10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2006
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 0-15313

SAVIENT PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	13-3033811
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
One Tower Center, 14th Floor, East Brunswick, New Jersey	08816
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:

(732) 418-9300

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.01 par value	Nasdaq Global Market
(Title of class)	(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of each class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):  Yes þ     No o

Large accelerated filer o     Accelerated filer þ     Non-accelerated filer o

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

The aggregate market value of Common Stock held by non-affiliates of the registrant (based on the closing price of these securities as reported by The Nasdaq Global Market on June 30, 2006) was approximately $321,787,000. Shares of Common Stock held by executive officers and directors of the registrant are not included in the computation. However, the registrant has made no determination that such individuals are “affiliates” within the meaning of Rule 405 under the Securities Act of 1933.

As of March 8, 2007, the number of shares of Common Stock outstanding was 52,949,240.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant’s definitive proxy statement for its 2007 annual meeting of stockholders are incorporated by reference into Part III of this report.

TABLE OF CONTENTS

PART I
	ITEM 1. BUSINESS
OUR EXECUTIVE OFFICERS
	ITEM 1A. RISK FACTORS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
	ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
SAVIENT PHARMACEUTICALS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
SAVIENT PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
SAVIENT PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (In thousands)
SAVIENT PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
SAVIENT PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Schedule II — Valuation and Qualifying Accounts
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	ITEM 9A. CONTROLS AND PROCEDURES
	ITEM 9B. OTHER INFORMATION
PART III
	ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
	ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
PART IV
	ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
SIGNATURES
EX-10.8: AMENDED AND RESTATED SAVIENT PHARMACEUTICALS, INC. 1998 EMPLOYEE STOCK PURCHASE PLAN
EX-10.18: AMENDMENT TO THE EMPLOYMENT AGREEMENT WITH ZEBULUN D. HOROWITZ, M.D.
EX-10.19: FORM OF SENIOR MANAGEMENT INCENTIVE STOCK OPTION AGREEMENT
EX-10.20: FORM OF SENIOR MANAGEMENT NON-QUALIFIED STOCK OPTION AGREEMENT
EX-10.21: FORM OF SENIOR MANAGEMENT RESTRICTED STOCK AGREEMENT
EX-10.22: FORM OF SENIOR MANAGEMENT PERFORMANCE SHARE AGREEMENT
EX-10.23: FORM OF BOARD OF DIRECTORS NON-QUALIFIED STOCK OPTION AGREEMENT
EX-10.24: LICENSE AGREEMENT
EX-10.25: SUPPLY AGREEMENT
EX-21.1: SUBSIDIARIES
EX-23.1: CONSENT OF GRANT THORNTON LLP
EX-23.2: CONSENT OF MCGLADREY & PULLEN LLP
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

PART I

ITEM 1.   BUSINESS

Overview

We are a specialty biopharmaceutical company engaged in developing and distributing pharmaceutical products that target unmet medical needs in both niche and broader markets.

We currently sell and distribute a branded and distribute a generic version of oxandrolone (“oxandrolone”), which is used to promote weight gain following involuntary weight loss. We sell and distribute the branded version of oxandrolone in the United States under the name Oxandrin^®, and we distribute the generic version of oxandrolone through an agreement with Watson Pharmaceuticals, Inc. (“Watson”). We launched oxandrolone in December 2006 in response to the approval and launch of generic competition to Oxandrin by two generic companies. We plan to continue to market and distribute the Oxandrin brand product directly through wholesalers.

We are currently developing Puricase^®, a drug targeting the control of elevated uric acid levels in the blood, or hyperuricemia, in patients with symptomatic gout in whom conventional treatment is contraindicated or has been shown to be ineffective. Puricase is in Phase 3 clinical development and has received “orphan drug” designation by the Food and Drug Administration (FDA). Orphan drug designation may prevent competitive products that are not shown to be clinically superior to Puricase from receiving FDA approval for the same indication for a period of seven years from the time of FDA authorization for marketing Puricase. Our strategic plan is to advance the development of Puricase and expand our product portfolio by in-licensing late-stage compounds and exploring co-promotion and co-development opportunities that fit our expertise in specialty pharmaceuticals and biopharmaceuticals with an initial focus in rheumatology.

Prior to August 2006, we also marketed more than 100 pharmaceutical products in oral liquid form in the United Kingdom and some European Union (EU) countries through our former U.K. subsidiary, Rosemont Pharmaceuticals, Ltd (“Rosemont”). In 2004 we commenced a repositioning of our commercial and development operations to focus on the development and commercialization of new pharmaceutical and biopharmaceutical products, such as Puricase. As a result of this repositioning, we sold Rosemont in August 2006, and prior to that, in July 2005 we sold our former global biologics manufacturing business which operated primarily through our former Israeli subsidiary, Bio-Technology General (Israel) Ltd. (BTG-Israel).

Also, in January 2006 we completed the sale to Indevus Pharmaceuticals, Inc. (“Indevus”) of Delatestryl, our former injectable testosterone product for male hypogonadism. Under the terms of the sale, Indevus paid us an initial payment of $5 million and a portion of net sales of the product for the first three years following closing of the transaction based on an escalating scale.

We have restructured our commercial operations in 2006 and early 2007 such that we currently operate within one “Specialty Pharmaceutical” segment which includes sales of Oxandrin and oxandrolone, and the research and development activities for Puricase. The elimination of our 19 person Oxandrin field sales force in January 2007 was part of this restructuring. The results of our former Rosemont and BTG-Israel subsidiaries are included as part of discontinued operations in our consolidated financial statements.

We were founded in 1980 as Bio-Technology General Corp. and changed our name to Savient Pharmaceuticals, Inc. in June 2003. We conduct our administration, finance, business development, clinical development, sales, marketing, quality assurance and regulatory affairs activities primarily from our headquarters in East Brunswick, New Jersey.

Our Products

Oxandrin and oxandrolone

Oxandrin is an oral synthetic derivative of testosterone used to promote weight gain following involuntary weight loss related to disease or medical condition. We sell Oxandrin in both 2.5 mg and 10 mg tablets. We first introduced Oxandrin with the 2.5 mg strength in December 1995 and followed with the 10 mg tablet in October 2002. We introduced the 10 mg strength to reduce the number of tablets required to be taken by

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patients taking 20 mg a day, which is a common dosage. By the end of 2006, approximately 49% of all Oxandrin prescriptions were being filled with the 10 mg tablet.

