    282,950
    (b)
    
    
    279,768
    (e)
    
    
    242,633
    (i)
    
    
    202,457
    (k)Research and development
    
    
    71,765
    (c)
    
    
    99,916
    (f)
    
    
    39,428
    (j)
    
    
    161,837
    (l)Depreciation and amortization
    
    
    29,047
    
    
    
    27,698
    
    
    
    24,548
    
    
    
    23,048In-process research and development
    
    
    
    
    
    
    30,500
    (g)
    
    
    
    
    
    
    Impairment of intangible assets
    
    
    
    
    
    
    
    
    
    
    4,067
    
    
    
    52,586Total operating expenses
    
    
    383,762
    
    
    
    437,882
    
    
    
    310,676
    
    
    
    439,928Operating income
    
    
    131,320
    
    
    
    41,154
    
    
    
    90,608
    
    
    
    (92,869
    )Other:Interest and investment (income)
expense, net
    
    
    (3,403
    )
    
    
    (16,722
    )
    
    
    (28,372
    )
    
    
    (20,147
    )Other income, net
    
    
    (867
    )(d)
    
    
    15,470
    (h)
    
    
    
    
    
    
    Income tax expense
    
    
    59,639
    
    
    
    32,130
    
    
    
    48,544
    
    
    
    (24,570
    )Net income
    
    $
    75,951
    
    
    $
    10,276
    
    
    $
    70,436
    
    
    $
    (48,152
    )Basic net income per share
    
    $
    1.29
    
    
    $
    0.18
    
    
    $
    1.25
    
    
    $
    (0.88
    )Diluted net income per share
    
    $
    1.21
    
    
    $
    0.18
    
    
    $
    1.07
    
    
    $
    (0.88
    )Cash dividend declared per common share
    
    $
    0.16
    
    
    $
    0.16
    
    
    $
    0.12
    
    
    $
    0.12Basic common shares outstanding
    
    
    57,252
    
    
    
    56,567
    
    
    
    55,988
    
    
    
    54,688Diluted common shares outstanding
    
    
    63,172
    
    
    
    56,567
    
    
    
    71,179
    
    
    
    54,688
 
 (a)
    
    Amounts exclude $22.4 million, $21.5 million, $21.6 million, and $20.0 million of
amortization expense related to acquired intangible assets for the year ended December 31,
2009, 2008, 2007 and 2006, respectively.(b)
    
    Includes approximately $18.1 million of compensation expense related to stock options,
restricted stock and stock appreciation rights.(c)
    
    Includes $12.0 million paid to IMPAX related to a development agreement, $10.0 million paid
to Revance related to a license agreement, $5.0 million paid to Glenmark related to a
development agreement, $5.0 50




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##### Table of Contents



million paid to Perrigo related to a development agreement and approximately $1.1 million of
compensation expense related to stock options, restricted stock and stock appreciation
rights.(d)
    
    Includes a $2.9 million reduction in the carrying value of our investment in Revance as a
result of a reduction in the net realizable value of the investment using the hypothetical
liquidation at book value approach and a $2.2 million gain on the sale of Medicis Pediatrics
to BioMarin. See Item 7 of Part II of this report, Managements Discussion and Analysis of
Financial Condition and Results of Operations  Recent Developments.(e)
    
    Includes approximately $16.3 million of compensation expense related to stock options and
restricted stock and $4.8 million of lease exit costs related to our previous headquarters
facility.(f)
    
    Includes $40.0 million paid to IMPAX related to a development agreement and $25.0 million
paid to Ipsen upon the FDAs acceptance of Ipsens BLA for DYSPORTTMand
approximately $0.3 million of compensation expense related to stock options and restricted
stock.(g)
    
    In-process research and development expense of $30.5 million is related to our acquisition of
LipoSonix.(h)
    
    Represents a $9.1 million reduction in the carrying value of our investment in Revance as a
result of a reduction in the net realizable value of the investment using the hypothetical
liquidation at book value approach as of December 31, 2008, and a $6.4 million
other-than-temporary impairment loss recognized related to our auction-rate securities
investments.(i)
    
    Includes approximately $21.0 million of compensation expense related to stock options and
restricted stock, $2.2 million of professional fees related to a strategic collaboration with
Hyperion Therapeutics, Inc. and $1.3 million of professional fees related to a strategic
collaboration agreement with Revance.(j)
    
    Includes approximately $8.0 million related to our option to acquire Revance or to license
Revances topical product currently under development and approximately $0.1 million of
compensation expense related to stock options and restricted stock.(k)
    
    Includes approximately $24.5 million of compensation expense related to stock options and
restricted stock, $10.2 million related to a loss contingency for a legal matter and $1.8
million related to a settlement of a dispute related to our merger with Ascent.(l)
    
    Includes approximately $125.2 million paid to Ipsen related to the DYSPORTTM
development and distribution agreement and approximately $1.6 million of compensation expense
related to stock options and restricted stock. DECEMBER 31,2009
    
    2008
    
    
    2007
    
    2006(in thousands)Balance Sheet Data:Cash, cash equivalents and short-term
investments
    
    $
    528,280
    
    
    $
    343,885
    
(a)
    
    $
    794,680
    
    
    $
    554,261
    
(b)Working capital
    
    
    434,639
    
    
    
    307,635
    

    
    
    422,971
    
    
    
    323,070Long-term investments
    
    
    25,524
    
    
    
    55,333
    

    
    
    17,072
    
    
    
    130,290Total assets
    
    
    1,172,198
    
    
    
    973,434
    

    
    
    1,213,411
    
    
    
    1,122,720Current portion of long-term debt
    
    
    
    
    
    
    
    

    
    
    283,910
    
    
    
    169,155Long-term debt
    
    
    169,326
    
    
    
    169,326
    

    
    
    169,145
    
    
    
    283,910Stockholders equity
    
    
    695,259
    
    
    
    603,694
    

    
    
    583,301
    
    
    
    475,520
 Year EndedDec. 31, 2009
    
    
    Dec. 31, 2008
    
    Dec. 31, 2007
    
    
    Dec. 31, 2006(in thousands)Cash Flow Data:Net cash provided by (used in)
operating activities
    
    $
    177,885
    
    (c)

    $
    45,770
    
    (d)
    $
    158,944
    
    (e)

    $
    (40,963
    )
(f)Net cash (used in) provided by
investing activities
    
    
    (62,226
    )
    

    
    220,091
    
    (g)
    
    (269,486
    )
    (h)

    
    (216,915
    )Net cash provided by (used in)
financing activites
    
    
    6,953
    
    

    
    (287,314
    )
    (i)
    
    14,470
    
    

    
    14,278
 51




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##### Table of Contents



(a)
    
    Decrease in cash, cash equivalents and short-term investments from December 31, 2007 to
December 31, 2008 primarily due to the repurchase of $283.7 million of our 1.5% Contingent
Convertible Senior Notes,our $150.0 million acquisition of LipoSonix, $40.0 million paid to IMPAX related to a
development agreement, $25.0 million paid to Ipsen upon the FDAs acceptance of Ipsens BLA
for DYSPORTTM, and payments totaling $87.8 million for income taxes during 2008.(b)
    
    Decrease in cash, cash equivalents and short-term investments from December 31, 2005 to
December 31, 2006 primarily due to payments totaling $125.2 million made to Ipsen related
to a development and distribution agreement for the development of DYSPORTTM,
payment of the $27.4 million contingent payment related to the merger with Ascent, and
payments totaling $35.7 million for income taxes during 2006. In addition, approximately
$130.3 million of our available-for-sale investments have been treated as long-term assets
as of December 31, 2006, based on their expected maturities.(c)
    
    Net cash provided by operating activities for the year ended December 31, 2009 is net
of $12.0 million paid to IMPAX related to a development agreement, $10.0 million paid to
Revance related to a license agreement, $5.0 million paid to Glenmark related to a
development agreement and $5.0 million paid to Perrigo related to a development agreement.(d)
    
    Net cash provided by operating activities for the year ended December 31, 2008 is net
of $40.0 million paid to IMPAX related to a development agreement and $25.0 million paid to
Ipsen upon the FDAs acceptance of Ipsens BLA for DYSPORTTM.(e)
    
    Net cash provided by operating activities for the year ended December 31, 2007 is net
of $8.0 million of the $20.0 million payment to Revance, representing the residual value of
the option to acquire Revance or to license Revances topical product currently under
development, included in research and development expense.(f)
    
    Net cash used in operating activities for the year ended December 31, 2006 included
payments totaling $125.2 million made to Ipsen related to a development and distribution
agreement for the development of DYSPORTTM.(g)
    
    Net cash provided by investing activities for the year ended December 31, 2008 included
$150.0 million of cash used for our acquisition of LipoSonix.(h)
    
    Net cash used in investing activities for the year ended December 31, 2007 includes a
$12.0 million investment in Revance, representing the fair value of the investment in
Revance at the time of the investment.(i)
    
    Net cash used in financing activities for the year ended December 31, 2008 includes the
repurchase of $283.7 million of our 1.5% Contingent Convertible Senior Notes. 52




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##### Table of Contents



FiscalTransition
    
    
    
    Six Months
    
    
    Year EndedYear Ended
    
    
    
    Period Ended
    
    
    
    Ended
    
    
    June 30,Dec. 31, 2005
    
    
    
    Dec. 31, 2005
    
    
    
    Dec. 31, 2004
    
    
    2005(unaudited)
    
    
    
    
    
    
    
    
    (unaudited)(in thousands, except per share amounts)Statements of Income Data:Net product revenues
    
    $
    306,735
    
    
    
    $
    156,963
    
    
    
    $
    144,116
    
    
    $
    293,888Net contract revenues
    
    
    46,002
    
    
    
    
    8,385
    
    
    
    
    34,168
    
    
    
    71,785Net revenues
    
    
    352,737
    
    
    
    
    165,348
    
    
    
    
    178,284
    
    
    
    365,673Gross profit (a)
    
    
    297,000
    
    
    
    
    139,583
    
    
    
    
    148,859
    
    
    
    307,548Operating expenses:Selling, general and administrative
    
    
    146,158
    
(b)
    
    
    78,535
    
(f)
    
    
    63,305
    
    (h)
    
    130,927
    
(j)Research and development
    
    
    42,903
    
(c)
    
    
    22,367
    
(g)
    
    
    45,140
    
    (i)
    
    65,676
    
(k)Depreciation and amortization
    
    
    24,548
    
    
    
    
    12,420
    
    
    
    
    10,222
    
    
    
    22,350Impairment of intangible assets
    
    
    9,171
    
    
    
    
    9,171
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    222,780
    
    
    
    
    122,493
    
    
    
    
    118,667
    
    
    
    218,953Operating income
    
    
    74,220
    
    
    
    
    17,090
    
    
    
    
    30,192
    
    
    
    88,595Other:Interest and investment (income) expense, net
    
    
    (5,804
    )
    
    
    
    (4,726
    )
    
    
    
    248
    
    
    
    (830
    )Other income, net
    
    
    (59,801
    )
(d)
    
    
    (59,801
    )
(d)
    
    
    
    
    
    
    Income tax expense
    
    
    49,551
    
    
    
    
    29,811
    
    
    
    
    10,377
    
    
    
    30,996Net income
    
    $
    90,274
    
    
    
    $
    51,806
    
    
    
    $
    19,567
    
    
    $
    58,429Basic net income per share
    
    $
    1.66
    
    
    
    $
    0.95
    
    
    
    $
    0.35
    
    
    $
    1.06Diluted net income per share
    
    $
    1.39
    
(e)
    
    $
    0.79
    
    
    
    $
    0.32
    
    
    $
    0.92Cash dividend declared per common share
    
    $
    0.12
    
    
    
    $
    0.06
    
    
    
    $
    0.06
    
    
    $
    0.12Basic common shares outstanding
    
    
    54,290
    
    
    
    
    54,323
    
    
    
    
    55,972
    
    
    
    55,196Diluted common shares outstanding
    
    
    69,558
    
(e)
    
    
    69,772
    
    
    
    
    72,160
    
    
    
    70,909
 
 (a)
    
    Amounts exclude $21.6 million, $10.9 million, $8.9 million and $19.6 million for
amortization expense related to acquired intangible assets in the year ended December 31,
2005, the Transition Period, the six months ended December 31, 2004 and fiscal 2005,
respectively.(b)
    
    Includes approximately $13.9 million of compensation expense related to stock options and
restricted stock recognized during the Transition Period and approximately $6.0 million of
integration planning costs incurred related to the proposed Inamed transaction during the
three months ended June 30, 2005 and three months ended September 30, 2005.(c)
    
    Includes approximately $8.3 million paid to AAIPharma related to a research and development
collaboration, $11.9 million related to a research and development collaboration with Dow and
approximately $1.0 million of compensation expense related to stock options and restricted
stock.(d)
    
    Represents a termination fee of $90.5 million received from Inamed upon the termination of
the proposed merger with Inamed, net of a termination fee paid to an investment banker and the
expensing of 53




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##### Table of Contents



accumulated transactions costs of $27.0 million, and integration costs incurred
during the three months ended December 31, 2005 of $3.7 million.(e)
    
    Diluted net income per common share for the unaudited year ended December 31, 2005 was
calculated by using the average of the periodic diluted common shares outstanding during the
year. For the period from January 1, 2005 to June 30, 2005, diluted common shares outstanding
was calculated using APB Opinion No. 25, while for the period from July 1, 2005 to December
31, 2005, diluted common shares outstanding was calculated using SFAS 123R. The Company
adopted SFAS No. 123R effective July 1, 2005.(f)
    
    Includes approximately $13.9 million of compensation expense related to stock options and
restricted stock recognized during the Transition Period and approximately $0.7 million of
integration planning costs incurred related to the proposed Inamed transaction during the
three months ended September 30, 2005.(g)
    
    Includes approximately $11.9 million related to a research and development collaboration with
Dow and approximately $1.0 million of compensation expense related to stock options and
restricted stock.(h)
    
    Includes approximately $1.3 million of professional fees related to research and development
collaborations with Ansata and Q-Med.(i)
    
    Includes $5.0 million paid to Ansata related to an exclusive development and license
agreement and $30.0 million paid to Q-Med related to an exclusive license agreement for the
development of RESTYLANE SUBQTM.(j)
    
    Includes approximately $5.3 million of business integration planning costs related to the
proposed merger with Inamed, and approximately $1.3 million of professional fees related to
research and development collaborations with AAIPharma, Ansata and Q-Med.(k)
    
    Includes approximately $8.3 million paid to AAIPharma related to a research and development
collaboration, $5.0 million paid to Ansata related to an exclusive development and license
agreement and $30.0 million paid to Q-Med related to an exclusive license agreement for the
development of RESTYLANE SUBQTM.  December 31,
    
