BUSINESS

Overview

We are a pharmaceutical company with integrated sales, marketing and development expertise, and we market a portfolio of branded cardiovascular pharmaceutical products. We focus on marketing promotionally sensitive pharmaceutical products to the high prescribing primary care, cardiovascular and specialist physician markets in the United States. We acquire rights to branded pharmaceutical products that typically have regulatory exclusivity or patent protection. We enhance the value of our product portfolio by applying highly focused marketing campaigns and by implementing strategies to extend the life cycle of the products we sell or market. In addition, we acquire rights to and develop product candidates in mid- to late-stage clinical development. This approach seeks to minimize many of the risks associated with early stage drug discovery.

We were founded in August 1999 and commenced commercial operations in the following year with the acquisition of rights to three marketed brands: DynaCirc, Axid and Lescol. Within our first six months of operations, these brands permitted the establishment of a sales force of more than 750 sales professionals. Since then, we have successfully identified and acquired rights to an additional marketed brand, Rythmol. To support the marketing of the Rythmol brand, we established our cardiovascular specialty sales force, which today consists of approximately 110 sales professionals who target specialty cardiologists. We have also received FDA approval for and market InnoPran XL and Antara, which we launched in January 2004 and February 2005, respectively. Additionally, we have received FDA approval for Omacor, which we expect to launch in late 2005.

Our sales infrastructure has grown with our product portfolio and is now comprised of nearly 1,000 sales professionals throughout the United States. As our product portfolio grows and we launch additional products, we intend to continue to expand our sales force. We believe that our sales force is highly effective relative to those of our peers, as evidenced in a recent independent survey conducted by Verispan. Compared to the specialty pharmaceutical companies that we consider our peers, we ranked second in sales force quality and familiarity among all physicians surveyed and second among cardiologists.

In addition to our marketing and promotion efforts, we use product life cycle management strategies to extend the life and marketing exclusivity of our owned products. For example, we conduct clinical trials to obtain additional FDA-approved uses. We also develop product enhancements that improve safety, convenience or compliance to enhance therapeutic value.

In 2004, we recorded strong growth in our owned product portfolio, driven principally by DynaCirc CR and the Rythmol family of products. We continue to expand our cardiovascular product offerings with the launch of Antara and the expected launch of Omacor. In addition to our owned products, we promote the Lescol family of products under a promotion agreement with Novartis. In 2004, we recorded $222.3 million in total revenues, of which $117.2 million was derived from net sales of our owned products and $105.1 million was promotion revenues, and we incurred a net loss of $106.2 million.

We believe that the experience, expertise and industry relationships of our senior management are vital to our success. Our Chief Executive Officer, Ernest Mario, Ph.D., served as Deputy Chairman and Chief Executive of Glaxo plc and Chairman and CEO of Alza Corporation. In addition, our Chief Operating Officer, Joseph S. Zakrzewski, served in various capacities over the past 17 years at Eli Lilly and Company, most recently as Vice President, Corporate Business Development. Many other members of our senior management team have also served in senior positions at leading pharmaceutical companies. Our Chief Financial Officer, Robert R. Ferguson III, also has significant public company experience, having served as Vice Chairman and CEO of Continental Airlines, as President, CEO and CFO of Continental Airlines Holdings, as well as Chairman and CEO of Midway Airlines.

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Our Strategy

Target the High Prescribing Primary Care, Cardiovascular and Specialist Physician Markets.     We believe the primary care and cardiovascular physician markets represent a highly attractive opportunity for us. Primary care and cardiovascular physicians represent only 34% of all prescribing physicians, yet they write approximately 68% of all prescriptions in the United States. We target our sales force promotional efforts to reach these physicians on a frequent basis. Our experience has shown that primary care and cardiovascular physicians respond well to direct pharmaceutical product promotion and education. Access to this market requires a relatively large sales force and significant investment. In addition, we target high prescribing specialist physicians through our cardiovascular specialty sales force, which provides additional marketing synergies among our various brands and an additional competitive advantage in seeking product opportunities.

Acquire, Develop and Market Novel Compounds in Mid- to Late-Stage Development.     To expand our owned product portfolio, we typically seek to acquire and develop product candidates in mid- to late-stage clinical development. This strategy seeks to minimize many of the risks associated with the early stage drug discovery process. These development opportunities typically originate with smaller pharmaceutical firms, biotechnology companies or international pharmaceutical companies having limited or no U.S. presence and that do not have the infrastructure necessary to take a drug through the FDA approval process or to market a product in the United States. For example, in August 2004, we acquired an exclusive license to develop, market and distribute Omacor in the United States, while it was in late-stage registration with the FDA. Omacor received FDA approval in November 2004 for the treatment of very high triglycerides (500 mg/dL and greater), and we expect to launch this product in late 2005.