Oxandrin is indicated in the United States as adjunctive therapy to promote weight gain after weight loss following extensive surgery, chronic infections, or severe trauma, and in some patients who without definite pathophysiologic reasons fail to gain or to maintain normal weight, to offset the protein catabolism associated with prolonged administration of corticosteroids, and for the relief of bone pain frequently accompanying osteoporosis. Oxandrin has various indications in other countries. With periodic laboratory and clinical monitoring Oxandrin is generally well tolerated by patients. Since our 1995 launch of Oxandrin, a significant portion of Oxandrin sales has been for the treatment of patients suffering from HIV/AIDS-related weight loss.

In September 2006 we filed a lawsuit against Barr Laboratories, Inc. (“Barr”) for infringement of certain patents related to various methods of using Oxandrin. The suit was brought in response to Barr’s filing of an Abbreviated New Drug Application (ANDA) with the FDA seeking approval to engage in the commercial manufacture, use or sale of specified dosages of oxandrolone tablets prior to expiration of our patents, all of which are listed in Approved Drug Products with Therapeutic Equivalence Evaluations for Oxandrin. Subsequent to this, in February 2007, Barr notified us that they amended their ANDA to carve out of their proposed labeling uses for the generic oxandrolone tablet intending to avoid the particular uses covered by our method of use. As a result, we have agreed to dismiss the action without prejudice at this time.

On December 1, 2006, the FDA denied two Citizens Petitions filed by us, which had been pending since February 2004 and September 2005, requesting that the Commissioner of Food and Drugs not approve any ANDAs for generic oral products containing oxandrolone until (i) agency adopted bioequivalence standards and a requirement for any generic product to have completed a trial determining whether it may safely be used by patients who take the prescription blood thinner warfarin are satisfied and (ii) prior to the expiration of our exclusive labeling for geriatric dosing of Oxandrin on June 20, 2008.

On December 1, 2006, the FDA also approved the ANDAs previously filed by Sandoz Pharmaceuticals Corp. (“Sandoz”) for 2.5 mg and 10 mg, and Upsher-Smith Laboratories, Inc. (“Upsher”) for 2.5 mg, dosage forms of generic oral products containing oxandrolone. We filed lawsuits against Sandoz and Upsher claiming that their generic oxandrolone products infringe our patents related to various methods of using oxandrolone. See “Item 3, Legal Proceedings” for further discussion.

Our financial results have been heavily dependent on Oxandrin since its product launch in December 1995. Sales of Oxandrin were $47.0 million, $44.4 million, and $53.5 million for the years ended December 31, 2006, 2005, and 2004, respectively which represented 99%, 92%, and 90% of our continuing net product sales for years ended December 31, 2006, 2005, and 2004, respectively. Given the introduction of generic competition to Oxandrin, we anticipate a significant deterioration in both the volume and pricing of combined Oxandrin and oxandrolone sales as compared to sales of Oxandrin prior to the introduction of generic competition. In the first two months of 2007, the Company has experienced a significant reduction in sales of Oxandrin as the effects of generic competition is actually encountered. See “Item 7. Management’s Discussion and Analysis of Financial Condition and results of Operations” for further discussion and forward looking disclosures.

We distribute Oxandrin primarily in the United States and sales of Oxandrin outside of the United States have historically been minimal.

Our Drug Development Activities

Puricase

Puricase is a recombinant porcine urate oxidase (uricase) that has been modified by the attachment of polyethylene glycol (PEG) polymer chains. Puricase is currently in clinical development for the control of elevated levels of uric acid in the blood, or hyperuricemia, in patients with symptomatic gout in whom conventional treatment is contraindicated or has been shown to be ineffective. Gout develops when uric acid accumulates in the tissues and joints as a result of elevation of blood concentration of uric acid persisting for years to decades. Gout is usually associated with bouts of severe joint pain and disability (gout flares) and

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tissue deposits of urate crystals (gout tophi). Patients with severe gout have an associated increased risk of kidney failure, which may lead to life-threatening complications. Uricase is an enzyme that is not naturally expressed in humans but is present in almost all other mammals. Uricase eliminates uric acid from the body by converting uric acid to allantoin, which is easily excreted by the kidney. Whereas uric acid is poorly soluble in blood and tends to precipitate when the blood concentration is too high, allantoin is easily soluble in blood and does not tend to form crystals in the body tissues or in urine. We believe that treatment with uricase will eliminate uric acid in the blood and possibly eliminate tissue deposits of urate crystals by converting the uric acid to easily excreted allantoin.

In 2001 we conducted the first of two Phase 1 clinical trials at the Duke University Medical Center, using subcutaneous delivery of Puricase. The results demonstrated a dose-dependent reduction in uric acid levels but two of 13 individuals participating in the study experienced allergic reactions such as hives or inflammation at the injection site. Therefore, the trial was terminated prematurely and the subcutaneous route was abandoned. We completed a second Phase 1 clinical trial in 2003 in which Puricase was administered intravenously. As expected, an inverse relationship between plasma uric acid and blood level of Puricase enzyme activity was demonstrated. A minimum effective dose and a dose-response plateau were identified in terms of plasma uric acid response from the first few hours after intravenous infusion and lasting to the end of the three-week observation period. In the Phase 2 intravenous trial no clinical allergic responses were observed, no infusion reactions were reported, and no adverse reactions were noted at the site of intravenous infusion.

In 2004 we conducted an open label, randomized, three-month Phase 2 safety and efficacy clinical trial of Puricase to determine an appropriate dose and dose regimen and to support further testing in pivotal registration studies (Phase 3). There were 41 trial participants in this trial. The results of the study confirmed and extended the single dose data obtained in Phase 1, again showing a minimum effective dose and a dose-response plateau, in terms of plasma uric acid normalization. The most important and most common adverse events observed in the Phase 2 trial were associated with infusion reactions. Infusion reactions are adverse events occurring around the time of dose administration and are typical of biological drugs administered by intravenous infusion. Characteristically, infusion reactions can be mitigated or avoided when the volume and duration of infusions are increased. Since the infusion volume and duration was reduced by half between Phase 1 and Phase 2, it is anticipated that, by again increasing the volume and duration of infusion in Phase 3, the number and severity of infusion reactions can be effectively reduced. No other important safety issues have arisen from the Phase 2 data set. In sum, the tolerability, safety, and efficacy profile of Puricase observed in Phase 2 supported full development of the product in Phase 3 clinical trials. In December 2004, we administered the last patient dose in a Phase 2 clinical trial of Puricase and completed the full analysis of the results of this study in April 2005. In May 2005, we reported positive top-line Phase 2 clinical trial results for Puricase. Anecdotal photographic evidence of the eradication of gout tophi on the hands of two patients was obtained by one investigator. As spontaneous regression of gout tophi has never been reported, this unexpected efficacy outcome was ascribed to Puricase and became the basis for further formal evaluation in Phase 3. Additionally, it was noted that the frequency of gout flares at the end of the three month Phase 2 study was only about half that anticipated for this severely symptomatic group of patients.