    June 30,2005
    
    2005(in thousands)Balance Sheet Data:Cash, cash equivalents, and short-term
investments
    
    $
    742,532
    
    
    $
    603,568Working capital
    
    
    630,951
    
    
    
    530,850Total assets
    
    
    1,196,354
    
    
    
    1,095,087Long-term debt
    
    
    453,065
    
    
    
    453,065Stockholders equity
    
    
    481,751
    
    
    
    416,891
 FiscalYear
    
    
    
    
    
    Six Months
    
    Year EndedEnded
    
    Transition
    
    Ended
    
    June 30,Dec. 31, 2005
    
    Period
    
    Dec. 31, 2004
    
    2005(unaudited)
    
    
    
    
    
    (unaudited)(in thousands)Cash Flow Data:Net cash provided by operating activities
    
    $
    232,506
    (a)
    
    $
    147,990
    (a)
    
    $
    45,465
    
    
    $
    129,981Net cash provided by investing activities
    
    
    187,994
    
    
    
    123,665
    
    
    
    76,158
    
    
    
    140,487Net cash used in financing activities
    
    
    (5,137
    )
    
    
    (2,792
    )
    
    
    (137,447
    )
    
    
    (139,793
    )
 
 (a)
    
    Net cash provided by operating activities for the year ended December 31, 2005 and the
Transition Period included a $90.5 million termination fee received from Inamed related to the
termination of a proposed merger. 54




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##### Table of Contents



® ® ® ® ® TM ® ® ® ® ® ® TM
 Financial Information About Segments
  Key Aspects of Our Business
 TM ® ® ® ® ® ®
 TM
  55




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##### Table of Contents



TM ® ®
   Recent Developments
  -
    
    Asset Purchase and Development Agreement and License and Settlement Agreements with Glenmark;-
    
    FDA approval of additional strengths of SOLODYN®;-
    
    License Agreement with Revance;-
    
    License and Settlement Agreement and Joint Development Agreement with Perrigo;-
    
    FDA approval of DYSPORTTM;-
    
    Sale of Medicis Pediatrics;-
    
    Tevas launch of a generic to SOLODYN®, our settlement agreement with Teva and the impact of the launch on our
sales reserves;
 56




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##### Table of Contents



-
    
    Clinical milestone payments related to our collaboration with IMPAX;-
    
    Reduction in the carrying value of our investment in Revance; and-
    
    Obtainment of a CE Mark verification for the LIPOSONIXTM system in Europe and Health Canadas approval of
LIPOSONIXTM system sales in Canada.
 Asset Purchase and Development Agreement and License and Settlement Agreements with Glenmark
   ® ® ® ® ® ® ® ® ® ®
 FDA approval of additional strengths of SOLODYN ®
 ® ®
 License Agreement with Revance
   57




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##### Table of Contents



License and Settlement Agreement and Joint Development Agreement with Perrigo
  ® ® ®
 
    
    we granted Perrigo, effective December 15, 2013, or earlier upon the occurrence of
certain events, a license to make and sell generic versions of the existing
VANOS® products; and
    
    when Perrigo does commercialize generic versions of VANOS® products, Perrigo
will pay us a royalty based on sales of such generic products.Pursuant to the Perrigo Joint Development Agreement, subject to the terms and conditions
contained therein:
    
    we and Perrigo will collaborate to develop a novel proprietary product;
    
    we have the sole right to commercialize the novel proprietary product;
    
    if and when a New Drug Application (NDA) for a novel proprietary product is submitted
to the FDA, we and Perrigo shall enter into a commercial supply agreement pursuant to
which, among other terms, for a period of three years following approval of the NDA,
Perrigo would exclusively supply to us all of our novel proprietary product requirements in
the U.S.;
    
    we made an up-front $3.0 million payment to Perrigo, and will make additional payments
to Perrigo of up to $5.0 million upon the achievement of certain development, regulatory
and commercialization milestones; and
    
    we will pay to Perrigo royalty payments on sales of the novel proprietary product.
  FDA approval of DYSPORT TM
 TM ® TM TM TM
  58




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##### Table of Contents



Sale of Medicis Pediatrics
   Tevas launch of a generic to SOLODYN ® , our settlement agreement with Teva, and the
impact of the launch on our sales reserves
 ®
 ® ® ® ® ® ® ®
 ® ® ®
 Clinical milestone payments related to our collaboration with IMPAX
 ® ® ® ® ®
 59




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##### Table of Contents



® ®
 Reduction in the carrying value of our investment in Revance
    Obtainment of a CE Mark verification for the LIPOSONIX TM system in Europe and Health
Canadas approval of LIPOSONIX TM system sales in Canada.
 TM TM TM TM TM
 60




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##### Table of Contents



Subsequent Event
 TM TM TM TM TM TM
   YEARS ENDED DECEMBER 31,2009
    
    

    2008
    
    

    2007Net revenues
    
    
    100.0
    %
    

    
    100.0
    %
    

    
    100.0
    %Gross profit (d)
    
    
    90.1
    
    

    
    92.5
    
    

    
    87.7Operating expenses
    
    
    67.1
    
    (a)

    
    84.6
    
    (b)

    
    67.9
    
(c)Operating income
    
    
    23.0
    
    

    
    7.9
    
    

    
    19.8Other income (expense), net
    
    
    0.2
    
    

    
    (3.0
    )
    

    
    Interest and investment income, net
    
    
    0.6
    
    

    
    3.3
    
    

    
    6.2Income before income tax expense
    
    
    23.8
    
    

    
    8.2
    
    

    
    26.0Income tax expense
    
    
    (10.4
    )
    

    
    (6.2
    )
    

    
    (10.6
    )Net income
    
    
    13.4
    %
    

    
    2.0
    %
    

    
    15.4
    %
 
 (a)
    
    Included in operating expenses is $12.0 million (2.1% of net revenues) paid to Impax
related to a product development agreement, $10.0 million (1.7% of net revenues) paid to
Revance related to a product development agreement, $5.3 million (0.9% of net revenues) paid
to Glenmark related to a product development agreement and two license and settlement
agreements, $5.0 million (0.9% of net revenues) paid to Perrigo related to a product
development agreement and $19.2 million (3.4% of net revenues) of compensation expense related
to stock options, restricted stock and stock appreciation rights.(b)
    
    Included in operating expenses is $40.0 million (7.8% of net revenues) paid to IMPAX related
to a development agreement, $30.5 million (5.9% of net revenues) of acquired
in-process research and development expense related to our acquisition of LipoSonix, $25.0
million (4.9% of net revenues) paid to Ipsen upon the FDAs acceptance of Ipsens BLA for
DYSPORTTM, $16.6 million (3.2% of net revenues) of compensation expense related to
stock options and restricted stock and $4.8 million (0.9% of net revenues) of lease exit costs
related to our previous headquarters facility.(c)
    
    Included in operating expenses is $21.1 million (4.6% of net revenues) of share-based
compensation expense related to stock options and restricted stock, $9.3 million (2.0% of net
revenues) related to our option to acquire Revance or to license Revances topical product
currently under development (including $1.3 million of professional fees incurred related to
the agreement), $4.1 million (0.9% of net revenues) for the write-down of an intangible asset
related to OMNICEF® and $2.2 million (0.5% of net revenues) of professional fees
related to a strategic collaboration with Hyperion.(d)
    
    Gross profit does not include amortization of the related intangibles as such expense is
included in operating expenses. 61




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##### Table of Contents



Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008
 Net Revenues
  2009
    
    2008
    
    $ Change
    
    % ChangeNet product revenues
    
    $
    561.7
    
    
    $
    501.0
    
    
    $
    60.7
    
    
    
    12.1
    %Net contract revenues
    
    
    10.2
    
    
    
    16.8
    
    
    
    (6.6
    )
    
    
    (39.3)
    %Total net revenues
    
    $
    571.9
    
    
    $
    517.8
    
    
    $
    54.1
    
    
    
    10.4
    %
 2009
    
    2008
    
    $ Change
    
    % ChangeAcne and acne-related dermatological products
    
    $
    398.8
    
    
    $
    325.0
    
    
    $
    73.8
    
    
    
    22.7
    %Non-acne dermatological products
    
    
    133.6
    
    
    
    148.0
    
    
    
    (14.4
    )
    
    
    (9.7)
    %Non-dermatological products (including contract revenues)
    
    
    39.5
    
    
    
    44.8
    
    
    
    (5.3
    )
    
    
    (11.8)
    %Total net revenues
    
    $
    571.9
    
    
    $
    517.8
    
    
    $
    54.1
    
    
    
    10.4
    %
 2009
    
    2008
    
    ChangeAcne and acne-related dermatological products
    
    
    69.7
    %
    
    
    62.8
    %
    
    
    6.9
    %Non-acne dermatological products
    
    
    23.4
    %
    
    
    28.6
    %
    
    
    (5.2)
    %Non-dermatological products (including contract revenues)
    
    
    6.9
    %
    
    
    8.6
    %
    
    
    (1.7)
    %Total net revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
 ® ® ® ® ® ®
 ® ® TM TM ® ®
 62




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##### Table of Contents



Gross Profit
   2009
    
    2008
    
    $ Change
    
    % ChangeGross profit
    
    $
    515.1
    
    
    $
    479.0
    
    
    $
    36.1
    
    
    
    7.5
    %% of net revenues
    
    
    90.1
    %
    
    
    92.5
    %
 TM
 Selling, General and Administrative Expenses
  2009
    
    2008
    
    $ Change
    
    % ChangeSelling, general and administrative
    
    $
    283.0
    
    
    $
    279.8
    
    
    $
    3.2
    
    
    
    1.1
    %% of net revenues
    
    
    49.5
    %
    
    
    54.0
    %Share-based compensation expense
included in selling, general and
administrative
    
    $
    18.1
    
    
    $
    16.3
    
    
    $
    1.8
    
    
    
    11.0
    %
 TM
 63




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##### Table of Contents



Research and Development Expenses
  2009
    
    2008
    
    $ Change
    
    % ChangeResearch and development
    
    $
    71.8
    
    
    $
    99.9
    
    
    $
    (28.1
    )
    
    
    (28.1)
    %Up-front and milestone
payments included in
research
and development
    
    $
    32.5
    
    
    $
    65.0
    
    
    $
    (32.5
    )
    
    
    (50.0)
    %Share-based compensation
expense included in
research and development
    
    $
    1.1
    
    
    $
    0.3
    
    
    $
    0.8
    
    
    
    266.7
    %
 TM ®
 Depreciation and Amortization Expenses
 TM
 In-Process Research and Development Expense
  Interest and Investment Income
  Interest Expense
  64




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##### Table of Contents



Other (Income) Expense, net
   Income Tax Expense
  2009
    
    2008
    
    $ Change
    
    % ChangeIncome tax expense
    
    $
    59.6
    
    
    $
    32.1
    
    
    $
    27.5
    
    
    
    85.7
    %Effective tax rate
    
    
    44.0
    %
    
    
    75.8
    %
  65




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##### Table of Contents



Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007
 Net Revenues
  2008
    
    
    2007
    
    
    $ Change
    
    
    % Change| | | |Net product revenues
    
    $
    501.0
    
    
    $
    441.9
    
    
    $
    59.1
    
    
    
    13.4
    %Net contract revenues
    
    
    16.8
    
    
    
    15.5
    
    
    
    1.3
    
    
    
    8.4
    %Total net revenues
    
    $
    517.8
    
    
    $
    457.4
    
    
    $
    60.4
    
    
    
    13.2
    %
 2008
    
    
    2007
    
    
    $ Change
    
    
    % Change| | | |Acne and acne-related
dermatological products
    
    $
    325.0
    
    
    $
    243.4
    
    
    $
    81.6
    
    
    
    33.5
    %Non-acne dermatological
products
    
    
    148.0
    
    
    
    172.9
    
    
    
    (24.9
    )
    
    
    (14.4
    )%Non-dermatological products
(including contract revenues)
    
    
    44.8
    
    
    
    41.1
    
    
    
    3.7
    
    
    
    9.0
    %Total net revenues
    
    $
    517.8
    
    
    $
    457.4
    
    
    $
    60.4
    
    
    
    13.2
    %
 2008
    
    
    2007
    
    
    ChangeAcne and acne-related
dermatological products
    
    
    62.8
    %
    
    
    53.2
    %
    
    
    9.6
    %Non-acne dermatological
products
    
    
    28.6
    %
    
    
    37.8
    %
    
    
    (9.2
    )%Non-dermatological products
(including contract revenues)
    
    
    8.6
    %
    
    
    9.0
    %
    
    
    (0.4
    )%Total net revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    
    %
 ®
 ®
  ® ®
 66




---



##### Table of Contents



Gross Profit
   2008
    
    2007
    
    $ Change
    
    % ChangeGross profit
    
    $
    479.0
    
    
    $
    401.3
    
    
    $
    77.7
    
    
    
    19.4
    %% of net revenues
    
    
    92.5
    %
    
    
    87.7
    %
 ®
 Selling, General and Administrative Expenses
  2008
    
    2007
    
    $ Change
    
    % ChangeSelling, general and administrative
    
    $
    279.8
    
    
    $
    242.6
    
    
    $
    37.2
    
    
    
    15.3
    %% of net revenues
    
    
    54.0
    %
    
    
    53.0
    %Share-based compensation expense
included in selling, general and
administrative expense
    
    $
    16.3
    
    
    $
    21.0
    
    
    $
    (4.7
    )
    
    
    (22.4
    )%
 ®
 67




---



##### Table of Contents



Research and Development Expenses
  2008
    
    2007
    
    $ Change
    
    % ChangeResearch and development
    
    $
    99.9
    
    
    $
    39.4
    
    
    $
    60.5
    
    
    
    153.6
    %Up-front and milestone
payments included in
research
and development
    
    $
    65.0
    
    
    $
    8.0
    
    
    $
    57.0
    
    
    
    712.5
    %Share-based compensation
expense included in
research and development
    
    $
    0.3
    
    
    $
    0.1
    
    
    $
    0.2
    
    
    
    200.0
    %
 TM TM
 Depreciation and Amortization Expenses
 ®
 In-Process Research and Development Expense
  Impairment of Intangible Assets
 ®
 ® ®
 Interest and Investment Income
  68




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##### Table of Contents



Interest Expense
  Other Expense
  Income Tax Expense
  2008
    
    2007
    
    $ Change
    
    % ChangeIncome tax expense
    
    $
    32.1
    
    
    $
    48.5
    
    
    $
    (16.4
    )
    
    
    (33.8
    )%Effective tax rate
    
    
    75.8
    %
    
    
    40.8
    %
  69




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##### Table of Contents



Overview
  2009
    
    
    2008
    
    
    $ Change
    
    
    % ChangeCash provided by (used in):Operating activities
    
    $
    177.9
    
    
    $
    45.8
    
    
    $
    132.1
    
    
    