Acquire Rights to Under-Promoted, Patent-Protected, Branded Pharmaceutical Products.     We seek to acquire rights to FDA-approved pharmaceutical products with well-established safety and efficacy profiles and annual sales potential of between $100 million and $500 million. Large pharmaceutical companies often view such products as having insufficient market potential to justify the time required and the investment necessary to promote these products. With our industry expertise, broad industry relationships and the capital from this offering, we expect to continue to have the ability to identify and act upon these acquisition opportunities. Once we acquire rights to a product, we endeavor to increase its sales by launching highly focused marketing campaigns that utilize our extensive sales force and marketing expertise.

Develop and Implement Life Cycle Management Strategies.     We implement life cycle management strategies for currently or previously marketed brands. These strategies typically involve seeking to expand the FDA-approved uses for our owned products, as well as develop line extensions that improve safety (such as fewer side effects), convenience (such as once daily dosing) or compliance (such as liquid formulations) to enhance therapeutic value. In the case of InnoPran XL, for example, we combined the active pharmaceutical ingredient, propranolol, with a proprietary drug release system licensed from Eurand to produce the first night-time dosed beta blocker. This life cycle development strategy enhanced the therapeutic value of propanolol by providing peak levels of the drug during the early morning hours, resulting in a new, patent protected product with three years of FDA-granted marketing exclusivity. We are currently evaluating life cycle management strategies for DynaCirc CR and Antara.

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Our Product Portfolio

We currently market five brands of cardiovascular products, four of which are primarily marketed to the high prescribing primary care and cardiovascular physician markets, while the Rythmol family of products is marketed to specialty cardiologists. In addition, we expect to launch Omacor in late 2005 and market it to primary care, cardiovascular and specialty physicians. We believe that our current focus on the cardiovascular market generates marketing synergies through increased sales force expertise and a high degree of overlap among the physicians we target. The following table summarizes our FDA-approved product portfolio:

DynaCirc and DynaCirc CR (isradipine)

Product Overview.     DynaCirc and DynaCirc CR (a controlled release, once daily formulation) contain isradipine, a dihydropyridine calcium channel blocker approved for the treatment of high blood pressure. Calcium channel blockers work by interrupting the movement of calcium into heart and blood vessel tissue, thereby reducing blood pressure. Isradipine has been proven to be an effective calcium channel blocker with a low incidence of side effects. DynaCirc CR, the product we actively promote, incorporates a patented drug delivery system that ensures accurate and consistent drug delivery over a 24-hour period. In addition, DynaCirc CR has been shown to reduce the risk of edema, or swelling of the legs and ankles, and is also well-tolerated in patients on multiple drug regimens.

In 2004, total U.S. sales of calcium channel blockers were approximately $4.5 billion, consistent with 2003 sales levels. The market leaders are Pfizer’s Norvasc (amlodipine) and AstraZeneca’s Plendil (felodipine). Total U.S. sales of Norvasc and Plendil in 2004 were approximately $2.4 billion and $216 million, respectively.

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In 2004, our net sales of the DynaCirc family of products were $56.3 million, representing a 42% increase over 2003. As a result of our promotional efforts, DynaCirc CR posted a 114% increase to $34.0 million in sales in 2004. Total U.S. prescriptions for DynaCirc CR grew 65% as compared to a 5% gain for Norvasc and 18% decline for Plendil in 2004 as compared to 2003.

Product Background.     DynaCirc was launched by Sandoz (a predecessor to Novartis) in 1991, but as a late market entrant with the relative disadvantage of twice daily dosing, its sales peaked in 1993 at $78.0 million. In 1996, DynaCirc CR was introduced as a once-a-day formulation. By 2000, net sales of the DynaCirc family of products had fallen to a combined total of $34.5 million, representing less than a 1% share of total prescriptions for the calcium channel blocker market. We believe that this decline was due primarily to the failure to manufacture and supply the product on a consistent basis causing periodic disruptions of trade and sample product, which resulted in a lack of promotional focus and support.

In July 2000, we acquired from Novartis an exclusive license to market, sell and distribute the DynaCirc family of products in the United States, with an option to purchase the brand. In March 2003, we completed the acquisition of the U.S. rights to DynaCirc and DynaCirc CR from Novartis. We now own all the NDAs and trademarks for, and sublicense the other intellectual property related to, DynaCirc CR. Other related intellectual property is licensed through Novartis. The composition of matter patent applicable to the DynaCirc products expired in August 2003. To date, no generic isradipine products have been approved by the FDA, but, we recently became aware that an ANDA was filed for isradipine in November 2004. DynaCirc CR has four formulation patents, three of which expire in October 2007 and one which expires in July 2008. We are currently in the early stages of formulating a line extension for the DynaCirc CR brand.

As discussed in “Business—Manufacturing,” we are in the process of transitioning the manufacture of DynaCirc CR from Novartis to Patheon Pharmaceuticals and Novartis Consumer Health. While Novartis is obligated to manufacture DynaCirc CR until the requirements under our supply agreement have been met, we expect Patheon and Novartis Consumer Health to manufacture DynaCirc CR going forward.