The results from the Phase 2 clinical trial showed that Puricase showed effectiveness in reducing uric acid levels. Based on the results of our end of Phase 2 meeting with the FDA and post-meeting interactions, in December 2005, we submitted a Special Protocol Assessment (SPA) of our Phase 3 protocols. In March 2006 we received a written response from the FDA reflecting the agency’s agreement with the Phase 3 protocols.

In May 2006, we announced that we had reached an agreement with the FDA through a SPA on the clinical trial protocol for Phase 3 trials, which commenced in the United States in May 2006 and Phase 3 patient dosing began in June 2006. Subsequent to the patient dosing in the United States we commenced patient dosing in Canada and Mexico. These trials consist of two replicate double blinded, placebo controlled studies of six months duration, each involving approximately 100 hyperuricemic patients with symptomatic gout in whom conventional treatment is contraindicated or has been shown to be ineffective. The primary efficacy endpoint of the Phase 3 studies will be the proportion of patients who achieve normalization of the plasma uric acid during Month 3 and Month 6. Secondary efficacy endpoints will assess the treatment effect of Puricase on the burden of gout tophi, the frequency of gout flares, the number of tender and swollen joints,

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and improvement in patient-reported outcomes. All patients who complete the Phase 3 studies will be invited to participate in a follow-on twelve month open label extension protocol. The registration data set is expected to include the six-month placebo-controlled data as well as available safety data from the open label extension trial at the time of dossier preparation, and data from all early clinical development trials. Patient recruitment for Phase 3 clinical trials was completed in March 2007. Subject to successful completion of the Phase 3 trials, we are targeting to file a BLA for Puricase with the FDA in early 2008 and expect an FDA action date by early 2009.

Puricase received “orphan drug” designation by the FDA in 2001. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process; however, it does make the product eligible for orphan drug exclusivity and specific tax credits in the United States. Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to orphan drug exclusivity. In such a case, later applications to market a competing drug of the same class for the same orphan indication may not be approved in the United States for a period of seven years, except in limited circumstances. However, if a competitive product is shown to be clinically superior to our product, including, for example, any showing that it is safer, more effective or an improvement to patient care, such as improved tolerance or reduced infusion reactions, any orphan drug exclusivity we have obtained would not block the approval of the competitive product.

Manufacturing, Supply and Distribution Arrangements

Oxandrin

Through March 2005, G.D. Searle LLC (Searle), a subsidiary of Pfizer Inc., manufactured and supplied our requirements of oxandrolone, which is the active ingredient in Oxandrin, pursuant to the terms of a manufacturing agreement which expired at that time. Pursuant to the terms of the expired agreement, the final shipment of oxandrolone manufactured by Searle was received by us in the first half of 2006. Additionally, under the terms of the expired agreement, Searle has agreed not to produce oxandrolone for any other entity prior to October 2009. DSM Pharmaceuticals, Inc. manufactures 2.5 mg and 10 mg Oxandrin tablets for us from the oxandrolone bulk supplied by Searle. We also have an alternative supply agreement with Gedeon-Richter Ltd., pursuant to which Gedeon-Richter will supply oxandrolone to us on an exclusive basis if we meet specified annual minimum purchase requirements. We believe that the final shipment received from Searle in the first half of 2006, when combined with our existing inventory of oxandrolone and our new source of supply from Gedeon-Richter, will be in excess of our requirements for the Oxandrin brand tablets and our authorized generic of oxandrolone tablets through at least 2011. As with all our commercial agreements, we continually review our commercial needs against our contractual commitments in order to ascertain whether adjustments to such commitments are required. At the present time, given the recent introduction of generic forms of oxandrolone tablets by competitors, we are engaged in discussions with Gedeon-Richter in order to mutually agree to reductions to our supply agreement to bring it in line with the current view of the market needs for Oxandrin brand and authorized generic tablets. There is no guarantee that we will be able to negotiate a change in this agreement on terms that are acceptable to either party.

Oxandrolone

In June 2006, we entered into a supply and distribution agreement with Watson Pharmaceuticals, Inc. (Watson) granting it exclusive U.S. distribution rights to our authorized generic of oxandrolone tablets, an Oxandrin-brand equivalent product, which will be manufactured and supplied to Watson through us. Performance under this agreement would occur only upon the launch of generic competition to Oxandrin by third parties. In December 2006, we authorized Watson to distribute our authorized generic of oxandrolone tablets. The distribution agreement with Watson has an initial 10 year term and may be terminated, among other customary reasons, by either party with one year’s prior notice.

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Puricase

We have entered into an arrangement with our former global biologics manufacturing business, BTG-Israel, to serve as the initial primary active pharmaceutical ingredient (API) manufacturer for our product candidate, Puricase, for the remaining clinical development program and for initial commercial supply of product, as well as to provide the regulatory support required of a contract manufacturer with respect to the Biologics License Application (BLA) filing that will be necessary for the approval of the product. All clinical supplies of Puricase required for the completion of our Phase 3 clinical trials and the open label extension clinical study are manufactured and packaged and are being stored and distributed by a facility located in the United States. We are also in the process of concluding our efforts to identify and contract with a secondary source of supply of Puricase, planning for late 2007 to initiate transfer of technology to such secondary supplier with the cooperation of BTG-Israel and separately concluding a long term supply agreement with the suppliers of key active ingredients for the product. We believe that our current arrangements for the supply of clinical and commercial quantities are adequate to complete our clinical development program and to satisfy our preliminary forecasted commercial requirements for Puricase upon its approval.