    288.4
    %Investing activities
    
    
    (62.2
    )
    
    
    220.1
    
    
    
    (282.3
    )
    
    
    (128.3)
    %Financing activities
    
    
    7.0
    
    
    
    (287.3
    )
    
    
    294.3
    
    
    
    (102.4)
    %
 Dec. 31, 2009
    
    Dec. 31, 2008
    
    $ Change
    
    % ChangeCash, cash equivalents,
and short-term investments
    
    $
    528.3
    
    
    $
    343.9
    
    
    $
    184.4
    
    
    
    53.6
    %Working capital
    
    
    434.6
    
    
    
    307.6
    
    
    
    127.0
    
    
    
    41.3
    %Long-term investments
    
    
    25.5
    
    
    
    55.3
    
    
    
    (29.8
    )
    
    
    (53.9)
    %2.5% contingent convertible
senior notes due 2032
    
    
    169.2
    
    
    
    169.2
    
    
    
    
    
    
    
    
    %1.5% contingent convertible
senior notes due 2033
    
    
    0.2
    
    
    
    0.2
    
    
    
    
    
    
    
    
    %
 Working Capital
  Dec. 31, 2009
    
    Dec. 31, 2008
    
    $ Change
    
    % ChangeCash, cash equivalents,
and short-term investments
    
    $
    528.3
    
    
    $
    343.9
    
    
    $
    184.4
    
    
    
    53.6
    %Accounts receivable, net
    
    
    95.2
    
    
    
    52.6
    
    
    
    42.6
    
    
    
    81.0
    %Inventories, net
    
    
    26.0
    
    
    
    24.2
    
    
    
    1.8
    
    
    
    7.4
    %Deferred tax assets, net
    
    
    66.3
    
    
    
    53.2
    
    
    
    13.1
    
    
    
    24.6
    %Other current assets
    
    
    16.5
    
    
    
    19.6
    
    
    
    (3.1
    )
    
    
    (15.8
    ) %Total current assets
    
    
    732.3
    
    
    
    493.5
    
    
    
    238.8
    
    
    
    48.4
    %Accounts payable
    
    
    44.2
    
    
    
    39.0
    
    
    
    5.2
    
    
    
    13.3
    %Reserve for sales returns
    
    
    48.0
    
    
    
    59.6
    
    
    
    (11.6
    )
    
    
    (19.5)
    %Accrued consumer rebate and
loyalty programs
    
    
    73.3
    
    
    
    28.4
    
    
    
    44.9
    
    
    
    158.1
    %Managed care and Medicaid
reserves
    
    
    47.1
    
    
    
    17.0
    
    
    
    30.1
    
    
    
    177.1
    %Income taxes payable
    
    
    16.7
    
    
    
    
    
    
    
    16.7
    
    
    
    100.0
    %Other current liabilities
    
    
    68.4
    
    
    
    41.9
    
    
    
    26.5
    
    
    
    63.2
    %Total current liabilities
    
    
    297.7
    
    
    
    185.9
    
    
    
    111.8
    
    
    
    60.1
    %Working capital
    
    $
    434.6
    
    
    $
    307.6
    
    
    $
    127.0
    
    
    
    41.3
    %
 70




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##### Table of Contents



TM TM TM TM
 Recognition and Presentation of Other-Than-Temporary
Impairments Investments  Debt and
Equity Securities
 71




---



##### Table of Contents



Operating Activities
  2009
    
    
    2008Payment made to Revance related to a development agreement
    
    $
    (10.0
    )
    
    $
    Payments made to IMPAX related to a development agreement
    
    
    (12.0
    )
    
    
    (40.0
    )Payments made to Perrigo related to a development agreement
    
    
    (5.0
    )
    
    
    Payment made to Glenmark related to a development agreement
and license and settlement agreements
    
    
    (5.3
    )
    
    
    Payment made to Ipsen related to development of DYSPORTTM
    
    
    
    
    
    
    (25.0
    )Income taxes paid
    
    
    (44.6
    )
    
    
    (87.8
    )Other cash provided by operating activities
    
    
    254.8
    
    
    
    198.6Cash provided by operating activities
    
    $
    177.9
    
    
    $
    45.8
  Investing Activities
 TM
 Financing Activities
  Contingent Convertible Senior Notes and Other Long-Term Commitments
  72




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##### Table of Contents



Exit or Disposal Cost Obligations Accounting
for Costs Associated with Exit or Disposal Activities
   Liability as of
    
    Amounts Charged
    
    Cash Payments
    
    Cash Received
    
    Liability as ofDecember 31, 2008
    
    to Expense
    
    Made
    
    from Sublease
    
    Dec. 31, 2009Lease exit costs
liability
    
    $
    3,996,102
    
    
    $
    211,545
    
    
    $
    (2,143,970
    )
    
    $
    
    
    
    $
    2,063,677
 Dividends
  Fair Value Measurements
  Fair Value Measurements and Disclosure
 73




---



##### Table of Contents



Investments  Debt and
Equity Securities
 Financial Instruments The Fair Value Option for Financial Assets and Financial Liabilities)
  Off-Balance Sheet Arrangements
  Contractual Obligations
  Payments Due by PeriodMore Than
    
    
    More Than1 Year and
    
    
    3 Years andLess Than
    
    
    Less Than
    
    
    Less Than
    
    
    More ThanTotal
    
    
    1 Year
    
    
    3 Years
    
    
    5 Years
    
    
    5 YearsLong-term debt
    
    $
    169,326
    
    
    $
    
    
    
    $
    169,145
    
    
    $
    181
    
    
    $
    Interest on long-term debt
    
    
    95,208
    
    
    
    4,231
    
    
    
    8,463
    
    
    
    8,463
    
    
    
    74,051Operating leases
    
    
    49,702
    
    
    
    6,635
    
    
    
    9,013
    
    
    
    8,972
    
    
    
    25,082Other purchase obligations
and commitments
    
    
    867
    
    
    
    173
    
    
    
    347
    
    
    
    347
    
    
    
    Total contractual obligations
    
    $
    315,103
    
    
    $
    11,039
    
    
    $
    186,968
    
    
    $
    17,963
    
    
    $
    99,133
 74




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##### Table of Contents



75




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##### Table of Contents



Revenue Recognition
 Revenue Recognition in Financial Statements Revenue
Recognition
 TM ® ®
  Items Deducted From Gross Revenue
   76




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##### Table of Contents



Managed
    
    
    ConsumerCare &
    
    
    RebateReserve
    
    
    
    
    
    
    Sales
    
    
    
    
    
    
    Medicaid
    
    
    andfor Sales
    
    
    Deferred
    
    
    Discounts
    
    
    Chargebacks
    
    
    Rebates
    
    
    LoyaltyReturns
    
    
    Revenue
    
    
    Reserve
    
    
    Reserve
    
    
    Reserve
    
    
    Programs
    
    
    TotalBalance at December 31, 2007
    
    $
    68,787
    
    
    $
    1,907
    
    
    $
    511
    
    
    $
    320
    
    
    $
    4,881
    
    
    $
    14,745
    
    
    $
    91,151Actual
    
    
    (50,042
    )
    
    
    
    
    
    
    (12,268
    )
    
    
    (2,001
    )
    
    
    (17,230
    )
    
    
    (49,462
    )
    
    
    (131,003
    )Provision
    
    
    40,866
    
    
    
    (1,193
    )
    
    
    13,005
    
    
    
    2,152
    
    
    
    29,305
    
    
    
    63,165
    
    
    
    147,300Balance at December 31, 2008
    
    $
    59,611
    
    
    $
    714
    
    
    $
    1,248
    
    
    $
    471
    
    
    $
    16,956
    
    
    $
    28,448
    
    
    $
    107,448Actual
    
    
    (29,498
    )
    
    
    
    
    
    
    (18,042
    )
    
    
    (2,812
    )
    
    
    (68,578
    )
    
    
    (168,196
    )
    
    
    (287,126
    )Provision
    
    
    17,949
    
    
    
    549
    
    
    
    18,954
    
    
    
    3,029
    
    
    
    98,700
    
    
    
    213,059
    
    
    
    352,240Balance at December 31, 2009
    
    $
    48,062
    
    
    $
    1,263
    
    
    $
    2,160
    
    
    $
    688
    
    
    $
    47,078
    
    
    $
    73,311
    
    
    $
    172,562
 Reserve for Sales Returns
    77




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##### Table of Contents



Sales Discounts
   Contract Chargebacks
  78




---



##### Table of Contents



Managed Care and Medicaid Rebates
  ® ®
 Consumer Rebates and Loyalty Programs
 ,
 ® ® TM ® ®
  Use of Information from External Sources
  79




---



##### Table of Contents



Use of Estimates in Reserves
  Share-Based Compensation
 Compensation  Stock
     80




---



##### Table of Contents



Inventory
  Long-lived Assets
    Income Taxes
  81




---



##### Table of Contents



Research and Development Costs and Accounting for Strategic Collaborations
   Legal Contingencies
  Recent Accounting Pronouncements
 Fair Value Measurements and
Disclosures
 82




---



##### Table of Contents



Financial Instruments
 New Consolidation Guidance for
Variable Interest Entities (VIE), Consolidation of Variable Interest
Entities
 Revenue Recognition Multiple  Deliverable Revenue Arrangements Revenue Arrangements with Multiple Deliverables. Revenue Recognition  Multiple Element Arrangements
 
     83




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##### Table of Contents



Interest Rate Sensitivity
Principal Amount by Expected Maturity as of December 31, 2009
 Financial instruments mature during year ended December 31,2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    ThereafterFinancial instruments mature during year ended December 31,Available-for-sale and
trading securities
    
    $
    143,417
    
    
    $
    167,522
    
    
    $
    8,290
    
    
    $
    
    
    
    $
    
    
    
    $
    25,524Weighted-average yield rate
    
    
    1.2
    %
    
    
    1.2
    %
    
    
    1.4
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    1.8
    %Contingent convertible
senior notes due 2032
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    169,145Interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.5
    %Contingent convertible
senior notes due 2033
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    181Interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.5
    %
     
   
   84




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##### Table of Contents



Managements Report on Internal Control over Financial Reporting
     85




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 The Board of Directors and Stockholders of Medicis Pharmaceutical Corporation
        
 86




---



##### Table of Contents



PART III
 
      
   
   
   
   87




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##### Table of Contents



PART IV
 
  Page(a) Documents filed as a part of this Report(1) Financial Statements:Index to consolidated financial statements
    
    
    F-1Report of Independent Registered Public
Accounting Firm
    
    
    F-2Consolidated balance sheets as of December 31, 2009
and 2008
    
    
    F-3Consolidated statements of income for the years ended
December 31, 2009, 2008 and 2007
    
    
    F-5Consolidated statements of stockholders equity for the years ended
December 31, 2009, 2008 and 2007
    
    
    F-6Consolidated statements of cash flows for the years ended
December 31, 2009, 2008 and 2007
    
    
    F-8Notes to consolidated financial statements
    
    
    F-9(2) Financial Statement Schedule:Schedule II  Valuation and Qualifying Accounts
    
    
    S-1This financial statement schedule should be read in conjunction with
the consolidated financial statements. Financial statement schedules
not included in this Annual Report on Form 10-K have been omitted
because they are not applicable or the required information is shown
in the financial statements or notes thereto.(3) Exhibits filed as part of this Report:
 Exhibit No.
    
    
    
    Description2.1
    
    
    
    Agreement of Merger by and between the Company, Medicis Acquisition Corporation and GenDerm
Corporation, dated November 28, 1997 (11)2.2
    
    
    
    Agreement of Plan of Merger, dated as of October 1, 2001, by and among the Company, MPC
Merger Corp. and Ascent Pediatrics, Inc. (17)2.3
    
    
    
    Agreement and Plan of Merger by and among the Company, Donatello, Inc., and LipoSonix, Inc.
dated June 16, 2008(49)3.1
    
    
    
    Certificate of Incorporation of the Company, as amended (23)3.2
    
    
    
    Amended and Restated By-Laws of the Company (43)4.1
    
    
    
    Amended and Restated Rights Agreement, dated as of August 17, 2005, between the Company and
Wells Fargo Bank, N.A., as Rights Agent(26)4.2
    
    
    
    Indenture, dated as of August 19, 2003, by and between the Company, as issuer, and Deutsche
Bank Trust Company Americas, as trustee (23)4.3
    
    
    
    Indenture, dated as of June 4, 2002, by and between the Company, as issuer, and Deutsche Bank
Trust Company Americas, as trustee.(19)4.4
    
    
    
    Supplemental Indenture dated as of February 1, 2005 to Indenture dated as of August 19, 2003
between the Company and Deutsche Bank Trust Company Americas as Trustee (25)4.5
    
    
    
    Registration Rights Agreement, dated as of June 4, 2002, by and between the Company and
Deutsche Bank Securities Inc. (19)4.6
    
    
    
    Form of specimen certificate representing Class A common stock (1)10.1
    
    
    
    Asset Purchase Agreement among the Company, Ascent Pediatrics, Inc., BioMarin Pharmaceutical
Inc., and BioMarin Pediatrics Inc., dated April 20, 2004 (23)10.2
    
    
    
    Merger Termination Agreement, dated as of December 13, 2005, by and among the Company,
Masterpiece Acquisition Corp., and Inamed Corporation(31)10.3
    
    
    
    Securities Purchase Agreement among the Company, Ascent Pediatrics, Inc., BioMarin
Pharmaceutical Inc. and BioMarin Pediatrics Inc., dated May 18, 2004 (23)10.4
    
    
    
    Termination Agreement dated October 19, 2005 between the Company and Michael A.
Pietrangelo(28)10.5
    
    
    
    License Agreement among the Company, Ascent Pediatrics, Inc. and BioMarin Pediatrics Inc.,
dated May 18, 2004 (23)10.6
    
    
    
    Medicis Pharmaceutical Corporation 1995 Stock Option Plan (incorporated by
reference to Exhibit C to the definitive Proxy Statement for the 1995 Annual
 88




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##### Table of Contents



Exhibit No.
    