Product Differentiation.     DynaCirc CR has a number of favorable characteristics when compared to the market leading calcium channel blockers, Norvasc and Plendil. Two clinical studies in 2002, one with Norvasc published in The Journal of Clinical Hypertension and one with Plendil published in Congestive Heart Failure , established the superior efficacy of DynaCirc CR at 10 mg doses versus these two products. In those studies, patients who had been taking Norvasc or Plendil for a minimum of four to six months were given DynaCirc CR for six weeks and then returned to their original medications. These studies showed that:

DynaCirc CR was also observed to result in a reduced incidence of edema or swelling of the ankles and legs, consistent with the findings of a clinical study published in the British Journal of Pharmacology , which showed reduced incidence of edema with DynaCirc CR at 5 mg doses compared to Norvasc.

Rythmol and Rythmol SR (propafenone)

Product Overview.     Rythmol and Rythmol SR (a sustained release, twice daily formulation) contain propafenone, an anti-arrhythmic approved for the treatment of an irregular heart rhythm known as atrial fibrillation in patients without structural heart disease. In atrial fibrillation, abnormal electrical

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impulses cause spasms in the upper chambers of the heart that result in irregular and rapid beating of the heart. As a result, the heart pumps less efficiently, reducing blood flow to the body and to the heart muscle. Anti-arrhythmic drugs, with a local anesthetic effect, act as a stabilizing agent on the fibrillating membranes.

Unlike our other products, which are promoted to primary care and cardiovascular physicians generally, the Rythmol products are marketed to a small base of doctors, consisting mainly of the highest prescribing cardiologists and electro-physiologists. Our cardiovascular specialty sales force of approximately 110 sales professionals is promoting Rythmol SR in addition to our other products. We believe that our cardiovascular specialty sales force can effectively promote these products due to its expertise in promoting drugs that target cardiovascular disease. Rythmol SR is currently the only actively promoted drug in the anti-arrhythmic market.

In 2004, total U.S. sales of anti-arrhythmics were approximately $366 million, down 14% from 2003. The anti-arrhythmic market consists primarily of lower-priced generic drugs. Total prescriptions for anti-arrhythmic drugs grew 1% in 2004 compared to 2003.

In 2004, our net sales of the Rythmol family of products were $48.8 million, representing a 126% increase over net sales in the twelve months ended November 2003 prior to our acquisition of the brand. Total U.S. prescriptions for the Rythmol family of products decreased by 8.3% in 2004 compared to 2003. We launched Rythmol SR in February 2004 and recognized net sales of $26.1 million in 2004.

Product Background.     On December 3, 2003, we acquired the U.S. rights to the Rythmol family of products from Abbott for $93 million and entered into long term supply agreements with Abbott for the manufacture and supply of Rythmol and Rythmol SR. Rythmol is an anti-arrhythmic that has been marketed for over 12 years. Rythmol’s marketing exclusivity expired in November 2000. Rythmol SR, a sustained release formulation, was approved by the FDA in September 2003. We began promoting Rythmol SR in February 2004.

Rythmol SR has FDA-granted marketing exclusivity until September 2006 in the United States under the Hatch-Waxman Act and is protected by a formulation patent until October 2014.

Product Differentiation.     Rythmol SR is approved for the treatment of irregular heart rhythms in patients without structural heart disease. Rythmol SR provides greater convenience with twice daily dosing versus the three-times daily dosing of the original Rythmol. Repeated dosing with Rythmol SR leads to less fluctuation of blood levels versus the original Rythmol. According to the prescribing information for Rythmol SR, no liver function monitoring is required.

In 2003, Abbott completed the Rythmol SR Atrial Fibrillation Trial (RAFT) and European Rythmol SR Atrial Fibrillation Trial (ERAFT). The results of the RAFT and ERAFT studies, which are included in the product labeling for Rythmol SR, showed that Rythmol SR significantly increased the time to recurrence of irregular heart rhythms at all dosage levels studied.

In the RAFT study, the largest clinical evaluation of Rythmol SR, there were no reported incidences of proarrhythmia, a common side effect of anti-arrhythmics that is characterized by the more frequent occurrence of the existing irregular heart rhythm or the appearance of a new irregular heart rhythm that is as bad as or worse than the condition being treated, and which side effect is required to be included in the Rythmol SR label.

InnoPran XL (propranolol)

Product Overview.     InnoPran XL is an extended release once daily formulation of propranolol, a beta blocker approved for the treatment of high blood pressure. Beta blockers reduce heart rate and blood pressure by blocking the effects of adrenaline.

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In 2004, total U.S. sales of beta blockers were approximately $1.9 billion, a 20% increase over 2003 sales. The market leader is AstraZeneca’s Toprol XL (metoprolol). Total U.S. sales of Toprol XL in 2004 were approximately $1.2 billion. We began active promotion of InnoPran XL in January 2004 and reported net sales of $7.0 million in 2004.