We also entered into an exclusive royalty-bearing license agreement with Mountain View Pharmaceuticals, Inc. and Duke University granting us rights to certain patents and pending patent applications directed to PEGylated urate oxidase, as well as methods for making and using such uricases, and to make, use and sell such products. We also have the exclusive license to Puricase, a registered trademark of Mountain View Pharmaceuticals. The license agreement shall remain in effect, on a country-by-country basis, for the longer of: ten years from the date of first sale of Puricase in each country, or the date of expiration of the last-to-expire patent covered by the agreement, in each country. The agreement may be terminated for customary reasons prior to such time and may be terminated at our option with six months prior notice.

Sales and Distribution

During 2006 we manufactured and sold Oxandrin in the United States. Prior to 2004, we engaged one distributor to fulfill orders and invoice drug wholesaler customers on our behalf. In 2004 we replaced that sole distributor with Integrated Commercialization Services, Inc. (ICS). Our sales to three drug wholesaler customers, Cardinal Health, AmerisourceBergen Corp. (the parent of ICS) and McKesson Corp., as a percent of our total gross sales related to continuing operations were 87%, 86% and 86% for the years ended December 31, 2006, 2005 and 2004, respectively. In December 2006 we began selling oxandrolone to Watson for distribution in the United States.

Research and Development

Our research and development expenses related to continuing operations were $21.4 million, $17.0 and $19.2 million for the years ended December 31, 2006, 2005 and 2004, respectively. Prior to the sale of our former global biologics manufacturing business in July 2005, we had received financial grants in support of research and development from the Office of the Chief Scientist of the State of Israel for the development of Puricase. These grants from the Office of Chief Scientist of the State of Israel are subject to repayment through a royalty on the commercial sales of Puricase when they commence.

Since the sale of our former global biologics manufacturing business in July 2005, we no longer internally conduct discovery scientific research on potential products. Instead, our efforts focus on the clinical development of Puricase for which we have commercialization rights exclusively licensed.

Governmental Regulation

Regulatory Compliance

Regulation by United States and foreign governmental authorities is a significant factor affecting our ability to commercialize our products, the timing of such commercialization, and our ongoing research and development activities. All of our products require regulatory approval by governmental agencies prior to commercialization. Various laws and regulations govern or influence the research and development,

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manufacturing, safety, labeling, storage, record keeping and marketing of our products. The lengthy process of seeking these approvals, and the subsequent compliance with applicable laws and regulations, require expending substantial resources. Any failure by us to obtain or maintain, or any delay in obtaining or maintaining, regulatory approvals could materially adversely affect our business.

Clinical testing, manufacturing and marketing of pharmaceutical products require prior approval from the FDA and comparable agencies in foreign countries. In the United States, these procedures include pre-clinical studies; the filing of an Investigational New Drug application, or IND; human clinical trials and filing and approval of either a New Drug Application, or NDA, for chemical pharmaceutical products, or a BLA for biological pharmaceutical products. The results of pre-clinical testing, which include laboratory evaluation of product chemistry and formulation, and animal studies to assess the potential safety and efficacy of the product and its formulations, and details concerning the drug manufacturing process and its controls, must be submitted to the FDA as part of an IND that must be reviewed and become effective before clinical testing can begin. An IND becomes effective 30 days after receipt by the FDA unless before that time the FDA raises concerns or questions relating to the proposed clinical trials outlined in the IND. If the FDA has comments or questions, these must be resolved to the satisfaction of the FDA before clinical trials can begin. In addition, the FDA may, at any time, impose a clinical hold on ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials cannot commence or recommence without FDA authorization and then only under terms authorized by the FDA.

Typically, clinical testing involves a three-phase process:

•  Phase 1 clinical trials are conducted in a small number of volunteers or patients to assess the early tolerability and safety profile, and the pattern of drug absorption, distribution and metabolism;

•  Phase 2 clinical trials are conducted in a limited patient population afflicted with a specific disease in order to assess appropriate dosages and dose regimens, expand evidence of the safety profile and evaluate preliminary efficacy; and

•  Phase 3 larger scale, multicenter, well-controlled clinical trials are conducted on patients with a specific disease to generate enough data to statistically evaluate the efficacy and safety of the product for approval, as required by the FDA.

The results of the preclinical and clinical testing and chemistry, manufacturing and controls are then submitted to the FDA in the form of either an NDA or BLA for review and potential approval to commence commercial sales. In responding to an NDA or BLA, the FDA may grant marketing approval, request additional information in an approvable letter or deny the approval if it determines that the NDA or BLA does not provide an adequate basis for approval. An approvable letter generally contains a statement of specific conditions that must be met in order to secure final approval of the NDA or BLA. If and when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an approval letter, which authorizes commercial marketing of the product with specific prescribing information for specific indications. Any approval required by the FDA might not be obtained on a timely basis, if at all.

Among the conditions for an NDA or BLA approval is the requirement that the manufacturing and quality control, some specific non-clinical toxicology studies and some laboratory tests, and clinical studies conform on an ongoing basis with current Good Manufacturing Practices (cGMP), Good Laboratory Practices (GLP), and Good Clinical Practices (cGCP). In complying with cGMP, GLP and cGCP, we must expend time, money and effort in the areas of training, production and quality control within our own organization and at our contract manufacturing laboratories and clinical trial partners. Following approval of the NDA or BLA, we and our third-party manufacturers remain subject to periodic inspections by the FDA. We also face similar inspections coordinated by the European Medicines Agency, or EMEA, by inspectors from particular European Union, or EU, member states that conduct inspections on behalf of the EU and from other foreign regulatory authorities. Any determination by the FDA or other regulatory authorities of manufacturing deficiencies could materially adversely affect our business.

Regulatory requirements and approval processes in EU countries are similar in principle to those in the United States and can be at least as costly and uncertain. The EU has established a unified centralized filing

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and approval system administered by The Committee for Medicinal Products for Human Use (CHMP) and designed to reduce the administrative burden of processing applications for pharmaceutical products derived from new technologies. In addition to obtaining regulatory approval of products, it is generally necessary to obtain regulatory approval of the facility in which the product will be manufactured.

We use and plan to continue to use third-party manufacturers to produce our products in clinical and commercial quantities. Future FDA inspections may identify compliance issues at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of problems with a product, including new safety risks, or the failure to comply with requirements may result in restrictions on a product, manufacturer or holder of an approved NDA or BLA, including withdrawal or recall of the product from the market or other voluntary or FDA-initiated action that could delay further marketing. Newly discovered or developed safety or efficacy data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications. Also, new government requirements may be established that could delay or prevent regulatory approval of our products under development.