    
    
    DescriptionMeeting of Shareholders previously filed with the SEC, File No. 0-18443)10.7(a)
    
    
    
    Employment Agreement between the Company and Jonah Shacknai, dated
July 24, 1996 (8)10.7(b)
    
    
    
    Amendment to Employment Agreement by and between the Company and
Jonah Shacknai, dated April 1, 1999 (15)10.7(c)
    
    
    
    Amendment to Employment Agreement by and between the Company and
Jonah Shacknai, dated February 21, 2001 (15)10.7(d)
    
    
    
    Third Amendment, dated December 30, 2005, to Employment Agreement between the Company and
Jonah Shacknai(32)10.8
    
    
    
    Medicis Pharmaceutical Corporation 2001 Senior Executive Restricted Stock Plan(30)10.9(a)
    
    
    
    Medicis Pharmaceutical Corporation 2002 Stock Option Plan (20)10.9(b)
    
    
    
    Amendment No. 1 to the Medicis Pharmaceutical Corporation 2002 Stock Option Plan, dated
August 1, 2005(29)10.10(a)
    
    
    
    Medicis Pharmaceutical Corporation 2004 Stock Incentive Plan(27)10.10(b)
    
    
    
    Amendment No. 1 to the Medicis Pharmaceutical Corporation 2004 Stock Option Plan, dated
August 1, 2005(29)10.11(a)
    
    
    
    Medicis Pharmaceutical Corporation 1998 Stock Option Plan(33)10.11(b)
    
    
    
    Amendment No. 1 to the Medicis Pharmaceutical Corporation 1998 Stock Option Plan, dated
August 1, 2005(29)10.11(c)
    
    
    
    Amendment No. 2 to the Medicis Pharmaceutical Corporation 1998 Stock Option Plan, dated
September 30, 2005(29)10.12(a)
    
    
    
    Medicis Pharmaceutical Corporation 1996 Stock Option Plan(34)10.12(b)
    
    
    
    Amendment No. 1 to the Medicis Pharmaceutical Corporation 1996 Stock Option Plan, dated
August 1, 2005(29)10.13
    
    
    
    Waiver Letter dated March 18, 2005 between the Company and Q-Med AB(27)10.14
    
    
    
    Supply Agreement, dated October 21, 1992, between Schein Pharmaceutical and the Company
(2)10.15
    
    
    
    Amendment to Manufacturing and Supply Agreement, dated March 2, 1993, between
Schein Pharmaceutical and the Company (3)10.16(a)
    
    
    
    Credit and Security Agreement, dated August 3, 1995, between the Company and
Norwest Business Credit, Inc. (5)10.16(b)
    
    
    
    First Amendment to Credit and Security Agreement, dated May 29, 1996,
between the Company and Norwest Bank Arizona, N.A. (8)10.16(c)
    
    
    
    Second Amendment to Credit and Security Agreement, dated November 22, 1996,
by and between the Company and Norwest Bank Arizona, N.A. as successor-in-interest
to Norwest Business Credit, Inc. (10)10.16(d)
    
    
    
    Third Amendment to Credit and Security Agreement, dated November 22, 1998, by
and between the Company and Norwest Bank Arizona, N.A., as successor-in-interest
to Norwest Business Credit, Inc. (12)10.16(e)
    
    
    
    Fourth Amendment to Credit and Security Agreement, dated November 22, 2000,
by and between the Company and Wells Fargo Bank Arizona, N.A., formerly
known as Norwest Bank Arizona, N.A., as successor-in-interest to Norwest Business
Credit, Inc.(16)10.16(f)
    
    
    
    Fifth Amendment to Credit and Security Agreement, dated November 22, 2002, by and between the
Company and Wells Fargo Bank Arizona, N.A., formerly known as Norwest Bank Arizona, N.A., as
successor-in-interest to Norwest Business Credit, Inc. (23)10.17(a)
    
    
    
    Patent Collateral Assignment and Security Agreement, dated August 3, 1995, by
the Company to Norwest Business Credit, Inc. (6)10.17(b)
    
    
    
    First Amendment to Patent Collateral Assignment and Security Agreement, dated
May 29, 1996, by the Company to Norwest Bank Arizona, N.A. (8)10.17(c)
    
    
    
    Amended and Restated Patent Collateral Assignment and Security Agreement, dated
November 22, 1998, by the Company to Norwest Bank Arizona, N.A. (12)10.18(a)
    
    
    
    Trademark Collateral Assignment and Security Agreement, dated August 3, 1995,
by the Company to Norwest Business Credit, Inc. (7)10.18(b)
    
    
    
    First Amendment to Trademark Collateral Assignment and Security Agreement, dated
May 29, 1996, by the Company to Norwest Bank Arizona, N.A. (8)10.18(c)
    
    
    
    Amended and Restated Trademark, Tradename, and Service Mark Collateral
Assignment and Security Agreement, dated November 22, 1998, by the Company
to Norwest Bank Arizona, N.A. (12)10.19
    
    
    
    Assignment and Assumption of Loan Documents, dated May 29, 1996, from
Norwest Business Credit, Inc., to and by Norwest Bank Arizona, N.A. (8)10.20
    
    
    
    Multiple Advance Note, dated May 29, 1996, from the Company to Norwest Bank
 89




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##### Table of Contents



Exhibit No.
    
    
    DescriptionArizona, N.A. (8)10.21
    
    
    Asset Purchase Agreement dated November 15, 1998, by and among the Company and
Hoechst Marion Roussel, Inc., Hoechst Marion Roussel Deutschland GMHB and
Hoechst Marion Roussel, S.A. (12)10.22
    
    
    License and Option Agreement dated November 15, 1998, by and among the Company
and Hoechst Marion Roussel, Inc., Hoechst Marion Roussel Deutschland GMBH and
Hoechst Marion Roussel, S.A. (12)10.23
    
    
    Loprox Lotion Supply Agreement dated November 15, 1998, by and between the
Company and Hoechst Marion Roussel, Inc. (12)10.24
    
    
    Supply Agreement dated November 15, 1998, by and between the Company and
Hoechst Marion Roussel Deutschland GMBH (12)10.25
    
    
    Asset Purchase Agreement effective January 31, 1999, between the Company and
Bioglan Pharma Plc (14)10.26
    
    
    Stock Purchase Agreement by and among the Company, Ucyclyd Pharma, Inc. and
Syed E. Abidi, William Brusilow, Susan E. Brusilow and Norbert L. Wiech, dated
April 19, 1999 (14)10.27
    
    
    Asset Purchase Agreement by and between the Company and Bioglan Pharma Plc,
dated June 29, 1999 (14)10.28
    
    
    Asset Purchase Agreement by and among The Exorex Company, LLC, Bioglan
Pharma Plc, the Company and IMX Pharmaceuticals, Inc., dated June 29, 1999 (16)10.29
    
    
    Medicis Pharmaceutical Corporation Executive Retention Plan (14)10.30
    
    
    Asset Purchase Agreement between Warner Chilcott, plc and the Company, dated
September 14, 1999(14)10.31(a)
    
    
    Share Purchase Agreement between Q-Med International B.V. and Startskottet 21914
AB (under proposed change of name to Medicis Sweden Holdings AB), dated
February 10, 2003(21)10.31(b)
    
    
    Amendment No. 1 to Share Purchase Agreement between Q-Med International
B.V. and Startskottet 21914 AB (under proposed change of name to Medicis Sweden
Holdings AB), dated March 7, 2003(21)10.32
    
    
    Supply Agreement between Q-Med AB and the Company,
dated March 7, 2003(21)10.33
    
    
    Amended and Restated Intellectual Property Agreement between Q-Med AB and HA
North American Sales AB, dated March 7, 2003(21)10.34
    
    
    Supply Agreement between Medicis Aesthetics Holdings Inc., a wholly owned subsidiary of the
Company, and Q-Med AB, dated July 15, 2004 (23) Portions of this exhibit
(indicated by asterisks) have been omitted pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.10.35
    
    
    Intellectual Property License Agreement between Q-Med AB and Medicis Aesthetics Holdings
Inc., dated July 15, 2004 (23) Portions of this exhibit (indicated by asterisks)
have been omitted pursuant to a request for confidential treatment pursuant to Rule 24b-2
under the Securities Exchange Act of 1934.10.36
    
    
    Note Agreement, dated as of October 1, 2001, by and among Ascent Pediatrics, Inc., the
Company, Furman Selz Investors II L.P., FS Employee Investors LLC, FS Ascent Investments LLC,
FS Parallel Fund L.P., BancBoston Ventures Inc. and Flynn Partners (17)10.37
    
    
    Voting Agreement, dated as of October 1, 2001, by and among the Company, MPC Merger Corp., FS
Private Investments LLC, Furman Selz Investors II L.P., FS Employee Investors LLC, FS Ascent
Investments LLC and FS Parallel Fund L.P. (17)10.38
    
    
    Exclusive Remedy Agreement, dated as of October 1, 2001, by and among the Company, Ascent
Pediatrics, Inc., FS Private Investments LLC, Furman Selz Investors II L.P., FS Employee
Investors LLC, FS Ascent Investments LLC and FS Parallel Fund L.P., BancBoston Ventures Inc.,
Flynn Partners, Raymond F. Baddour, Sc.D., Robert E. Baldini, Medical Science Partners L.P.
and Emmett Clemente, Ph.D. (17)10.39
    
    
    Medicis Pharmaceutical Corporation 1992 Stock Option Plan(35)10.40
    
    
    Form of Stock Option Agreement for Medicis Pharmaceutical Corporation 2004 Stock Incentive
Plan(36)10.41
    
    
    Form of Restricted Stock Agreement for Medicis Pharmaceutical Corporation 2004 Stock
Incentive Plan(36)10.42
    
    
    Letter Agreement dated as of March 13, 2006 among Medicis Pharmaceutical Corporation,
Aesthetica Ltd., Medicis Aesthetics Holdings Inc., Ipsen S.A. and Ipsen Ltd.(37)10.43
    
    *
    Development and Distribution Agreement by and between Aesthetica, Ltd. and Ipsen,
 90




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##### Table of Contents



Exhibit No.
    
    
    DescriptionLtd.(38)10.44
    
    *
    Trademark License Agreement by and between Aesthetica, Ltd. and Ipsen, Ltd.(38)10.45
    
    *
    Trademark Assignment Agreement by and between Aesthetica, Ltd. and Ipsen, Ltd.(38)10.46(a)
    
    
    Medicis 2006 Incentive Award Plan(39)10.46(b)
    
    
    Amendment to the Medicis 2006 Incentive Award Plan, dated July 10, 2006(41)10.46(c)
    
    
    Amendment No. 2 to the Medicis 2006 Incentive Award Plan, dated April 11, 2007(46)10.46(d)
    
    
    Amendment No. 3 to the Medicis 2006 Incentive Award Plan, dated April 16, 2007(45)10.46(e)
    
    
    Form of Stock Option Agreement for Medicis Pharmaceutical Corporation 2006 Incentive Award
Plan(48)10.46(f)
    
    
    Form of Restricted Stock Agreement for Medicis Pharmaceutical Corporation 2006 Incentive
Award Plan(48)10.47
    
    
    Employment Agreement, dated July 25, 2006, between Medicis Pharmaceutical Corporation and
Mark A. Prygocki, Sr.(40)10.48
    
    
    Employment Agreement, dated July 25, 2006, between Medicis Pharmaceutical Corporation and
Mitchell S. Wortzman, Ph.D.(40)10.49
    
    
    Employment Agreement, dated July 25, 2006, between Medicis Pharmaceutical Corporation and
Richard J. Havens(40)10.50
    
    
    Employment Agreement, dated July 27, 2006, between Medicis Pharmaceutical Corporation and
Jason D. Hanson(40)10.51
    
    *
    Office Sublease by and between Apex 7720 North Dobson, L.L.C., an Arizona limited liability
company, and Medicis Pharmaceutical Corporation, dated as of July 26, 2006(42)10.52
    
    
    Corporate Integrity Agreement between the Office of Inspector General of the department of
Health and Human Services and Medicis Pharmaceutical Corporation(44)10.53
    
    *
    Collaboration Agreement, dated as of August 23, 2007, by and between Ucyclyd Pharma, Inc. and
Hyperion Therapuetics, Inc.(47)10.54
    
    
    Employment Agreement, dated December 23, 2008, by and between the Company and Joseph P.
Cooper (50)10.55
    
    
    Amended and Restated Employment Agreement, dated December 23, 2008, by and between the
Company and Jason D. Hanson(50)10.56
    
    
    Employment Agreement, dated December 23, 2008, by and between the Company and Vincent P.
Ippolito (50)10.57
    
    
    Employment Agreement, dated December 23, 2008, by and between the Company and Richard D.
Peterson (50)10.58
    
    
    Amended and Restated Employment Agreement, dated December 23, 2008, by and between the
Company and Mark A. Prygocki (50)10.59
    
    
    Amended and Restated Employment Agreement, dated December 23, 2008, by and between the
Company and Mitchell S. Wortzman, Ph.D. (50)10.60
    
    
    Fourth Amendment to Employment Agreement, dated December 23, 2008, by and between the Company
and Jonah Shacknai (50)10.61
    
    *
    Joint Development Agreement, dated as of November 26, 2008, between the Company and Impax
Laboratories, Inc.10.62
    
    *
    License and Settlement Agreement, dated as of November 26, 2008, between the Company and
Impax Laboratories, Inc.10.63
    
    
    Amendment No. 4 to the Medicis 2006 Incentive Award Plan, dated March 26, 2009.(52)10.64
    
    *
    Settlement Agreement, dated March 18, 2009, between the Company and Barr Laboratories, Inc.,
a wholly owned subsidiary of Teva Pharmaceuticals USA, Inc.(52)10.65
    
    *
    License and Settlement Agreement, dated April 8, 2009, between the Company and Perrigo Israel
Pharmaceuticals Ltd. and Perrigo Company.(52)10.66
    
    *
    Joint Development Agreement, dated April 8, 2009, between the Company and Perrigo Israel
Pharmaceuticals Ltd.(52)10.67
    
    
    Form of Indemnification Agreement for Directors and Officers of the Company.(52)10.68
    
    *
    Second Amendment to the Collaboration Agreement between Ucyclyd Pharma, Inc. and Hyperion
Therapeutics, Inc.(53)10.69
    
    
    Settlement Agreement and Mutual Releases, dated August 18, 2009 between the Company and
Sandoz, Inc.(54)10.70
    
    +*
    Transition Agreement, dated as of January 25, 2005, between the Company and aaiPharma Inc.10.71
    
    +*
    First Amendment to the Transition Agreement, dated as of August 11, 2006, between the Company
and aaiPharma Inc.10.72
    
    +*
    Second Amendment to the Transition Agreement, dated as of September 8, 2006, between the
Company and aaiPharma Inc.10.73
    
    +*
    Master Manufacturing Agreement, dated as of March 20, 2008, between Medicis Global
 91




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##### Table of Contents



Exhibit No.
    