Product Background.     Propranolol, the first FDA-approved beta blocker, was originally developed for the treatment of high blood pressure, angina and migraine headaches. Inderal LA, a long acting once-a-day version of propranolol, is dosed in the morning. We submitted the NDA for InnoPran XL to the FDA in November 2001. On March 12, 2003, we received FDA approval for InnoPran XL. Shipments of the product commenced in the second quarter of 2003. Largely due to our existing obligations under our co-promotion agreements, as discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we were unable to commit the sales force resources necessary to meaningfully launch InnoPran XL until January 2004.

InnoPran XL has FDA-granted marketing exclusivity in the United States under the Hatch-Waxman Act until March 2006 and is protected by a formulation patent until October 4, 2021. Additional patents are pending.

Product Differentiation.     InnoPran XL is the first and only beta blocker designed to provide 24-hour control of blood pressure and heart rate with additional protection in the early morning hours. We developed InnoPran XL as an extended release formulation that enables patients to take a single nightly dose of the drug. This formulation incorporates a proprietary drug release system that delivers the highest concentrations of the drug and results in maximum anti-hypertensive protection during the early morning period. The Sixth Report of the Joint National Committee on Prevention, Detection, Evaluation and Treatment of High Blood Pressure from the National Institutes of Health published in November 1997 noted that a risk of heart attack and stroke exists during the early morning period due to abrupt increases in blood pressure after rising from overnight sleep.

Antara (fenofibrate)

Product Overview.     Antara is a once daily formulation of fenofibrate approved for use in combination with a diet restricted in saturated fat and cholesterol to reduce elevated low-density lipoprotein cholesterol (LDL or “bad” cholesterol), triglyceride and Apolipoprotein B (free floating fats in the blood) levels, and to increase high-density lipoprotein cholesterol (HDL or “good” cholesterol) in adult patients with high cholesterol or an abnormal concentration of lipids in the blood. Fenofibrates work primarily to lower triglycerides and increase HDL cholesterol, which makes the drugs an attractive alternative for those patients whose LDL cholesterol is well controlled. Antara is approved and marketed in a 43 mg and 130 mg dose.

In 2004, total U.S. sales of fibrates were approximately $972 million, a 31% increase over 2003 sales. The market leader is Abbott’s Tricor (fenofibrate). According to IMS, total U.S. sales of Tricor in 2004 were approximately $854 million, up 37% from 2003. The remaining market for fibrates consists primarily of the branded and generic forms of gemfibrozil, which had U.S. sales of approximately $111 million in 2004. Sales of Antara for the quarter ended March 31, 2005 were $4.4 million, primarily resulting from the wholesaler and retailer inventory stocking process typically associated with a product launch.

Product Background.     We licensed the North American rights to Antara from Ethypharm in May 2001 and received FDA approval of our NDA in November 2004. In order to maintain the exclusivity of our rights, we must achieve minimum annual sales in the United States and Canada until February 2012 or pay amounts to Ethypharm to compensate for any shortfall. The license term expires in

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February 2020 and, absent notice of termination by either party, automatically renews for additional two year periods. Under the terms of the agreement, at our option, Ethypharm is obligated to either manufacture and deliver to us finished fenofibrate product or deliver bulk product to us for encapsulation and packaging. Ethypharm’s fenofibrate is protected through a formulation patent that expires in August 2007. As part of our life cycle management strategy, we have filed a utility patent for Antara. In addition, Ethypharm has filed two additional formulation patents for the product. If issued, we believe these patents may provide Antara with up to 20 years of additional patent protection. We also believe that these patents would be eligible for listing in the Orange Book. Additionally, we are evaluating clinical development strategies and possible acquisitions of line extensions for Antara.

In May 2005, Teva obtained final FDA approval to market a generic version of Abbott’s Tricor 160 mg tablet, which contains the same active pharmaceutical ingredient as Antara. In addition, three other companies have filed ANDAs seeking approval to manufacture generic versions of Abbott’s 160 mg Tricor tablet. The Teva product as well as the other generic products for which ANDAs have been filed are the subject of pending patent infringement actions, involving non-infringement, validity and/or enforceability of the Fournier Patents. We are also aware of two other companies who have filed 505(b)(2) applications with the FDA seeking approval to market 160 mg branded fenofibrate products. The FDA granted final approval in May 2005 for one of these branded products, which we expect to launch later this year, and the FDA granted tentative approval for the other product pending the earlier of the expiration of a 30 month stay imposed under Hatch-Waxman, to occur in March 2006, and a judgment of non-infringement or invalidity of the Fournier Patents.

Prior to receiving FDA approval, in June 2004, we filed a complaint in the United States District Court for the District of Delaware seeking a judicial determination that the manufacture, importation or sale of Antara would not infringe any valid claim of the Fournier Patents, which are licensed to Abbott. The complaint also seeks a determination that the Fournier Patents are unenforceable against us because of the inventors’ inequitable conduct in obtaining the patents in proceedings before the United States Patents and Trademark Office. In January 2005, Abbott and Fournier filed an answer to the complaint as well as a counterclaim alleging that Antara infringes two of the Fournier Patents. Additionally, Abbott and Fournier are continuing to prosecute a number of patents related to the Fournier Patents which, if issued, could also be included in their infringement counterclaim. The trial in this matter has been scheduled for August 2006. See “Business—Legal Proceedings.”