Once an NDA or BLA is approved, a product will be subject to certain post-approval requirements, including requirements for adverse event reporting and submission of periodic reports to the FDA. In addition, the FDA strictly regulates the promotional claims that may be made about prescription drug products and biologics. In particular, a drug or biologic may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. The FDA also requires substantiation of any claims of superiority of one product over another, including that such claims be proven by adequate and well-controlled head-to-head clinical trials.

We are also subject to various laws and regulations relating to safe working conditions, clinical, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research and development activities.

Pricing Controls

The levels of revenues and profitability of biopharmaceutical companies may be affected by the continuing efforts of government and third party payors to contain or reduce the costs of health care. For example, in certain foreign markets, pricing reimbursement or profitability of therapeutic and other pharmaceutical products is subject to governmental control. In the United States there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental pricing control. For example, the passage of the Medicare Prescription Drug Improvement and Modernization Act of 2003 imposed requirements for the distribution and pricing of prescription drugs which affect the marketing of our products. The subsequent Medicare Part D prescription program that went into effect January 1, 2006 is currently providing prescription coverage to approximately 31 million people with an estimated cost of $579 billion through 2015, creating additional pressures on product pricing.

Patents and Proprietary Rights

Our scientific staff, contract manufacturing partners and consultants continually work to develop proprietary techniques, processes and products. We protect our intellectual property rights in this work by a variety of means, including assignments of inventions from our scientific staff, contract manufacturing partners and consultants, and filing patent and trademark applications in the United States, Europe and other major industrialized countries. We also rely upon trade secrets and improvements, unpatented proprietary know-how and continuing technological innovation to develop and maintain our competitive position. Our products are sold under brand-name, logo and certain product design trademarks that we consider in the aggregate to be of material importance.

As of March 8, 2007, we maintained worldwide approximately 98 issued patents either owned or exclusively licensed by us, including 18 patents issued in the United States. Additionally, approximately 102 patent applications owned or exclusively licensed by us are pending in various countries. However, our patent

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applications might not result in issued patents and issued patents might be circumvented or invalidated. The expiration or loss of patent protection resulting from legal challenge normally results in significant competition from generic products against the originally patented product and can result in significant reduction in sales of that product in a very short time. We believe that important legal issues remain to be resolved as to the extent and scope of patent protection; and we expect that in certain cases litigation may be necessary to determine the validity and scope of our and others’ proprietary rights. Such litigation may consume substantial amounts of our resources.

We are aware of patents and patent applications issued to and filed by other companies with respect to technology that is potentially useful to us and, in some cases, related to products and processes being developed by us. We cannot currently assess the effect, if any, that these patents may have on our operations.

In the aggregate, our patent and related rights are of material importance to our business. The following is the intellectual property status for our principal products and product candidates:

Oxandrin and oxandrolone

We have been granted several United States patents directed to the use of oxandrolone in the treatment of wounds, burns, and chronic obstructive pulmonary disease, and in ameliorating muscle weakness and wasting in HIV-positive patients. These patents and patent applications would expire between 2012 and 2022. We also have registered Oxandrin as a trademark in the United States.

Puricase

We have exclusively licensed from Mountain View Pharmaceuticals and Duke University certain patents and pending patent applications directed to PEGylated urate oxidase, as well as methods for making and using such uricases, and have jointly filed a patent application with Duke University directed to administration of PEGylated urate oxidase. These patents and patent applications, if issued, would expire between 2019 and 2026. Mountain View Pharmaceuticals has registered the Puricase trademark, which we have exclusively licensed. We have also filed patent applications directed to urate exidase, the resulting patents of which we would be the sole owner of.

Competition

In general, the pharmaceutical and biotechnology industries are intensely competitive. The technological areas in which we work continue to evolve at a rapid pace. Competition from pharmaceutical, chemical and biotechnology companies, universities and research institutions is intense and we expect it to increase. Many of these competitors are substantially larger than we are and have substantially greater capital resources, research and development capabilities and experience and manufacturing, marketing, financial and managerial resources than we do. Acquisitions of competing companies by large pharmaceutical companies or other companies could enhance the financial, marketing and other resources available to these competitors.

An important factor in our ability to compete will be the timing of market introduction of competitive products. Accordingly, the relative speed with which we and competing companies can develop products, complete the clinical testing and approval processes, and supply commercial quantities of the products to the market will be an important element of market success. Other significant competitive factors include:

•  capabilities of our collaborators;

•  product safety and efficacy;

•  timing and scope of regulatory approval;

•  product availability;

•  marketing and sales capabilities;

•  reimbursement coverage from insurance companies and others;

•  the amount of clinical benefits and side effects of our products relative to their cost;

•  the method of administering a product;

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•  price; and

•  patent protection.

In the United States, Oxandrin competes against several other anabolic agents and appetite stimulants, and other oxandrolone generics in addition to our authorized generic brand equivalent product. Each of these products has different strategies and resources allocated to its promotion as compared to Oxandrin and our authorized generic brand equivalent product.

If and when commercialized, Puricase will be launched in the gout treatment-failure population, an indication for which there is currently no product commercially available. Products used to treat the symptoms of gout, such as gout flares and synovitis, could be used concomitantly in patients also using Puricase, as long as symptoms and signs of the disease persist. Other uric acid lowering therapies, such as probenecid, oxypurinol, and allopurinol, have not been tested for use in combination with Puricase.

Employees

As of March 8, 2007, we had 67 employees. All employees are located in the United States. There are 23 employees engaged in research and development activities including clinical, regulatory, quality assurance and control, and manufacturing or production activities, 34 employees are engaged in general and administrative activities including executive, finance, tax, legal, human resources, internal audit, investor relations, technology, and operations, and 10 employees are engaged in sales and marketing activities including business development, commercial operations, sales operations and marketing. In January 2007, as part of a restructuring of our commercial operations in response to generic competition impacting Oxandrin, we discontinued the 19 person Oxandrin field sales force.

Available Information

We file annual, quarterly, and current reports, proxy statements and other documents with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended. The SEC maintains an Internet web site that contains reports, proxy and information statements, and other information regarding issuers, including Savient Pharmaceuticals, Inc. that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.