    
    DescriptionServices Corporation and WellSpring Pharmaceutical Canada Corp.10.74
    
    +*
    License and Settlement Agreement, dated as of November 14, 2009, among the Company, Glenmark
Generics Ltd. and Glenmark Generics Inc., USA10.75
    
    +*
    Amended and Restated Settlement Agreement, dated as of November 13, 2009, between the Company
and Teva Pharmaceutical Industries Ltd.12
    
    +
    Computation of Ratios of Earnings to Fixed Charges21.1
    
    +
    Subsidiaries23.1
    
    +
    Consent of Independent Registered Public Accounting Firm24.1
    
    
    Power of Attorney See signature page31.1
    
    +
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act, as amended31.2
    
    +
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act, as amended32.1
    
    +
    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 200232.2
    
    +
    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
 
 +
    
    Filed herewith*
    
    Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request
for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.(1)
    
    Incorporated by reference to the Registration Statement on Form S-1 of the Registrant,
File No. 33-32918, filed with the SEC on January 16, 1990(2)
    
    Incorporated by reference to the Registration Statement on Form S-1 of the Company, File
No. 33-54276, filed with the SEC on June 11, 1993(3)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended June 30, 1993, File No. 0-18443, filed with the SEC on October 13, 1993(4)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended June 30, 1995, File No. 0-18443, previously filed with the SEC (the 1994 Form 10-K)(5)
    
    Incorporated by reference to the Companys 1995 Form 10-K(6)
    
    Incorporated by reference to the Companys 1995 Form 10-K(7)
    
    Incorporated by reference to the Companys 1995 Form 10-K(8)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended June 30, 1996, File No. 0-18443, previously filed with the SEC(9)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997, File No. 0-18443, previously filed with the SEC(10)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended December 31, 1996, File No. 0-18443, previously filed with the SEC(11)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed with the SEC
on December 15, 1997(12)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended December 31, 1998, File No. 001-14471, previously filed with the SEC(13)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed with the SEC
on July 13, 2006(14)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended June 30, 1999, File No. 001-14471, previously filed with the SEC(15)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 2001, File No. 001-14471, previously filed with the SEC(16)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended June 30, 2001, File No. 001-14471, previously filed with the SEC(17)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed with the SEC
on October 2, 2001(18)
    
    Incorporated by reference to the Companys registration statement on Form 8-A12B/A filed
with the SEC
on June 4, 2002(19)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed with the SEC
on
June 6, 2002(20)
    
    Incorporated by reference to the Companys Annual Report on Form
10-K for the fiscal year ended June 30, 2002, File No. 0-18443, previously filed with the
SEC(21)
    
    Incorporated by reference to the Companys Current Report on Form 92




---



##### Table of Contents



8-K filed with the SEC on March 10, 2003(22)
    
    Incorporated by reference to the Companys Quarterly Report on
Form 10-Q for the quarter ended December 31, 2003, File No. 001-14471, previously filed with
the SEC(23)
    
    Incorporated by reference to the Companys Annual Report on Form
10-K for the fiscal year ended June 30, 2004, File No. 001-14471, previously filed with the
SEC(24)
    
    Incorporated by reference to the Companys Current Report on Form
8-K filed with the SEC on March 21, 2005(25)
    
    Incorporated by reference to the Companys Quarterly Report on
Form 10-Q for the quarter ended March 31, 2005, File No. 001-14471, previously filed with
the SEC(26)
    
    Incorporated by reference to the Companys Current Report on
Form 8-K filed with the SEC on August 18, 2005(27)
    
    Incorporated by reference to the Companys Annual Report on
Form 10-K for the fiscal year ended June 30, 2005, File No. 001-14471, previously filed with
the SEC(28)
    
    Incorporated by reference to the Companys Current Report on
Form 8-K filed with the SEC on October 20, 2005(29)
    
    Incorporated by reference to the Companys Annual Report on
Form 10-K/A for the fiscal year ended June 30, 2005, File No. 001-14471, previously filed
with the
SEC on October 28, 2005(30)
    
    Incorporated by reference to the Companys Quarterly Report on
Form 10-Q for the quarter ended September 30, 2005, File No. 001-14471, previously filed
with the SEC(31)
    
    Incorporated by reference to the Companys Current Report on
Form 8-K filed with the SEC on December 13, 2005(32)
    
    Incorporated by reference to the Companys Current Report on
Form 8-K filed with the SEC on January 3, 2006(33)
    
    Incorporated by reference to Appendix 1 to the Companys definitive Proxy Statement for
the 1998 Annual
Meeting of Stockholders filed with the SEC on December 2, 1998(34)
    
    Incorporated by reference to Appendix 2 to the Companys definitive Proxy Statement for
the 1996 Annual
Meeting of Stockholders filed with the SEC on October 23, 1996(35)
    
    Incorporated by reference to Exhibit B to the Companys definitive Proxy Statement for
the 1992 Annual
Meeting of Stockholders previously filed with the SEC(36)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K/T for the six month
transition
period ended December 31, 2005, File No. 001-14471, previously filed with the SEC on March
16, 2006(37)
    
    Incorporated by reference to the Companys Current Report on
Form 8-K filed with the SEC on March 16, 2006(38)
    
    Incorporated by reference to the Companys Quarterly Report on
Form 10-Q for the quarter ended March 31, 2006, File No. 001-14471, previously filed with
the SEC(39)
    
    Incorporated by reference to Appendix A to the Companys Definitive Proxy Statement for
the 2006
Annual Meeting of Stockholders filed with the SEC on April 13, 2006(40)
    
    Incorporated by reference to the Companys Current Report on
Form 8-K filed with the SEC on July 31, 2006(41)
    
    Incorporated by reference to the Companys Quarterly Report on
Form 10-Q for the quarter ended June 30, 2006, File No. 001-14471, previously filed with
the SEC(42)
    
    Incorporated by reference to the Companys Quarterly Report on
Form 10-Q for the quarter ended September 30, 2006, File No. 001-14471, previously filed
with the SEC(43)
    
    Incorporated by reference to the Companys Current Report on
Form 8-K filed with the SEC on February 18, 2009(44)
    
    Incorporated by reference to the Companys Current Report on
Form 8-K filed with the SEC on April 30, 2007(45)
    
    Incorporated by reference to Appendix A to the Companys Definitive Proxy Statement on
Schedule 14A filed with the SEC on April 16, 2007(46)
    
    Incorporated by reference to the Companys Registration Statement on Form S-8 dated
September 3, 2007(47)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended
September 30, 2007, File No. 001-14471, previously filed with the SEC(48)
    
    Incorporated by reference to the Companys Annual Report on
Form 10-K for the year ended December 31, 2007, File No. 001-14471, previously filed with
the SEC(49)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2008, File No. 001-14471, previously filed with the SEC. 93




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##### Table of Contents



(50)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed with the SEC
on December 30, 2008(51)
    
    Incorporated by reference to the Companys Annual Report on 10-K for the year ended
December 31, 2008, File No. 0-14471, previously filed with the SEC(52)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 2009, File No. 001-14471, previously filed with the SEC.(53)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2009, File No. 001-14471, previously filed with the SEC.(54)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended September 30, 2009, File No. 001-14471, previously filed with the SEC. (b)
    
    The exhibits to this Form 10-K follow the Companys Financial Statement Schedule included in
this Form 10-K.
 (c)
    
    The Financial Statement Schedule to this Form 10-K appears on page S-1 of this Form 10-K.
 94




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##### Table of Contents



SIGNATURES
   MEDICIS PHARMACEUTICAL CORPORATIONBy:
    /s/ JONAH SHACKNAIJonah ShacknaiChairman of the Board and Chief Executive Officer POWER OF ATTORNEY
   SIGNATURE
    
    TITLE
    
    DATE/s/ JONAH SHACKNAI

Jonah Shacknai
    
    Chairman of the Board of Directors and
Chief Executive Officer
(Principal Executive Officer)
    
    March 1, 2010/s/ RICHARD D. PETERSON

Richard D. Peterson
    
    Executive Vice President, Chief Financial
Officer, and
Treasurer
(Principal Financial and Accounting Officer)
    
    March 1, 2010/s/ ARTHUR G. ALTSCHUL, JR.

Arthur G. Altschul, Jr.
    
    Director
    
    March 1, 2010/s/ SPENCER DAVIDSON

Spencer Davidson
    
    Director
    
    March 1, 2010/s/ STUART DIAMOND

Stuart Diamond
    
    Director
    
    March 1, 2010/s/ PETER S. KNIGHT, ESQ.

Peter S. Knight, Esq.
    
    Director
    
    March 1, 2010/s/ MICHAEL A. PIETRANGELO

Michael A. Pietrangelo
    
    Director
    
    March 1, 2010/s/ PHILIP S. SCHEIN, M.D.

Philip S. Schein, M.D.
    
    Director
    
    March 1, 2010/s/ LOTTIE SHACKELFORD

Lottie Shackelford
    
    Director
    
    March 1, 2010
 95




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##### Table of Contents



MEDICIS PHARMACEUTICAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PAGEReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2009
and 2008
    
    
    F-3Consolidated Statements of Income for the years ended
December 31, 2009, 2008 and 2007
    
    
    F-5Consolidated Statements of Stockholders Equity for the
years ended December 31, 2009, 2008 and 2007
    
    
    F-6Consolidated Statements of Cash Flows for the years ended
December 31, 2009, 2008 and 2007
    
    
    F-8Notes to Consolidated Financial Statements
    
    
    F-9
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 To the Board of Directors and Stockholders of Medicis Pharmaceutical Corporation
     /s/ Ernst & Young LLP 
 F-2




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##### Table of Contents



MEDICIS PHARMACEUTICAL CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
(in thousands)
 DECEMBER 31,2009
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    209,051
    
    
    $
    86,450Short-term investments
    
    
    319,229
    
    
    
    257,435Accounts receivable, less allowances:December 31, 2009 and 2008: $2,848
and $1,719, respectively
    
    
    95,222
    
    
    
    52,588Inventories, net
    
    
    25,985
    
    
    
    24,226Deferred tax assets, net
    
    
    66,321
    
    
    
    53,161Other current assets
    
    
    16,525
    
    
    
    19,676Total current assets
    
    
    732,333
    
    
    
    493,536Property and equipment, net
    
    
    25,247
    
    
    
    26,300Net intangible assets
    
    
    227,840
    
    
    
    161,429Goodwill
    
    
    93,282
    
    
    
    156,762Deferred tax assets, net
    
    
    64,947
    
    
    
    77,149Long-term investments
    
    
    25,524
    
    
    
    55,333Other assets
    
    
    3,025
    
    
    
    2,925$
    1,172,198
    
    
    $
    973,434
  F-3




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##### Table of Contents



MEDICIS PHARMACEUTICAL CORPORATION

CONSOLIDATED BALANCE SHEETS, Continued

(in thousands, except share amounts)
 DECEMBER 31,2009
    
    
    2008LiabilitiesCurrent liabilities:Accounts payable
    
    $
    44,183
    
    
    $
    39,032Reserve for sales returns
    
    
    48,062
    
    
    
    59,611Accrued consumer rebate and loyalty programs
    
    
    73,311
    
    
    
    28,449Managed care and Medicaid reserves
    
    
    47,078
    
    
    
    16,956Income taxes payable
    
    
    16,679
    
    
    
    Other current liabilities
    
    
    68,381
    
    
    
    41,853Total current liabilities
    
    
    297,694
    
    
    
    185,901Long-term liabilities:Contingent convertible senior notes
    
    
    169,326
    
    
    
    169,326Other liabilities
    
    
    9,919
    
    
    
    14,513Stockholders EquityPreferred stock, $0.01 par value; shares
authorized: 5,000,000; no shares issued
    
    
    
    
    
    
    Class A common stock, $0.014 par value;
shares authorized: 150,000,000; issued and
outstanding: 70,732,409 and 69,396,394 at
December 31, 2009 and December 31, 2008,
respectively
    
    
    985
    
    
    
    969Class B common stock, $0.014 par value; shares
authorized: 1,000,000; issued and outstanding: none
    
    
    
    
    
    
    Additional paid-in capital
    
    
    690,497
    
    
    
    661,703Accumulated other comprehensive (loss) income
    
    
    (3,814
    )
    
    
    2,106Accumulated earnings
    
    
    351,842
    
    
    
    282,284Less: Treasury stock, 12,749,261 and 12,678,559 shares
at cost at December 31, 2009 and December 31,
2008, respectively
    
    
    (344,251
    )
    
    
    (343,368
    )Total stockholders equity
    
    
    695,259
    
    
    
    603,694$
    1,172,198
    
    
    $
    973,434
  F-4




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##### Table of Contents



MEDICIS PHARMACEUTICAL CORPORATION
 
 CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
 YEARS ENDED DECEMBER 31,2009
    
    
    2008
    
    
    2007Net product revenues
    
    $
    561,761
    
    
    $
    500,977
    
    
    $
    441,868Net contract revenues
    
    
    10,154
    
    
    
    16,773
    
    
    
    15,526Net revenues
    
    
    571,915
    
    
    
    517,750
    
    
    
    457,394Cost of product revenues (1)
    
    
    56,833
    
    
    
    38,714
    
    
    
    56,110Gross profit
    
    
    515,082
    
    
    
    479,036
    
    
    
    401,284Operating expenses:Selling, general and administrative (2)
    
    
    282,950
    
    
    
    279,768
    
    
    
    242,633Research and development (3)
    
    
    71,765
    
    
    
    99,916
    
    
    
    39,428Depreciation and amortization
    
    
    29,047
    
    
    
    27,698
    
    
    
    24,548In-process research and development
    
    
    
    
    
    
    30,500
    
    
    
    Impairment of intangible assets
    
    
    
    
    
    
    
    
    
    
    4,067Operating income
    
    
    131,320
    
    
    
    41,154
    
    
    
    90,608Interest and investment income
    
    
    (7,631
    )
    
    
    (23,396
    )
    
    
    (38,390
    )Interest expense
    
    
    4,228
    
    
    
    6,674
    
    
    
    10,018Other (income) expense, net
    
    
    (867
    )
    
    
    15,470
    
    
    
    Income before income tax expense
    
    
    135,590
    
    
    
    42,406
    
    
    
    118,980Income tax expense
    
    
    59,639
    
    
    
    32,130
    
    
    
    48,544Net income
    
    $
    75,951
    
    
    $
    10,276
    
    
    $
    70,436Basic net income per share
    
    $
    1.29
    
    
    $
    0.18
    
    
    $
    1.25Diluted net income per share
    
    $
    1.21
    
    
    $
    0.18
    
    
    $
    1.07Cash dividend declared per common share
    
    $
    0.16
    
    
    $
    0.16
    
    
    $
    0.12Common shares used in calculating:Basic net income per share
    
    
    57,252
    
    
    
    56,567
    
    
    
    55,988Diluted net income per share
    
    
    63,172
    
    
    
    56,567
    
    
    
    71,179
 
 (1)  amounts exclude amortization
of intangible assets related to
acquired products
    
    $
    22,378
    
    
    $
    21,479
    
    
    $
    21,606(2)   amounts include share-based
compensation expense
    
    $
    18,122
    
    
    $
    16,265
    
    
    $
    21,031(3)   amounts include share-based
compensation expense
    
    $
    1,053
    
    
    $
    332
    
    
    $
    112
  F-5




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##### Table of Contents



MEDICIS PHARMACEUTICAL CORPORATION
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(in thousands)
 Class A
    