Product Differentiation.     Antara is the lowest therapeutic dose fenofibrate currently available with equivalent blood levels of the drug and efficacy equal to the market leader, Tricor. Antara is distributed in 130 mg and 43 mg formulations as compared to 145 mg and 48 mg formulations of Tricor. In clinical studies of patients with elevated triglyceride levels, Antara has proven to:

Omacor (omega-3 acid ethyl esters, predominantly EPA and DHA)

Product Overview.     Omacor is a highly purified and distilled formulation of the ethyl esters of a range of omega-3 acids, predominantly EPA and DHA, and approved by the FDA for the treatment of very high triglycerides (500 mg/dL and greater). According to the American Heart Association, evidence suggests that the consumption of EPA and DHA supplements significantly reduces the risk of death caused by cardiovascular disease. We believe that Omacor will be the only FDA-approved prescription omega-3 product available to physicians with demonstrated safety and efficacy.

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Based on data included in the National Cholesterol Education Program (NCEP) expert panel on “Detection, Evaluation and Treatment of High Blood Cholesterol in Adults (Adult Treatment Panel III),” approximately 2.5% to 3.0% (5 to 6 million) of the adult U.S. population have levels of triglycerides of 500 mg/dL or higher. The same report estimates that 13% to 14% (25 to 27 million) of the adult U.S. population have levels of triglycerides greater than or equal to 200 mg/dL and less than 500 mg/dL.

Product Background.     Pronova developed Omacor through a patented manufacturing process yielding very pure extracts of EPA and DHA. In the United States, Abbott pursued the primary indication for elevated triglycerides pursuant to an agreement with Pronova, which was subsequently terminated. We entered into an exclusive license and supply agreement with Pronova in August 2004 for the U.S. rights to Omacor, which expires 15 years from the first commercial sale of the product. Omacor was approved by the FDA for the treatment of very high triglycerides (500 mg/dL and greater) in November 2004. Following the approval, the NDA was transferred to us. We also received a letter from the FDA citing the requirements that must be met for Omacor to be approved for the treatment of high triglycerides (from 200 mg/dL to 499 mg/dL). Omacor has previously been approved by relevant regulatory bodies and is actively marketed by others outside the United States, including Pfizer, SPA, Sigma Tau, Solvay and AstraZeneca.

We have entered into a long-term supply agreement with Pronova for the active pharmaceutical ingredients. In order to maintain the exclusivity of our rights, we must purchase minimum annual levels of active pharmaceutical ingredient following the first commercial sale of Omacor or pay amounts to Pronova to compensate for any shortfall. We have also entered into a manufacturing agreement with Cardinal to encapsulate and package the finished product, and we are currently validating the manufacturing process in anticipation of our planned commercial launch of Omacor in late 2005.

Omacor has FDA-granted marketing exclusivity in the United States under the Hatch-Waxman Act through November 2009 and is protected by method of use and formulation patents, the last of which expires in August 2014.

Product Differentiation.     As the only FDA-approved omega-3 product, Omacor has the following advantages over the omega-3 products available in the nutritional supplement category:

In the clinical studies of patients with elevated triglyceride levels, compared to placebo, Omacor has been proven to have the following favorable effects:

Utilization of Omacor for the treatment of very high triglyceride levels may result in elevations in LDL cholesterol in some individuals.

We are aware of multiple third-party clinical studies with Omacor and other omega-3 products that have been completed or are ongoing. These studies seek to identify additional

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indications and uses for the product. We do not control the design, administration or data analysis of these trials. In some of these trials we may not have access to the clinical results for use in seeking FDA approvals for the use of Omacor. As part of our life cycle management strategy for the brand, we will continue to evaluate the merits and utility of the data from these trials.

The Gruppo Italiano per lo Studio della Sopravvivenza nell’Infarto miocardio (GISSI-Prevenzione) trial was completed in 1999. This 11,324 patient study demonstrated that Omacor reduced overall mortality by 20% and sudden death by 45% compared to the control group. This study and related analysis were published in the August 7, 1999 issue of Lancet and April 23, 2002 issue of Circulation . We believe this study is a major factor in the rapid growth of omega-3 product utilization. Despite the strong scientific credentials, it may not be possible to obtain an indication for secondary prevention of cardiac events based on this study alone. We believe that one or more of the clinical studies ongoing in Europe or that we may initiate could be the basis for a FDA filing for these indications.

According to an article published in the September 5, 2002 issue of the New England Journal of Medicine , substantial progress has been made with omega-3 nutritional supplements along with other modes of treatment, including ACE inhibitors and oral corticosteroids, in preventing IgA Nephropathy, a progressive kidney disease often resulting in the need for dialysis and kidney transplantation. According to the article, IgA Nephropathy may affect up to 1.3% of the population. Prior to our acquisition of the product, the FDA did not approve an NDA which had been filed seeking approval for this indication. We are evaluating the response from the FDA and exploring options for obtaining FDA approval for this indication.