Our Internet website is http://www.savientpharma.com. We make available free of charge through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. We have made these reports available through our website during the period covered by this report at the same time that they become available from the SEC. Our Internet website is not meant to be incorporated by reference into this Annual Report on Form 10-K.

Our board of directors corporate governance guidelines, code of ethics, whistleblower policy, and the charters of the Audit and Finance Committee, Compensation Committee and Nominating and Corporate Governance Committee are each available on the corporate governance section of our website. Stockholders may request a free copy of any of these documents by writing to Investor Relations, Savient Pharmaceuticals, Inc., One Tower Center, Fourteenth Floor, East Brunswick, New Jersey 08816.

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OUR EXECUTIVE OFFICERS

Our current executive officers are as follows:

Name	Age		Positions
Christopher Clement		51	President and Chief Executive Officer
Philip K. Yachmetz		50	Executive Vice President and Chief Business Officer
Paul Hamelin		52	Senior Vice President, Commercial Operations
Brian J. Hayden		55	Senior Vice President, Chief Financial Officer and Treasurer
Zebulun D. Horowitz, M.D.		55	Senior Vice President, Chief Medical Officer
Robert Lamm		52	Senior Vice President, Quality and Regulatory Affairs

Christopher Clement was appointed President and Chief Executive Officer in July 2004 after joining us in May 2002 as President and Chief Operating Officer. From September 2000 until joining us, Mr. Clement served as CEO and Chairman of Epicyte Pharmaceutical, Inc. Prior to joining Epicyte, he held the positions of Executive Vice President and Senior Vice President, Chief Marketing Officer at Ares-Serono Group. From 1988 to 1997, Mr. Clement held a number of senior management positions at Searle Pharmaceuticals, including Vice President of Marketing, Vice President of Corporate Product Planning, Vice President, General Manager of Global Franchises, and Division President. Mr. Clement also held management positions at Ciba-Geigy Pharmaceuticals and Merck and Co.

Philip K. Yachmetz was appointed Executive Vice President and Chief Business Officer in February 2006 after joining us in May 2004 as Senior Vice President — Corporate Strategy, General Counsel and Secretary. Mr. Yachmetz joined us from Progenics Pharmaceuticals, Inc., where he held the position of Vice President, General Counsel and Secretary from 2000 until 2004. From 1998 to 2000 he served as Senior Vice President, Business Development, General Counsel and Secretary at CytoTherapeutics, Inc. (now StemCells, Inc.). He also founded and served in 1997 to 1998 as Managing Director of Millennium Venture Management, LLC, a business consulting and advisory firm to the pharmaceutical, healthcare, and high technology industry. From 1989 to 1996, he held legal positions of increasing responsibility at Hoffmann-La Roche Inc. Mr. Yachmetz is an attorney admitted to the bar in New Jersey and New York.

Paul Hamelin joined us in May 2006 as Senior Vice President, Commercial Operations. From March 2006 until May 2006, Mr. Hamelin was Managing Director of Rosemont. From 2004 to 2005 Mr. Hamelin served as President and Chief Operating Officer at Algorx Pharmaceuticals. Prior to joining Algorx he held the positions of President and Chief Executive Officer of Elitra Pharmaceuticals, Inc. from 2002 to 2004 and Senior Vice President, Global Commercial Operations at Millennium Pharmaceuticals, Inc. from 2000 to 2002. Mr. Hamelin has also held management marketing, sales and commercial operations positions at Pharmacia/Searle, Abbott Labs and Eli Lilly for over 20 years and is also a Registered Pharmacist.

Brian J. Hayden joined us in July 2006 as Senior Vice President, Chief Financial Officer and Treasurer. Prior to joining us Mr. Hayden was the Vice President of Finance and Chief Financial Officer of Bone Care International, Inc from 2003 to 2005. Prior to joining Bone Care, Mr. Hayden served as Vice President, Chief Financial Officer and Treasurer of Cell Pathways, Inc. from 1997 to 2003. Mr. Hayden has also held financial management positions at Hoffmann-La Roche, Inc.

Zebulun Horowitz, M.D. joined us in March 2003 as Senior Vice President, Chief Medical Officer. Prior to joining us, Dr. Horowitz was Executive Director of Global Clinical Research and Development of Novartis Pharmaceuticals. Prior to joining Novartis in 1996, he was Principal Scientist and Medical Director, New Drug Development at Procter & Gamble Pharmaceuticals from 1992 to 1996; Associate Professor of Clinical Medicine at University of Cincinnati College of Medicine (Endocrinology) from 1989 to 1996; Section Chief and Consultant in Endocrinology, Diabetes, Metabolism at Veterans Administration Medical Center, Cincinnati, Ohio, from 1989 to 1996; Assistant Professor of Medicine and Assistant Attending Physician, New York

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University School of Medicine — Bellevue Hospital Medical Center from 1983 to 1989, and Attending Physician in Endocrinology, Diabetes, Metabolism at New Gouverneur Hospital in New York City from 1982 to 1984. He received his B.A. from Reed College in 1974, his M.D. in June 1978 from New York University School of Medicine and is a Diplomate, ABIM: Endocrinology, Diabetes, and Metabolism (1985), Diplomate, ABIM: Internal Medicine (1981) and Diplomate, National Board of Medical Examiners (1979).

Robert Lamm, Ph.D. joined us in June 2002 as Vice President, Worldwide Quality Assurance and was appointed Senior Vice President, Quality and Regulatory Affairs in February 2006. Prior to joining Savient, Dr. Lamm was a Consultant at Quantic Consulting, Inc from 2001 until 2002. Prior to that time, Dr. Lamm was employed by Carter-Wallace, Inc. from 1987 to 2001 in positions of increasing responsibility, the last three years as Vice-President of Corporate Quality Standards. From 1984 to 1987, Dr. Lamm worked at Bristol-Myers Squibb Corporation as Quality Section Head. Dr. Lamm received his Masters of Science and Ph.D. degrees from Rutgers University in 1981 and 1984, respectively.