    
    Class BCommon Stock
    
    
    Common StockShares
    
    
    Amount
    
    
    Shares
    
    
    AmountBalance at December 31, 2006
    
    
    68,044
    
    
    $
    952
    
    
    
    
    
    
    $
    Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net unrealized gains on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive incomeAdjustment for adoption of FIN 48 (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted shares issued for deferred compensation
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    Restricted shares held in lieu of employee taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    924
    
    
    
    13
    
    
    
    
    
    
    
    Tax effect of stock options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2007
    
    
    69,005
    
    
    
    965
    
    
    
    
    
    
    
    Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net unrealized gains on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive incomeShare-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted shares issued for deferred compensation
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    Restricted shares held in lieu of employee taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    281
    
    
    
    4
    
    
    
    
    
    
    
    Tax effect of stock options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2008
    
    
    69,396
    
    
    
    969
    
    
    
    
    
    
    
    Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net unrealized losses on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive incomeAdjustment for adoption of FSP FAS 115-2 (b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted shares issued for deferred compensation
    
    
    202
    
    
    
    
    
    
    
    
    
    
    
    Restricted shares held in lieu of employee taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    1,134
    
    
    
    16
    
    
    
    
    
    
    
    Tax effect of stock options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2009
    
    
    70,732
    
    
    $
    985
    
    
    
    
    
    
    $
    
 
 (a)
    
    FIN 48 is now part of ASC 740, Income Taxes.(b)
    
    FSP FAS 115-2 is now part of ASC 320, Investments  Debt and Equity Securities.  F-6




---



##### Table of Contents



AccumulatedAdditional
    
    Other
    
    
    
    
    
    
    TreasuryPaid-in
    
    Comprehensive
    
    
    Accumulated
    
    
    StockCapital
    
    Income (Loss)
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    Total$598,435
    
    $
    537
    
    
    $
    218,392
    
    
    
    (12,650
    )
    
    $
    (342,796
    )
    
    $
    475,520
    
    
    
    
    
    
    70,436
    
    
    
    
    
    
    
    
    
    
    
    70,436
    
    
    885
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    885
    
    
    799
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79972,120
    
    
    
    
    
    
    (808
    )
    
    
    
    
    
    
    
    
    
    
    (808
    )21,143
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,143
    
    
    
    
    
    
    (6,802
    )
    
    
    
    
    
    
    
    
    
    
    (6,802
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (214
    )
    
    
    (214
    )19,739
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,7522,590
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,590641,907
    
    
    2,221
    
    
    
    281,218
    
    
    
    (12,656
    )
    
    
    (343,010
    )
    
    
    583,301
    
    
    
    
    
    
    10,276
    
    
    
    
    
    
    
    
    
    
    
    10,276
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    (143
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (143
    )10,16116,597
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,597
    
    
    
    
    
    
    (9,210
    )
    
    
    
    
    
    
    
    
    
    
    (9,210
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    (358
    )
    
    
    (358
    )4,842
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,846(1,643)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,643
    )661,703
    
    
    2,106
    
    
    
    282,284
    
    
    
    (12,679
    )
    
    
    (343,368
    )
    
    
    603,694
    
    
    
    
    
    
    75,951
    
    
    
    
    
    
    
    
    
    
    
    75,951
    
    
    (2,814
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,814
    )
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )73,126
    
    
    (3,095
    )
    
    
    3,095
    
    
    
    
    
    
    
    
    
    
    
    13,556
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,556
    
    
    
    
    
    
    (9,488
    )
    
    
    
    
    
    
    
    
    
    
    (9,488
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70
    )
    
    
    (883
    )
    
    
    (883
    )16,107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,123(869)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (869
    )$690,497
    
    $
    (3,814
    )
    
    $
    351,842
    
    
    
    (12,749
    )
    
    $
    (344,251
    )
    
    $
    695,259
 F-7




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##### Table of Contents



MEDICIS PHARMACEUTICAL CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 YEARS ENDED DECEMBER 31,2009
    
    
    2008
    
    
    2007Operating Activities:Net income
    
    $
    75,951
    
    
    $
    10,276
    
    
    $
    70,436Adjustments to reconcile net income to
net cash provided by operating activities:In-process research and development
    
    
    
    
    
    
    30,500
    
    
    
    Depreciation and amortization
    
    
    29,046
    
    
    
    27,698
    
    
    
    24,548Amortization of deferred financing fees
    
    
    
    
    
    
    666
    
    
    
    1,519Impairment of intangible assets
    
    
    
    
    
    
    
    
    
    
    4,067Loss on disposal of property and equipment
    
    
    
    
    
    
    20
    
    
    
    19(Gain) loss on sale of product rights
    
    
    (350
    )
    
    
    398
    
    
    
    259Gain on sale of Medicis Pediatrics
    
    
    (2,915
    )
    
    
    
    
    
    
    Impairment of available-for-sale investments
    
    
    
    
    
    
    6,400
    
    
    
    Charge reducing value of investment in Revance
    
    
    2,886
    
    
    
    9,071
    
    
    
    Gain on sale of available-for-sale investments, net
    
    
    (1,609
    )
    
    
    (1,020
    )
    
    
    (105
    )Share-based compensation expense
    
    
    19,175
    
    
    
    16,597
    
    
    
    21,143Deferred income tax (benefit) expense
    
    
    (3,408
    )
    
    
    (42,690
    )
    
    
    14,027Tax (expense) benefit from exercise of stock options and
vesting of restricted stock awards
    
    
    (925
    )
    
    
    (1,643
    )
    
    
    2,590Excess tax benefits from share-based payment arrangements
    
    
    (241
    )
    
    
    (169
    )
    
    
    (1,494
    )Increase (decrease) in provision for sales discounts
and chargebacks
    
    
    1,129
    
    
    
    888
    
    
    
    (1,318
    )Accretion (amortization) of premium/(discount) on investments
    
    
    3,273
    
    
    
    (60
    )
    
    
    (3,369
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (43,763
    )
    
    
    (30,259
    )
    
    
    50,777Inventories
    
    
    (1,759
    )
    
    
    6,693
    
    
    
    (2,957
    )Other current assets
    
    
    3,152
    
    
    
    (1,176
    )
    
    
    (2,060
    )Accounts payable
    
    
    5,151
    
    
    
    3,707
    
    
    
    (12,622
    )Reserve for sales returns
    
    
    (11,549
    )
    
    
    (9,176
    )
    
    
    (18,625
    )Income taxes payable
    
    
    16,679
    
    
    
    (7,731
    )
    
    
    (4,420
    )Other current liabilities
    
    
    93,981
    
    
    
    28,417
    
    
    
    8,000Other liabilities
    
    
    (6,019
    )
    
    
    (1,637
    )
    
    
    8,529Net cash provided by operating activities
    
    
    177,885
    
    
    
    45,770
    
    
    
    158,944Investing Activities:Purchase of property and equipment
    
    
    (5,339
    )
    
    
    (11,071
    )
    
    
    (10,020
    )Equity investment in an unconsolidated entity
    
    
    (616
    )
    
    
    
    
    
    
    (11,957
    )LipoSonix acquisition, net of cash acquired
    
    
    
    
    
    
    (149,805
    )
    
    
    Payment of direct merger costs
    
    
    
    
    
    
    (3,637
    )
    
    
    Payments for purchase of product rights
    
    
    (88,860
    )
    
    
    (1,024
    )
    
    
    (30,394
    )Proceeds from sale of product rights
    
    
    350
    
    
    
    
    
    
    
    1,000Proceeds from sale of Medicis Pediatrics
    
    
    70,294
    
    
    
    
    
    
    
    Purchase of available-for-sale investments
    
    
    (414,527
    )
    
    
    (393,862
    )
    
    
    (741,075
    )Sale of available-for-sale investments
    
    
    131,914
    
    
    
    417,536
    
    
    
    291,804Maturity of available-for-sale investments
    
    
    244,553
    
    
    
    361,988
    
    
    
    231,156Decrease (increase) in other assets
    
    
    5
    
    
    
    (34
    )
    
    
    Net cash (used in) provided by investing activities
    
    
    (62,226
    )
    
    
    220,091
    
    
    
    (269,486
    )Financing Activities:Payment of dividends
    
    
    (9,411
    )
    
    
    (8,600
    )
    
    
    (6,771
    )Payment of contingent convertible senior notes
    
    
    
    
    
    
    (283,729
    )
    
    
    (5
    )Proceeds from the exercise of stock options
    
    
    16,123
    
    
    
    4,846
    
    
    
    19,752Excess tax benefits from share-based payment arrangements
    
    
    241
    
    
    
    169
    
    
    
    1,494Net cash provided by (used in) financing activities
    
    
    6,953
    
    
    
    (287,314
    )
    
    
    14,470Effect of exchange rate on cash and cash equivalents
    
    
    (11
    )
    
    
    (143
    )
    
    
    799Net increase (decrease) in cash and cash equivalents
    
    
    122,601
    
    
    
    (21,596
    )
    
    
    (95,273
    )Cash and cash equivalents at beginning of period
    
    
    86,450
    
    
    
    108,046
    
    
    
    203,319Cash and cash equivalents at end of period
    
    $
    209,051
    
    
    $
    86,450
    
    
    $
    108,046
  F-8




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##### Table of Contents



MEDICIS PHARMACEUTICAL CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. THE COMPANY AND BASIS OF PRESENTATION
  ® ® ® ® ® ®
  The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principlesa
replacement of FASB Statement No. 162
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Cash and Cash Equivalents
  Short-Term and Long-Term Investments
  F-9




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##### Table of Contents



Inventories
    DECEMBER 31,2009
    
    
    2008Raw materials
    
    $
    7,472
    
    
    $
    4,462Work-in-process
    
    
    3,660
    
    
    
    2,508Finished goods
    
    
    21,087
    
    
    
    18,671Valuation reserve
    
    
    (6,234
    )
    
    
    (1,415
    )Total inventories
    
    $
    25,985
    
    
    $
    24,226
   Property and Equipment
  DECEMBER 31,2009
    
    
    2008Furniture, fixtures and equipment
    
    $
    31,765
    
    
    $
    26,661Leasehold improvements
    
    
    14,655
    
    
    
    14,48946,420
    
    
    
    41,150Less: accumulated depreciation
    
    
    (21,173
    )
    
    
    (14,850
    )$
    25,247
    
    
    $
    26,300
 F-10




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##### Table of Contents



Goodwill
   Balance at December 31, 2007
    
    $
    63,107Acquisition of Liposonix (see Note 8)
    
    
    93,655Balance at December 31, 2008
    
    
    156,762Sale of Medicis Pediatrics (see Note 6)
    
    
    (63,107
    )Adjustment of LipoSonix tax
attributes acquired
    
    
    (373
    )Balance at December 31, 2009
    
    $
    93,282
  Intangible Assets
  Weighted
    
    
    December 31, 2009
    
    
    December 31, 2008Average
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedLife
    
    
    Gross
    
    
    Amortization
    
    
    Net
    
    
    Gross
    
    
    Amortization
    
    
    NetRelated to product line acquisitions
    
    
    15.6
    
    
    $
    320,796
    
    
    $
    (107,278
    )
    
    $
    213,518
    
    
    $
    253,142
    
    
    $
    (107,377
    )
    
    $
    145,765Related to business combinations
    
    
    10.0
    
    
    
    9,400
    
    
    
    (1,005
    )
    
    
    8,395
    
    
    
    14,482
    
    
    
    (5,176
    )
    
    
    9,306Patents and trademarks
    
    
    19.3
    
    
    
    7,598
    
    
    
    (1,671
    )
    
    
    5,927
    
    
    
    7,752
    
    
    
    (1,394
    )
    
    
    6,358Total intangible assets
    
    
    
    
    
    $
    337,794
    
    
    $
    (109,954
    )
    
    $
    227,840
    
    
    $
    275,376
    
    
    $
    (113,947
    )
    
    $
    161,429
  F-11




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##### Table of Contents



Impairment of Long-Lived Assets
   ®
 ®
 Managed Care and Medicaid Reserves
  Consumer Rebate and Loyalty Programs
  Other Current Liabilities
  DECEMBER 31,2009
    
    
    2008Accrued incentives
    
    $
    26,671
    
    
    $
    18,910Deferred revenue
    
    
    18,508
    
    
    
    3,341Other accrued expenses
    
    
    23,202
    
    
    
    19,602$
    68,381
    
    
    $
    41,853
 F-12




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##### Table of Contents



Revenue Recognition
 Revenue Recognition in Financial Statements Revenue
Recognition
  TM ® ®
 Advertising
  F-13




---



##### Table of Contents



Share-Based Compensation
    WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber
    
    
    Exercise
    
    
    Contractual
    
    
    Intrinsicof Shares
    
    
    Price
    
    
    Term
    
    
    Value| | | |Balance at December 31, 2008
    
    
    10,707,357
    
    
    $
    27.98Granted
    
    
    182,017
    
    
    $
    13.94Exercised
    
    
    (1,134,415
    )
    
    $
    14.21Terminated/expired
    
    
    (501,112
    )
    
    $
    30.70Balance at December 31, 2009
    
    
    9,253,847
    
    
    $
    29.24
    
    
    
    3.0
    
    
    $
    11,860,331
   WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber
    
    
    Exercise
    
    
    Contractual
    
    
    Intrinsicof Shares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding, net of expected forfeitures
    
    
    8,480,159
    
    
    $
    29.34
    
    
    
    3.1
    
    
    $
    10,739,330Exercisable
    
    
    8,179,147
    
    
    $
    29.62
    
    
    
    2.9
    
    
    $
    8,485,569
 F-14




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##### Table of Contents



YEAR ENDEDDECEMBER 31, 2009
    
    DECEMBER 31, 2008
    
    DECEMBER 31, 2007Expected dividend yield
    
    0.3% to 1.0%
    
    0.6% to 0.7%
    
    
    0.4
    %Expected stock price volatility
    
    0.45 to 0.46
    
    0.35 to 0.38
    
    
    0.35Risk-free interest rate
    
    2.2% to 2.8%
    
    3.0% to 3.4%
    
    4.5% to 4.8%Expected life of options
    
    7.0 Years
    
    7.0 Years
    
    7.0 Years
     Weighted-AverageGrant-DateNonvested Shares
    
    Shares
    
    
    Fair ValueNonvested at December 31, 2008
    
    
    1,204,851
    
    
    $
    23.38Granted
    
    
    975,173
    
    
    $
    11.28Vested
    
    
    (201,600
    )
    
    $
    25.35Forfeited
    
    
    (62,955
    )
    