Lescol and Lescol XL (fluvastatin)

Product Overview.     Lescol and Lescol XL, which contain fluvastatin, are members of the statin class of drugs approved for the treatment of high cholesterol. Statins are compounds that inhibit the liver enzyme HMG-CoA reductase, which is used in the body’s manufacture of cholesterol, and are effective in the reduction of cholesterol levels. Statins reduce levels of LDL cholesterol and triglycerides and increase levels of HDL cholesterol. Fluvastatin is a synthetic statin that has favorable safety and side-effect profiles.

In 2004, total U.S. sales of statins were approximately $15.7 billion, a 13.0% increase over 2003 sales. The market leaders are Pfizer’s Lipitor (atorvastatin) and Merck’s Zocor (simvastatin). U.S. sales of Lipitor and Zocor in 2004 were approximately $7.7 billion and $4.6 billion, respectively. The statin market became increasingly competitive as a result of the publication of clinical results demonstrating the benefits of higher potency statins, as well as the significant promotion spending by Pfizer (in support of the statin market leader, Lipitor), AstraZeneca (in support of Crestor) and Merck/Schering-Plough (in support of Vytorin).

In 2004, U.S. net sales of the Lescol family as publicly reported by Novartis were $284.0 million, a 9% decrease over 2003 sales. We earned promotion revenues attributed to the Lescol brand of $105.1 million in 2004, a decrease of 13% compared to 2003. Since its launch in 2001, we have focused our promotional efforts on Lescol XL because of its significant increase in efficacy versus the original Lescol. Total prescriptions for Lescol XL grew by only 2% in 2004 compared to 2003 due primarily to increased competition.

Product Background.     In November 2000, we acquired an exclusive license (other than with respect to Novartis) from Novartis to promote and market Lescol and Lescol XL in the United States. Under this agreement, we are entitled to receive a substantial percentage of Lescol and Lescol XL sales above certain contractually specified minimum sales levels through 2005. We have exceeded

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these minimum sales levels during each of the last four years. In 2006 and 2007, we are entitled to receive residual payments equal to 20% and 10% of Novartis’ net sales as reported to us, respectively.

In April 2005, we and Novartis extended the term of our promotion agreement with respect to the Lescol brand of products through December 31, 2007. Under the terms of the agreement, we will continue to promote the Lescol brand of products with our primary care and cardiovascular specialty sales forces. We will be compensated for our sales, marketing and promotional efforts at agreed levels. Under the agreement, beginning in January 2006, Novartis will be permitted to develop and independently promote products containing fluvastatin. In addition, both parties have the right to terminate the extended promotion agreement without cause upon 90 days advanced written notice with effect beginning as of January 1, 2006.

Patent exclusivity for Lescol expires in December 2011.

Product Differentiation.     The market research we conducted just prior to the launch of Lescol XL indicated that approximately two-thirds of cholesterol management prescriptions are written for patients requiring 30% to 40% reductions in LDL cholesterol. The FDA-approved product labeling for the once daily tablet formulation of Lescol XL shows that it reduces LDL cholesterol by a median of 35% to 38% which is comparable to the twice daily Lescol 40mg tablet formulation required to be taken twice a day. In addition to its convenient once daily dosing, Lescol XL has a well characterized safety and tolerability profile with low potential for drug to drug interaction and a low risk of muscle pain.

In 2002, Novartis completed the Lescol Intervention Prevention Study (LIPS). It was subsequently published in the June 26, 2002 issue of the Journal of the American Medical Association (JAMA). This was the first prospective outcomes study of high-risk post-angioplasty patients. In the LIPS study, patients treated with Lescol as compared with placebo exhibited:

Based upon the LIPS results, the FDA approved in May 2003 the use of Lescol and Lescol XL in patients with coronary heart disease for secondary prevention of cardiovascular events.

Axid and Axid Oral Solution (nizatidine)

In October 2000, we acquired from Lilly rights to Axid (nizatidine) for the treatment of acid reflux disease. In April 2002, Axid’s patent protection expired, and in July 2002, the first generic version of nizatidine entered the market. As a result, we no longer actively market this product. We also internally developed Axid OS, which received FDA approval in July 2004. Since Axid OS is primarily prescribed by pediatricians, which are outside our target audience, we intend to divest the product in 2005.