ITEM 1A.   RISK FACTORS

Our Annual Report on Form 10-K contains statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements that set forth anticipated results based on management’s plans and assumptions. From time to time, we also provide forward-looking statements in other materials we release to the public as well as oral forward-looking statements. Such statements discuss our strategy, expected future financial position, results of operations, cash flows, financing plans, development of products, strategic alliances, intellectual property, competitive position, plans and objectives of management. We often use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions to identify forward-looking statements. In particular, the statements regarding our new strategic direction and its potential effects on our business and the development of our lead drug candidate Puricase are forward-looking statements. Additionally, forward-looking statements include those relating to future actions, prospective products or product approvals, future performance, financing needs, liquidity or results of current and anticipated products, sales efforts, expenses, interest rates, foreign exchange rates and the outcome of contingencies, such as legal proceedings, and financial results.

We cannot guarantee that any forward-looking statement will be realized. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements.

We undertake no obligation to publicly update forward-looking statements. We provide the following cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our businesses. These are important factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

Risks Relating to Our Strategic Direction

We have repositioned our company to focus on product development, particularly Puricase. If we are unable to develop and commercialize this product candidate or any other product candidate that we may pursue in the future, or if we experience significant delays or unanticipated costs in doing so, our business will be materially harmed.

Much of our near term results will depend on our successfully completing clinical testing of Puricase and, if successful, commercial launch of this product. In December 2004, we administered the last patient dose in a Phase 2 clinical trial of Puricase and we completed the full analysis of the results of this study in April 2005. In May 2005, we reported positive top-line Phase 2 clinical trial results for Puricase. The results from the Phase 2 clinical trial showed that Puricase showed effectiveness in reducing uric acid levels. Based on the

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results of our end of Phase 2 meeting with the FDA and post-meeting interactions, in December 2005, we submitted a Special Protocol Assessment, or SPA, of our Phase 3 protocols. In March 2006, we received a written response from the FDA reflecting the agency’s agreement with the Phase 3 protocols. On May 3, 2006, we announced we had received written notification from the FDA that the SPA was approved. We have implemented the protocols in support of a marketing application for the orphan drug indication of the control of hyperuricemia in patients with symptomatic gout in whom conventional treatment is contraindicated or has been shown to be ineffective.

Although we may determine to enter certain markets outside of the United States ourselves, we are concentrating our business development efforts principally on identifying and entering into a transaction with a partner for the clinical development and commercialization of Puricase outside of the United States. Moreover, we continue to identify and evaluate late stage compounds and technologies for possible in-licensing or partnering transactions in certain specialty areas as part of our business strategy.

Our ability to commercialize Puricase or any other product candidate that we may develop in the future will depend on several factors, including:

•  successfully completing clinical trials;

•  successfully partnering to manufacture fully comparable clinical and commercial drug supplies;

•  receiving marking approvals from the FDA and similar foreign regulatory authorities;

•  establishing commercial manufacturing arrangements with third party manufacturers;

•  launching commercial sales of the product, whether alone or in collaboration with others; and

•  acceptance of the product in the medical community and with third party payors and consumers.

There is no guarantee that we will successfully accomplish any of the above factors, and our inability to do so may result in significant delays, unanticipated costs or the failure of the clinical development and commercialization of Puricase, which would have a material adverse affect on our business. We will face similar drug development risks for any other product candidates that we may develop in the future.

Our ability to engage in in-licensing or partnering transactions in certain specialty areas in the future will depend on several factors, including:

•  identifying products that fit within our product portfolio; and

•  successfully competing for early and late-stage development products.

There is no guarantee that we will successfully accomplish any of the above factors, and our inability to do so may result in our not fully or partially implementing our business strategy, which may have a material adverse affect on our business.

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Puricase, and any other product candidate that we may develop in the future, must satisfy rigorous standards of safety and efficacy before it can be approved for sale. To satisfy these standards, we must engage in expensive and lengthy clinical trials and extensive manufacturing quality assessments to obtain regulatory approval.

We must successfully complete clinical trials for Puricase before we can apply for its marketing approval. Completion of our clinical trials does not assure FDA approval.

We began Phase 3 patient dosing in June 2006. The Phase 3 clinical trials are being conducted in the United States, Canada and Mexico. Our Phase 3 trials may be unsuccessful which would materially harm our business. Even if these trials are successful, we may be required to conduct additional clinical trials or additional manufacturing quality assessments before a Biologics License Agreement, or BLA, can be filed with the FDA for marketing approval or as a condition of approval.

Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome. Success in early phases of clinical trials does not ensure that later clinical trials will be successful and interim results of a clinical trial do not necessarily predict final results. A failure of one or more of our clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize Puricase, including:

•  regulators or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site;

•  our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical testing or clinical trials or we may abandon projects that we expect to be promising;

•  enrollment in our clinical trials may be slower than we currently anticipate, or participants may drop out of our clinical trials at higher rates than we currently anticipate;

•  we might have to suspend or terminate our clinical trials if the participating patients are being exposed to unacceptable health risks;

•  regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;

•  the cost of our clinical trials may be greater than we currently anticipate;

•  we may encounter difficulties or delays in obtaining sufficient quantities of product candidate materials or other materials necessary for the conduct of our clinical trials;

•  any regulatory approval we ultimately obtain may be limited or subject to restrictions; and

•  the effects of our product candidates may not be the desired effects or may include undesirable side effects or the product candidates may have other unexpected characteristics.

Additionally, we, along with our third-party manufacturers and collaborators, may not employ, in any capacity, persons who have been debarred under the FDA’s Application Integrity Policy. Employment of such a debarred person (even if inadvertently) may result in delays in FDA review or approval of our products, or the rejection of data developed with the involvement of such person(s).

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete our clinical trials or other testing or if the results of these trials or tests are not positive or are only modestly positive, we may:

•  be delayed in obtaining marketing approval for our product candidates;

•  not be able to obtain marketing approval;

•  obtain approval for indications that are not as broad as intended; or

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•  not obtain marketing approval before other companies are able to bring competitive products to market.

Our product development costs will also increase if we experience delays in testing or approvals. We do not know whether our ongoing clinical trials will be completed on schedule. Similarly, we do not know whether our clinical trials will begin as planned or will need to be restructured, if at all. Significant delays in clinical trials could also allow our competitors to bring products to market before we do and impair our ability to commercialize our products or product candidates.

We rely on third parties to conduct our clinical trials of Puricase and those third parties may not perform satisfactorily, including failing to meet established deadlines for the completion of such trials.