    $
    20.08Nonvested at December 31, 2009
    
    
    1,915,469
    
    
    $
    17.12
  Stock Appreciation Rights
  F-15




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##### Table of Contents



SARS Granted During
    
    
    Remeasurementthe Year Ended
    
    
    as ofDecember 31, 2009
    
    
    December 31, 2009Expected dividend yield
    
    0.3% to 1.0%
    
    
    0.6%Expected stock price volatility
    
    
    0.38 to 0.46
    
    
    
    0.34Risk-free interest rate
    
    2.2% to 3.0%
    
    
    3.4Expected life of SARs
    
    7.0 years
    
    
    6.2 to 6.8 years
   WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber
    
    
    Exercise
    
    
    Contractual
    
    
    Intrinsicof SARs
    
    
    Price
    
    
    Term
    
    
    Value| | | |Balance at December 31, 2008
    
    
    
    
    
    $
    Granted
    
    
    2,039,558
    
    
    $
    11.39Exercised
    
    
    
    
    
    $
    Terminated/expired
    
    
    (123,402
    )
    
    $
    11.28Balance at December 31, 2009
    
    
    1,916,156
    
    
    $
    11.40
    
    
    
    6.2
    
    
    $
    29,991,583
   Shipping and Handling Costs
  F-16




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##### Table of Contents



Research and Development Costs and Accounting for Strategic Collaborations
   Income Taxes
  Legal Contingencies
  Foreign Currency Translations
 .
 Earnings Per Common Share
 Earnings Per Share
 F-17




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##### Table of Contents



Use of Estimates and Risks and Uncertainties
   Fair Value of Financial Instruments
  Supplemental Disclosure of Cash Flow Information
  Accumulated Other Comprehensive (Loss) Income
  Recent Accounting Pronouncements
 Fair Value Measurements and
Disclosures
 F-18




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##### Table of Contents



Financial Instruments
 Subsequent Events
 New Consolidation Guidance for
Variable Interest Entities (VIE), Consolidation of Variable Interest
Entities
 Revenue Recognition Multiple  Deliverable Revenue Arrangements Revenue Arrangements with Multiple Deliverables. Revenue Recognition  Multiple Element Arrangements
 3. SEGMENT AND PRODUCT INFORMATION
 ® ® ® ® ® TM ® ® ® ® ® ® TM
 F-19




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##### Table of Contents



® ®
 YEARS ENDED DECEMBER 31,2009
    
    
    2008
    
    
    2007McKesson
    
    
    40.8
    %
    
    
    45.8
    %
    
    
    52.2
    %Cardinal
    
    
    37.1
    %
    
    
    21.2
    %
    
    
    16.9
    %
 ® ® TM
  YEARS ENDED DECEMBER 31,2009
    
    
    2008
    
    
    2007Acne and acne-related
dermatological products
    
    $
    398,861
    
    
    $
    325,020
    
    
    $
    243,414Non-acne dermatological products
    
    
    133,595
    
    
    
    147,954
    
    
    
    172,902Non-dermatological products
    
    
    39,459
    
    
    
    44,776
    
    
    
    41,078Total net revenues
    
    $
    571,915
    
    
    $
    517,750
    
    
    $
    457,394
 YEARS ENDED DECEMBER 31,2009
    
    
    2008
    
    
    2007Acne and acne-related
dermatological products
    
    
    70
    %
    
    
    63
    %
    
    
    53
    %Non-acne dermatological products
    
    
    23
    
    
    
    29
    
    
    
    38Non-dermatological products
    
    
    7
    
    
    
    8
    
    
    
    9Total net revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  4. STRATEGIC COLLABORATIONS
 Glenmark
   F-20




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##### Table of Contents



® ® ® ® ® ® ® ® ® ®
 Revance
   Hyperion
 ® ® ®
   F-21




---



##### Table of Contents



® ®
      Perrigo
  ® ® ®
 
    
    the Company granted Perrigo, effective December 15, 2013, or earlier upon the occurrence
of certain events, a license to make and sell generic versions of the existing
VANOS® products; and
    
    when Perrigo does commercialize generic versions of VANOS® products, Perrigo
will pay the Company a royalty based on sales of such generic products.Pursuant to the Perrigo Joint Development Agreement, subject to the terms and conditions
contained therein:
    
    the Company and Perrigo will collaborate to develop a novel proprietary product;
 F-22




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##### Table of Contents




    
    the Company has the sole right to commercialize the novel proprietary product;
    
    if and when an NDA for a novel proprietary product is submitted to the U.S. Food and
Drug Administration (FDA), the Company and Perrigo shall enter into a commercial supply
agreement pursuant to which, among other terms, for a period of three years following
approval of the NDA, Perrigo would exclusively supply to the Company all of the Companys
novel proprietary product requirements in the U.S.;
    
    the Company made an up-front $3.0 million payment to Perrigo and will make additional
payments to Perrigo of up to $5.0 million upon the achievement of certain development,
regulatory and commercialization milestones; and
    
    the Company will pay to Perrigo royalty payments on sales of the novel proprietary
product.
  IMPAX
 ® ®
 ® ® ®
 ® ®
  5.
    
    DEVELOPMENT AND DISTRIBUTION AGREEMENT WITH IPSEN FOR RIGHTS TO IPSENS BOTULINUM TOXIN TYPE
A PRODUCT KNOWN AS DYSPORTTM
 ®
 ®
 F-23




---



##### Table of Contents



TM ® TM TM TM
   6.
    
    SALE OF MEDICIS PEDIATRICS
   7.
    
    INVESTMENT IN REVANCE
  F-24




---



##### Table of Contents



8.
    
    ACQUISITION OF LIPOSONIX
 TM TM TM
 TM
  Cash consideration
    
    $
    150.0Transaction costs
    
    
    3.6$
    153.6
 F-25




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##### Table of Contents



Current assets
    
    $
    2.1Deferred tax assets, short-term
    
    
    3.8Deferred tax assets, long-term
    
    
    14.9Property and equipment
    
    
    0.7Identifiable intangible assets
    
    
    9.4In-process research and development
    
    
    30.5Goodwill
    
    
    93.7Accounts payable and other current liabilities
    
    
    (1.5
    )$
    153.6
       YEAR ENDED DECEMBER 31,2008
    
    2007(in millions, except per share data)Net revenues
    
    $
    518.5
    
    
    $
    457.4Net income
    
    
    4.6
    
    
    
    59.2Diluted net income per share
    
    $
    0.08
    
    
    $
    0.92
 9.
    
    SHORT-TERM AND LONG-TERM INVESTMENTS
  F-26




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##### Table of Contents



DECEMBER 31, 2009Other-ThanGross
    
    
    Gross
    
    
    TemporaryUnrealized
    
    
    Unrealized
    
    
    Impairment
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Losses
    
    
    ValueCorporate notes and bonds
    
    $
    98,993
    
    
    $
    506
    
    
    $
    (83
    )
    
    $
    
    
    
    $
    99,416Federal agency notes and bonds
    
    
    215,759
    
    
    
    221
    
    
    
    (203
    )
    
    
    
    
    
    
    215,777Auction rate floating securities
    
    
    35,000
    
    
    
    
    
    
    
    (8,179
    )
    
    
    
    
    
    
    26,821Asset-backed securities
    
    
    3,070
    
    
    
    25
    
    
    
    (356
    )
    
    
    
    
    
    
    2,739Total securities
    
    $
    352,822
    
    
    $
    752
    
    
    $
    (8,821
    )
    
    $
    
    
    
    $
    344,753
 DECEMBER 31, 2008Other-ThanGross
    
    
    Gross
    
    
    TemporaryUnrealized
    
    
    Unrealized
    
    
    Impairment
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Losses
    
    
    ValueCorporate notes and bonds
    
    $
    124,622
    
    
    $
    418
    
    
    $
    (429
    )
    
    $
    
    
    
    $
    124,611Federal agency notes and bonds
    
    
    117,040
    
    
    
    1,841
    
    
    
    
    
    
    
    
    
    
    
    118,881Auction rate floating securities
    
    
    44,625
    
    
    
    
    
    
    
    
    
    
    
    (6,400
    )
    
    
    38,225Asset-backed securities
    
    
    31,681
    
    
    
    
    
    
    
    (630
    )
    
    
    
    
    
    
    31,051Total securities
    
    $
    317,968
    
    
    $
    2,259
    
    
    $
    (1,059
    )
    
    $
    (6,400
    )
    
    $
    312,768
  DECEMBER 31, 2009EstimatedCost
    
    
    Fair ValueAvailable-for-saleDue in one year or less
    
    $
    142,256
    
    
    $
    142,120Due after one year
through five years
    
    
    175,566
    
    
    
    175,812Due after 10 years
    
    
    33,700
    
    
    
    25,524$
    351,522
    
    
    $
    343,456
  F-27




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##### Table of Contents



Recognition and Presentation of Other-Than-Temporary Impairments Investments  Debt and Equity Securities
 Financial Instruments The Fair Value Option for
Financial Assets and Financial Liabilities
  F-28




---



##### Table of Contents



Less Than 12 Months
    
    
    Greater Than 12 MonthsGross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    LossCorporate notes and bonds
    
    $
    18,968
    
    
    $
    83
    
    
    $
    
    
    
    $
    Federal agency notes and bonds
    
    
    103,635
    
    
    
    203
    
    
    
    
    
    
    
    Auction rate floating securities
    
    
    
    
    
    
    
    
    
    
    26,821
    
    
    
    8,179Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    1,193
    
    
    
    356Total securities
    
    $
    122,603
    
    
    $
    286
    
    
    $
    28,014
    
    
    $
    8,535
  10. FAIR VALUE MEASUREMENTS
    F-29




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##### Table of Contents



Fair Value Measurements and Disclosures Fair Value
Measurements)
 Fair Value Measurement at Reporting Date UsingQuoted
    
    
    SignificantPrices in
    
    
    Other
    
    
    SignificantActive
    
    
    Observable
    
    
    UnobservableMarkets
    
    
    Inputs
    
    
    InputsDec. 31, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Auction rate floating securities
    
    $
    26,821
    
    
    $
    
    
    
    $
    
    
    
    $
    26,821Other available-for-sale securities
    
    
    317,932
    
    
    
    317,932
    
    
    
    
    
    
    
    Investment in Hyperion
    
    
    2,375
    
    
    
    
    
    
    
    
    
    
    
    2,375Total assets measured at fair value
    
    $
    347,128
    
    
    $
    317,932
    
    
    $
    
    
    
    $
    29,196
  Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Auction Rate
    
    
    Investment
    
    
    InvestmentFloating
    
    
    in
    
    
    inSecurities
    
    
    Revance
    
    
    HyperionBalance at December 31, 2008
    
    $
    38,225
    
    
    $
    2,887
    
    
    $
    Total gains (losses) included in other
(income) expense, net
    
    
    1,525
    
    
    
    (2,887
    )
    
    
    Total losses included in other
comprehensive income
    
    
    (3,304
    )
    
    
    
    
    
    
    Common stock of Hyperion related
to amendment of collaboration
agreement (see Note 4)
    
    
    
    
    
    
    
    
    
    
    2,375Purchases and settlements (net)
    
    
    (9,625
    )
    
    
    
    
    
    
    Balance at December 31, 2009
    
    $
    26,821
    
    
    $
    
    
    
    $
    2,375
 11. CONTINGENT CONVERTIBLE SENIOR NOTES
   F-30




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##### Table of Contents




    
    during any quarter commencing after June 30, 2002, if the closing price of the Companys
Class A common stock over a specified number of trading days during the previous quarter,
including the last trading day of such quarter, is more than 110% of the conversion price
of the Old Notes, or $31.96. The Old Notes are initially convertible at a conversion price
of $29.05 per share, which is equal to a conversion rate of approximately 34.4234 shares
per $1,000 principal amount of Old Notes, subject to adjustment;
    
    if the Company has called the Old Notes for redemption;
    
    during the five trading day period immediately following any nine consecutive day
trading period in which the trading price of the Old Notes per $1,000 principal amount for
each day of such period was less than 95% of the product of the closing sale price of the
Companys Class A common stock on that day multiplied by the number of shares of the
Companys Class A common stock issuable upon conversion of $1,000 principal amount of the
Old Notes; or
    
    upon the occurrence of specified corporate transactions.
       F-31




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
    
    during any quarter commencing after September 30, 2003, if the closing price of the
Companys Class A common stock over a specified number of trading days during the previous
quarter, including the last trading day of such quarter, is more than 120% of the
conversion price of the New Notes, or $46.51. The Notes are initially convertible at a
conversion price of $38.76 per share, which is equal to a conversion rate of approximately
25.7998 shares per $1,000 principal amount of New Notes, subject to adjustment;
    
    if the Company has called the New Notes for redemption;
    
    during the five trading day period immediately following any nine consecutive day
trading period in which the trading price of the New Notes per $1,000 principal amount for
each day of such period was less than 95% of the product of the closing sale price of the
Companys Class A common stock on that day multiplied by the number of shares of the
Companys Class A common stock issuable upon conversion of $1,000 principal amount of the
New Notes; or
    
    upon the occurrence of specified corporate transactions.
   12. COMMITMENTS AND CONTINGENCIES
 Occupancy Arrangements
    F-32




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YEAR ENDING DECEMBER 31,2010
    
    $
    6,6352011
    
    
    4,5322012
    
    
    4,4812013
    
    
    4,4132014
    
    
    4,559Thereafter
    
    
    25,082$
    49,702
 Lease Exit Costs
 Exit or Disposal Cost Obligations Accounting for Costs Associated with Exit or Disposal Activities),
   Liability as of
    
    Amounts Charged
    
    Cash Payments
    
    Cash Received
    
    Liability as ofDecember 31, 2008
    
    to Expense
    
    Made
    
    from Sublease
    
    Dec. 31, 2009Lease exit costs
liability
    
    $
    3,996,102
    
    
    $
    211,545
    
    
    $
    (2,143,970
    )
    
    $
    
    
    
    $
    2,063,677
 Research and Development and Consulting Contracts
  F-33




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Medicaid Drug Rebates
  Department of Defense/TRICARE
  Legal Matters
 ® ® ® ®
 F-34




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® ® ®
 ® ® ® ® ® ®
 ® ® ®
  ®
 F-35




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® ® ®
 ® ® ® ®
 ® ® ® ® ® ® ® ®
 F-36




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® ® ®
 ® ® ® ®
 ® ® ® ®
  F-37




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13. INCOME TAXES
  YEARS ENDED DECEMBER 31,2009
    
    
    2008
    
    
    2007CurrentFederal
    
    $
    55,978
    
    
    $
    68,767
    
    
    $
    31,639State
    
    
    4,364
    
    
    
    3,631
    
    
    
    186Foreign
    
    
    2,704
    
    
    