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Product Development Projects

In addition to promoting our currently marketed products, we are pursuing several product development projects. To develop our product candidates, we use in-house expertise as well as third-party proprietary drug delivery systems, formulation technologies and clinical patient recruitment and monitoring services. Our research and development expenses were $37.7 million in 2004 and $6.8 million for the quarter ended March 31, 2005. The following table summarizes projects that we have in various stages of development and that we expect will serve as the basis for our future marketed products:

Antara Label Expansion

In 2004, we completed a clinical trial entitled “Triglyceride Reduction in Metabolic Syndrome” (TRIMS Study) patients. According to NCEP guidelines, Metabolic Syndrome is defined as a collection of frequently associated cardiovascular risk factors that tend to aggregate in selected patient populations that increase coronary and cardiovascular mortality. The TRIMS Study looked at the effect, if any, of food on the efficacy of Antara. The data from the TRIMS Study is scheduled to be presented in June 2005 at the meeting of the American Association of Clinical Endocrinologists and published in the June issue of Clinical Therapeutics . In December 2004, we filed a Supplemental NDA with the FDA seeking revisions to the Antara label incorporating the results of the TRIMS Study. The statutory deadline for FDA action on the Supplemental NDA is October 23, 2005.

Rythmol Observational Registry

In the second quarter of 2005, we initiated a physician education program and observational registry for patients with atrial fibrillation known as the AFFECTS Registry. We anticipate that approximately 500 physicians will participate in the program with a target enrollment of 5,000 patients. The program is expected to continue through late 2006.

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Omacor Related Projects

We believe that Omacor is a platform product. Clinical studies published in the scientific literature demonstrate that Omacor has potential beyond hypertriglyceridemia, creating a tangible basis for new indications and line extensions in the future. Additionally, we believe the development of combination products will expand the addressable market for this brand.

Omacor Label Expansion Projects

Ÿ      Co-therapy with a statin:     In November 2004, concurrent with the FDA approval of Omacor for treatment of very high triglyceride levels of 500 mg/dL and greater, the FDA issued a letter citing the requirements that must be met for Omacor to be approved for the treatment of patients with triglyceride levels from 200 mg/dL to 499 mg/dL. According to the NCEP guidelines, the treatment of LDL cholesterol and non-HDL cholesterol are the primary treatment objectives in this patient group. In the correspondence with the FDA, the FDA indicated that these patients have a high likelihood of being treated with a statin. The FDA requested additional data regarding the safety and efficacy of the combined use of Omacor and a statin. Although Omacor when taken on its own reduced triglyceride levels in this patient group, a 25% mean reduction as compared to baseline, the NDA originally submitted to the FDA only contained the data from one relatively small study of Omacor used together with a statin. We have initiated post approval clinical studies to pursue a label expansion for this treatment option.

Ÿ      Co-therapy with a fenofibrate:     For patients with high triglycerides, the use of a fenofibrate on a stand-alone basis may not provide the necessary efficacy to reach the treatment goal. We believe that a treatment program that includes Omacor taken in combination with a fenofibrate may be appropriate. We have developed a clinical program and intend to commence clinical trials in the second half of 2005 to pursue a label expansion for this treatment option. We are also exploring the effects of Omacor-fenofibrate co-therapy on other aspects of cholesterol management.

Omacor Combination Product Projects

Ÿ      Omacor-statin fixed dose combination:     We believe a portion of the patients currently prescribed for a statin to reduce their LDL cholesterol are not able to reduce their triglyceride levels further by adding a fibrate to their regimen due to the elevated risks of side effects. We believe that an Omacor-statin combination product may reduce the risk of side effects, while offering additional efficacy, dosing convenience and reduced out-of-pocket costs. As a result, we are currently developing an Omacor-statin fixed dose formulation.

Ÿ      Omacor-fenofibrate fixed dose combination:     In patients with high levels of triglycerides, the typical reduction of these levels by fibrates may not be enough to achieve the desired goals. We believe that an Omacor-fenofibrate fixed dose combination product may offer additional efficacy, dosing convenience and reduced out-of-pocket costs to these patients compared to taking each of these products on their own. As a result, we are currently developing an Omacor-fenofibrate fixed dose formulation.

DynaCirc CR Reformulation

As part of our life cycle management strategy for the DynaCirc CR brand, we are currently developing an improved controlled release isradipine formulation that would also allow for a more reliable manufacturing process that could be less expensive to produce. We are exploring the possibility of a broader range of available dosage strengths (6 mg, 12 mg and 18 mg), while remaining within the approved dosage range for controlled release isradipine of 5 mg to 20 mg per day.

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If we are successful in developing the new formulation, demonstrating clinical efficacy and receiving FDA approval for this new formulation, we would receive three years of Hatch-Waxman marketing exclusivity. We are also exploring the potential for additional indications for the new formulation, such as chronic stable angina. We filed a provisional patent application in March 2005 covering the formulation and method of administration for this new formulation of DynaCirc CR.

Propranolol LA

While formulating InnoPran XL in 2000, an extended release formulation of propranolol, we began developing a generic equivalent of the branded, off-patent Inderal LA, a long-acting form of propranolol. Inderal LA, marketed by Wyeth, is a long-acting beta blocker, approved for the treatment of high blood pressure, angina and migraines.

We are continuing to develop a formulation of the generic equivalent to Inderal LA and expect to begin clinical trials to demonstrate bioequivalency. We expect to complete these clinical trials in 2006. If successful, we intend to file an ANDA seeking approval of this product. If approved by the FDA, we believe that, upon introduction, Propranolol LA would likely be the only generic form of Inderal LA that could be directly substituted at the pharmacy for prescriptions of Inderal LA.

While this product does not fit with our stated focus of developing and promoting branded prescription pharmaceuticals, U.S. sales of Inderal LA in 2004 were in excess of $220 million, and we believe this market represents a unique opportunity to generate cash flow.

RP-606

In February 2002, we entered into a license agreement with Medivir AB, to acquire the rights to develop, market and distribute RP-606, then known as MIV-606, in the United States and Canada. RP-606, a valomaciclovir stearate, is a broad spectrum, oral antiviral for the treatment of herpes zoster, commonly called shingles, and for the reduction of pain associated with shingles. The FDA has proposed that additional Phase II clinical trials should be performed before Phase III clinical trials may commence. Reliant and Medivir are currently investigating whether the request for additional Phase II clinical trials could be satisfied by a combined Phase II/III clinical trial. If Phase III clinical trials are commenced, we are required to finance them pursuant to the terms of our agreement with Medivir AB. We are currently in the process of evaluating our clinical development strategy and other strategic alternatives with respect to this compound.

Sales & Marketing

We have established a sales force consisting of nearly 1,000 full-time sales professionals, including approximately 90 sales force managers. We have organized our sales force into four groups to manage the national reach of our marketing and promotion efforts and to maximize calling frequency. The first and largest group, consisting of approximately 390 sales professionals, targets primary care and cardiovascular physicians on a national basis. The second group, consisting of approximately 380 sales professionals, increases the frequency of contact with high prescribing primary care and cardiovascular physicians that have already been called on by the first sales group. The third group, consisting of approximately 110 sales professionals, calls on specialty cardiologists, such as electrophysiologists and other high prescribers of our products. The fourth group consists of approximately 20 sales professionals that focus exclusively on managed-care, government and pharmaceutical benefit management organizations.

A recent independent survey conducted by Verispan entitled “Sales Force Structures and Strategies: Ranking Tables Study: 2004-2005” asked 7,250 doctors to rate the effectiveness of prescription pharmaceutical sales forces based upon the quality of their presentations and the physician’s overall familiarity with the sales representative. Sixty companies, including the largest pharmaceutical firms in the world, were mentioned by the physicians surveyed and included in the

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rankings. As noted in the report, we ranked 33 ^rd overall in sales force quality and familiarity among all physicians surveyed; 30 ^th among general practitioner and family medicine physicians, our largest target audience; and 17 ^th among cardiologists, our current specialist focus.

Compared to the specialty pharmaceutical companies that we consider our peers, we ranked second overall in sales force quality and familiarity among general practitioner and family medicine physicians and second among cardiologists. The identified peer group included Allergan, Andrx, Biovail, Elan, First Horizon, Forest Laboratories, Ivax, King Pharmaceuticals, Kos Pharmaceuticals, Sepracor, Shire Pharmaceuticals, and Watson Labs.

We have established a fully-integrated marketing strategy and sales support department consisting of over 50 professionals responsible for brand management, market research and sales operations. Our marketing strategy team develops and tests the brand-specific positioning messages that demonstrate the safety and efficacy advantages of our products and identifies and targets the high prescribing universe of primary care, cardiovascular and specialist physicians. Our sales operations group provides training, promotional material production, logistical support and management development for our sales force.

We also use third-party vendors, such as advertising agencies, market research firms and suppliers of marketing and other sales support related services.

Medical and Scientific Affairs Department

We have a Medical and Scientific Affairs Department consisting of approximately 20 professionals, which provides scientific and medical information regarding our products and related medical issues to the health care community. This information is communicated through a broad variety of channels in three functional areas, consisting of Medical Information, Medical Education and Medical Science Liason. The Medical Information group addresses unsolicited scientific and medical inquiries from physicians and other health care professionals. The Medical Education group educates physicians and other health care professionals regarding our products and related scientific and medical issues. The Medical Science Liason Group interacts with key opinion leaders in cardiovascular medicine and key decision makers in managed care.

Product Acquisition Model

We are focused on acquiring rights to branded pharmaceutical products and mid- to late-stage clinical development candidates. We do not conduct basic research for the creation or discovery of novel chemicals with the potential for development as new drug therapies. Instead, we replace the traditional drug research process with a drug search process. We typically focus on products that are either in the process of gaining FDA approval or are already FDA-approved.

We believe that our strong presence and track record in the primary care, cardiovascular and specialty physician markets, coupled with a national sales force, uniquely position us as an attractive partner for large- and mid-sized pharmaceutical companies, as well as biotech or international companies that lack U.S. marketing presence and expertise. We believe that we are becoming a logical business partner for many in the pharmaceutical and biotech industries because:

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Our business development group has successfully negotiated for the rights to four marketed brands, two promotion agreements and three late-stage clinical development compounds. We are currently evaluating multiple opportunities across several therapeutic categories.