    2,422
    
    
    
    3,19463,046
    
    
    
    74,820
    
    
    
    35,019DeferredFederal
    
    
    (2,873
    )
    
    
    (40,435
    )
    
    
    13,091State
    
    
    (534
    )
    
    
    (2,255
    )
    
    
    434(3,407
    )
    
    
    (42,690
    )
    
    
    13,525Total
    
    $
    59,639
    
    
    $
    32,130
    
    
    $
    48,544
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YEARS ENDED DECEMBER 31,2009
    
    
    2008
    
    
    2007Statutory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State tax rate, net of federal benefit
    
    
    0.9
    
    
    
    2.2
    
    
    
    0.9Share-based payments
    
    
    0.7
    
    
    
    2.4
    
    
    
    0.4Foreign taxes
    
    
    1.2
    
    
    
    3.3
    
    
    
    1.7Tax contingencies reserve
    
    
    
    
    
    
    0.3
    
    
    
    (0.4
    )Non-deductible research and
development
expense
    
    
    
    
    
    
    25.2
    
    
    
    Taxable gain in excess of book gain on
sale of subsidiary
    
    
    5.9
    
    
    
    
    
    
    
    Other non-deductible items
    
    
    0.7
    
    
    
    4.2
    
    
    
    1.3Credits and other
    
    
    (1.1
    )
    
    
    (4.5
    )
    
    
    (0.8
    )Valuation allowance
    
    
    0.7
    
    
    
    7.7
    
    
    
    2.744.0
    %
    
    
    75.8
    %
    
    
    40.8
    %
  DECEMBER 31,2009
    
    
    2008Current
    
    
    Long-term
    
    
    Current
    
    
    Long-termDeferred tax assets:Net operating loss carryforwards
    
    $
    7,177
    
    
    $
    2,706
    
    
    $
    7,558
    
    
    $
    13,547Reserves and liabilities
    
    
    59,104
    
    
    
    11,826
    
    
    
    46,037
    
    
    
    6,176Unrealized losses on securities
    
    
    40
    
    
    
    2,885
    
    
    
    
    
    
    
    2,319Excess of tax basis over net
book value of intangible assets
    
    
    
    
    
    
    83,204
    
    
    
    
    
    
    
    80,182Share-based payment awards
    
    
    
    
    
    
    18,511
    
    
    
    
    
    
    
    17,665Depreciation on property and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141Credits and other
    
    
    
    
    
    
    1,775
    
    
    
    
    
    
    
    1,38766,321
    
    
    
    120,907
    
    
    
    53,595
    
    
    
    121,417Deferred tax liabilities:Unrealized gains on securities
    
    
    
    
    
    
    
    
    
    
    (434
    )
    
    
    Bond interest
    
    
    
    
    
    
    (45,334
    )
    
    
    
    
    
    
    (37,605
    )Depreciation on property and equipment
    
    
    
    
    
    
    (3,009
    )
    
    
    
    
    
    
    
    
    
    
    (48,343
    )
    
    
    (434
    )
    
    
    (37,605
    )Valuation allowance
    
    
    
    
    
    
    (7,617
    )
    
    
    
    
    
    
    (6,663
    )Net deferred tax assets
    
    $
    66,321
    
    
    $
    64,947
    
    
    $
    53,161
    
    
    $
    77,149
 F-39




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F-40




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Accounting for Uncertainty in
Income Taxes Income Taxes
 2009
    
    
    2008
    
    
    2007Balance at beginning of period
    
    $
    2,512
    
    
    $
    3,410
    
    
    $
    4,310Additions based on tax positions related to the
current year
    
    
    118
    
    
    
    
    
    
    
    Additions for tax positions of prior years
    
    
    1,010
    
    
    
    
    
    
    
    200Reductions for tax positions of prior years
    
    
    
    
    
    
    
    
    
    
    (1,100
    )Settlements
    
    
    
    
    
    
    (898
    )
    
    
    Reductions due to lapse in statute of limitations
    
    
    (1,383
    )
    
    
    
    
    
    
    Balance at end of period
    
    $
    2,257
    
    
    $
    2,512
    
    
    $
    3,410
   14. DIVIDENDS DECLARED ON COMMON STOCK
  F-41




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15. STOCK OPTION PLANS
  Weighted
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    AverageRange of
    
    Number
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    ExerciseExercise Prices
    
    Outstanding
    
    
    Life
    
    
    Price
    
    
    Exerciseable
    
    
    Price$11.28 - $18.33
    
    
    1,022,899
    
    
    
    3.4
    
    
    $
    17.56
    
    
    
    842,834
    
    
    $
    18.33$19.60 - $26.89
    
    
    536,849
    
    
    
    3.2
    
    
    $
    23.28
    
    
    
    518,720
    
    
    $
    23.41$26.95 - $26.95
    
    
    1,306,464
    
    
    
    1.5
    
    
    $
    26.95
    
    
    
    1,306,464
    
    
    $
    26.95$27.30 - $27.63
    
    
    1,512,068
    
    
    
    0.6
    
    
    $
    27.63
    
    
    
    1,512,068
    
    
    $
    27.63$27.70 - $28.87
    
    
    62,510
    
    
    
    2.9
    
    
    $
    28.20
    
    
    
    62,510
    
    
    $
    28.20$29.20 - $29.20
    
    
    1,666,710
    
    
    
    3.6
    
    
    $
    29.20
    
    
    
    1,666,710
    
    
    $
    29.20$29.30 - $32.56
    
    
    1,095,330
    
    
    
    3.7
    
    
    $
    31.54
    
    
    
    968,264
    
    
    $
    31.44$32.81 - $36.06
    
    
    171,607
    
    
    
    4.3
    
    
    $
    33.78
    
    
    
    160,879
    
    
    $
    33.81$38.45 - $39.04
    
    
    1,879,410
    
    
    
    4.6
    
    
    $
    38.50
    
    
    
    1,879,410
    
    
    $
    38.509,253,847
    
    
    
    3.0
    
    
    $
    29.24
    
    
    
    8,917,859
    
    
    $
    29.52
 F-42




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WeightedAverageQualified
    
    
    Non-Qualified
    
    
    Total
    
    
    PriceBalance at December 31, 2006
    
    
    925,789
    
    
    
    12,063,222
    
    
    
    12,989,011
    
    
    $
    27.63Granted
    
    
    
    
    
    
    119,553
    
    
    
    119,553
    
    
    $
    33.75Exercised
    
    
    (270,194
    )
    
    
    (621,545
    )
    
    
    (891,739
    )
    
    $
    20.65Terminated/expired
    
    
    (29,948
    )
    
    
    (519,922
    )
    
    
    (549,870
    )
    
    $
    32.70Balance at December 31, 2007
    
    
    625,647
    
    
    
    11,041,308
    
    
    
    11,666,955
    
    
    $
    27.99Granted
    
    
    
    
    
    
    127,702
    
    
    
    127,702
    
    
    $
    22.22Exercised
    
    
    (62,422
    )
    
    
    (216,070
    )
    
    
    (278,492
    )
    
    $
    15.59Terminated/expired
    
    
    (58,936
    )
    
    
    (749,872
    )
    
    
    (808,808
    )
    
    $
    31.55Balance at December 31, 2008
    
    
    504,289
    
    
    
    10,203,068
    
    
    
    10,707,357
    
    
    $
    27.98Granted
    
    
    
    
    
    
    182,017
    
    
    
    182,017
    
    
    $
    13.94Exercised
    
    
    (157,515
    )
    
    
    (976,900
    )
    
    
    (1,134,415
    )
    
    $
    14.21Terminated/expired
    
    
    (51,884
    )
    
    
    (449,228
    )
    
    
    (501,112
    )
    
    $
    30.70Balance at December 31, 2009
    
    
    294,890
    
    
    
    8,958,957
    
    
    
    9,253,847
    
    
    $
    29.24
 16. NET INCOME PER COMMON SHARE
 Earnings per Shar
 F-43




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YEARS ENDED DECEMBER 31,2009
    
    
    2008
    
    
    2007BASICNet income
    
    $
    75,951
    
    
    $
    10,276
    
    
    $
    70,436Less: income allocated to participating securities
    
    
    2,363
    
    
    
    158
    
    
    
    657Net income available to common stockholders
    
    $
    73,588
    
    
    $
    10,118
    
    
    $
    69,779Weighted average number of common shares outstanding
    
    
    57,252
    
    
    
    56,567
    
    
    
    55,988Basic net income per common share
    
    $
    1.29
    
    
    $
    0.18
    
    
    $
    1.25DILUTEDNet income
    
    $
    75,951
    
    
    $
    10,276
    
    
    $
    70,436Less: income allocated to participating securities
    
    
    2,363
    
    
    
    158
    
    
    
    657Net income available to common stockholders
    
    
    73,588
    
    
    
    10,118
    
    
    
    69,779Less:Undistributed earnings allocated to unvested stockholders
    
    
    (2,099
    )
    
    
    
    
    
    
    (597
    )Add:Undistributed earnings re-allocated to unvested stockholders
    
    
    2,096
    
    
    
    
    
    
    
    576Add:Tax-effected interest expense and issue costs related to Old Notes
    
    
    2,664
    
    
    
    
    
    
    
    2,950Tax-effected interest expense and issue costs related to New Notes
    
    
    2
    
    
    
    
    
    
    
    3,357Net income assuming dilution
    
    $
    76,251
    
    
    $
    10,118
    
    
    $
    76,065Weighted average number of common shares outstanding
    
    
    57,252
    
    
    
    56,567
    
    
    
    55,988Effect of dilutive securities:Old Notes
    
    
    5,823
    
    
    
    
    
    
    
    5,823New Notes
    
    
    4
    
    
    
    
    
    
    
    7,325Stock options
    
    
    93
    
    
    
    
    
    
    
    2,043Weighted average number of common shares assuming dilution
    
    
    63,172
    
    
    
    56,567
    
    
    
    71,179Diluted net income per common share
    
    $
    1.21
    
    
    $
    0.18
    
    
    $
    1.07
   F-44




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17. FINANCIAL INSTRUMENTS  CONCENTRATIONS OF CREDIT AND OTHER RISKS
     18. DEFINED CONTRIBUTION PLAN
  F-45




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19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
  YEAR ENDED DECEMBER 31, 2009(FOR THE QUARTERS ENDED)MARCH 31, 2009 (a)
    
    
    JUNE 30, 2009 (b)
    
    
    SEPTEMBER 30, 2009 (c)
    
    
    DECEMBER 31, 2009 (d)Net revenues
    
    $
    99,819
    
    
    $
    141,246
    
    
    $
    151,811
    
    
    $
    179,040Gross profit (1)
    
    
    90,373
    
    
    
    128,179
    
    
    
    138,271
    
    
    
    158,259Net income
    
    
    329
    
    
    
    15,593
    
    
    
    21,148
    
    
    
    38,882Basic net income per common share
    
    $
    0.01
    
    
    $
    0.26
    
    
    $
    0.36
    
    
    $
    0.65Diluted net income per common share
    
    $
    0.01
    
    
    $
    0.25
    
    
    $
    0.33
    
    
    $
    0.60
 YEAR ENDED DECEMBER 31, 2008(FOR THE QUARTERS ENDED)MARCH 31, 2008 (e)
    
    JUNE 30, 2008 (f)
    
    SEPTEMBER 30, 2008 (g)
    
    DECEMBER 31, 2008 (h)Net revenues
    
    $
    128,903
    
    
    $
    137,450
    
    
    $
    115,425
    
    
    $
    135,971Gross profit (1)
    
    
    117,771
    
    
    
    128,246
    
    
    
    104,577
    
    
    
    128,442Net income (loss)
    
    
    20,525
    
    
    
    13,009
    
    
    
    (14,657
    )
    
    
    (8,601
    )Basic net income (loss) per common share
    
    $
    0.36
    
    
    $
    0.23
    
    
    $
    (0.26
    )
    
    $
    (0.15
    )Diluted net income (loss) per common share
    
    $
    0.31
    
    
    $
    0.21
    
    
    $
    (0.26
    )
    
    $
    (0.15
    )
 
 (1)
    
    Gross profit does not include amortization of the related intangibles.  (a)
    
    Operating expenses included $5.0 million paid to IMPAX related to a product development
agreement and approximately $3.9 million of compensation expense related to stock options,
restricted stock and stock appreciation rights.(b)
    
    Operating expenses included approximately $5.0 million of compensation expense related
to stock options, restricted stock and stock appreciation rights and $3.0 million paid to
Perrigo related to a product development agreement.(c)
    
    Operating expenses included $10.0 million paid to Revance related to a product
development agreement, $5.0 million paid to IMPAX related to a product development
agreement, $2.0 million paid to Perrigo related to a product development agreement and
approximately $4.7 million of compensation expense related to stock options, restricted
stock and stock appreciation rights.(d)
    
    Operating expenses included $5.3 million paid to Glenmark related to license and
settlement agreements, $2.0 million paid to IMPAX related to a product development
agreement and approximately $5.6 million of compensation expense related to stock options,
restricted stock and stock appreciation rights.(e)
    
    Operating expenses included approximately $4.4 million of compensation expense related
to stock options and restricted stock.(f)
    
    Operating expenses included a $25.0 million payment to Ipsen upon the FDAs acceptance
of Ipsens BLA for DYSPORTTM and approximately $4.7 million of compensation
expense related to stock options and restricted stock.(g)
    
    Operating expenses included $30.5 million of acquired in-process research and
development expense related to the Companys acquisition of LipoSonix, approximately $4.8
million of lease exit costs related to
 F-46




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the Companys previous headquarters facility and approximately $4.1 million of compensation
expense related to stock options and restricted stock.(h)
    
    Operating expenses included $40.0 million paid to IMPAX related to a product
development agreement and approximately $3.4 million of compensation expense related to
stock options and restricted stock.
 F-47




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SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 Balance at
    
    
    Charged tobeginning of
    
    
    costs and
    
    
    Charged to
    
    
    
    
    
    
    Balance at endDescription
    
    period
    
    
    expense
    
    
    other accounts
    
    
    Deductions
    
    
    of period(in thousands)Year Ended December 31, 2009Deducted from Asset Accounts:Accounts Receivable:Allowances
    
    $
    1,719
    
    
    $
    21,983
    
    
    $
    
    
    
    $
    (20,854
    )
    
    $
    2,848Year Ended December 31, 2008Deducted from Asset Accounts:Accounts Receivable:Allowances
    
    $
    830
    
    
    $
    15,157
    
    
    $
    
    
    
    $
    (14,268
    )
    
    $
    1,719Year Ended December 31, 2007Deducted from Asset Accounts:Accounts Receivable:Allowances
    
    $
    2,148
    
    
    $
    11,385
    
    
    $
    
    
    
    $
    (12,703
    )
    
    $
    830
 S-1