We do not independently conduct clinical trials for our product candidate, Puricase. We rely on third parties, such as contract research organizations, clinical data management organizations, medical institutions and clinical investigators, to perform this function. Our reliance on these third parties for clinical development activities reduces our control over these activities. We are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us and third parties acting on our behalf to comply with standards, commonly referred to as Good Clinical Practices, for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we may not be able to obtain, or may be delayed in obtaining, regulatory approvals for Puricase and may not be able to, or may be delayed in our efforts to, successfully commercialize Puricase.

We also rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our existing or future distributors could delay clinical development or regulatory approval of Puricase or commercialization of Puricase, producing additional losses and depriving us of potential product revenue.

Our strategic focus includes a licensing initiative to partner our Puricase product candidate outside the United States. We may not be successful in our efforts to partner our Puricase product candidate.

Although we may determine to enter certain markets outside of the United States ourselves, we are seeking a development and commercialization partner for Puricase outside the United States as part of our strategic business plan. To date, we have had limited success in identifying a suitable partner outside the United States, and we may continue to have difficulty in this area for a number of reasons. In particular, the licensing and partnering of pharmaceutical products is a competitive area. Numerous companies are also pursuing strategies to license and partner products similar to those that we are pursuing. These companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.

Our strategic focus includes an initiative to in-license or partner other novel compounds to build our development portfolio. We may not be successful in our efforts to expand our portfolio of products in this manner.

As part of our strategic business plan, we are seeking an active in-licensing or partnering program to access and develop novel compounds in later clinical development. To date, we have not found a suitable partner outside the United States, and we may continue to have difficulty in this area for a number of reasons. In particular, the licensing and acquisition of pharmaceutical products is a competitive area. Numerous companies are also pursuing strategies to license or acquire products similar to those that we are pursuing. These companies may have a competitive advantage over us due to their size, cash resources and greater

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clinical development and commercialization capabilities. Other factors that may prevent us from partnering, licensing or otherwise acquiring suitable product candidates include the following:

•  we may be unable to identify suitable products or product candidates within our areas of expertise;

•  we may be unable to license or acquire the relevant technology on terms that would allow us to make an appropriate return on our investment in the product; or

•  companies that perceive us to be their competitors may be unwilling to assign or license their product rights to us.

If we are unable to develop suitable potential product candidates by obtaining rights to novel compounds from third parties, our business could suffer.

The full development and commercialization of our development drug products and execution of our strategic business plan will require substantial capital, and we may be unable to obtain such capital. If we are unable to obtain additional financing, our business, results of operations and financial condition may be adversely affected.

The development and commercialization of pharmaceutical products requires substantial funds. In addition, we may require cash to acquire new product candidates and to fully execute on our strategic business plan. In recent periods, we have satisfied our cash requirements primarily through product sales, the divestiture of assets that are not core to our strategic business plan and the monetization of underperforming investments. Historically, we have also obtained capital through collaborations with third parties, contract fees, government funding and equity and debt financings. These financing alternatives might not be available in the future to satisfy our cash requirements.

We may not be able to obtain additional funds or, if such funds are available, such funding may be on unacceptable terms. If we raise additional funds by issuing equity securities, dilution to our then existing stockholders will result. If we raise additional funds through the issuance of debt securities or borrowings, we may incur substantial interest expense and could become subject to financial and other covenants that could restrict our ability to take specified actions, such as incurring additional debt or making capital expenditures. If adequate funds are not available, we may be required to significantly curtail one or more of our commercialization efforts or development programs or obtain funds through sales of assets or arrangements with collaborative partners or others on less favorable terms than might otherwise be available.

Risks Related to Our Business

We incurred an operating loss from continuing operations for the year ended 2006 and anticipate that we may incur operating losses from continuing operations for the foreseeable future. If we are unable to commercialize Puricase or any other product candidates, we may never achieve operating profitability.

Since 2004, we have incurred substantial operating losses from continuing operations. Our operating loss from continuing operations was $19.6 million for the year ended December 31, 2004, $14.5 million for the year ended December 31, 2005 and $17.0 million for the year ended December 31, 2006. Our operating losses from continuing operations have resulted principally from costs incurred in connection with our research and development activities, including clinical trials, and from general and administrative expenses associated with our operations. We expect to continue to incur substantial, and even increasing, operating losses from continuing operations for the foreseeable future. Our continuing operations financial results have been substantially dependent on Oxandrin sales. Sales of Oxandrin accounted for 99%, 92%, and 90% of our continuing net product sales in the years ended 2006, 2005, and 2004, respectively. Moreover, we expect that our revenues will decline significantly, and our results of operations will be materially adversely affected as the FDA has approved generic versions of Oxandrin in December 2006 which are currently on the market. In addition, our consolidated net income from 2005 and 2006 and positive cash flow was substantially attributable to the operating results of Rosemont and the gain on disposition of Rosemont which are included in our consolidated financial statements as discontinued operations.

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Our ability to generate operating profits is dependent on the completion of development and successful commercialization of Puricase and any other product candidates that we may develop, license, partner or acquire. If we are unable to successfully develop and commercialize Puricase or any other product candidates, or if we experience significant delays or unanticipated costs in doing so, or if sales revenue from any product candidate that receives marketing approval is insufficient, we may never achieve operating profitability. Even if we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis.

A significant portion of our revenues was attributable to sales of Oxandrin in 2006. The 2006 launch of generic competition to Oxandrin will likely cause a significant decrease in Oxandrin sales in 2007 and future years and may render our existing Oxandrin inventory obsolete. In addition, Oxandrin sales in particular reporting periods may be affected by wholesalers’ buying patterns and product returns. Future returns of Oxandrin, our authorized generic of Oxandrin or other products could also affect our results of operations.

Our sales of Oxandrin in the United States are principally to three major drug wholesalers. These sales are affected by fluctuations in the buying patterns of these wholesalers and the corresponding changes in inventory levels that they maintain. In the past, wholesalers have reduced their inventories of Oxandrin and we expect that wholesalers will continue to reduce inventories as a result of generic competition of Oxandrin. Generic competition for Oxandrin began in December 2006 following the denial by the Court of Appeals for the Federal Circuit of our motion for a stay pending appeal from the District Court’s denial of injunctive relief in connection with our lawsuit against Sandoz Pharmaceuticals and Upsher-Smith Laboratories for infringement of our patents related to various methods of using Oxandrin (oxandrolone). Moreover, we may face additional generic competition from Barr Laboratories, Inc. (“Barr”) which filed an Abbreviated New Drug Application (ANDA) with the FDA seeking approval to engage in the commercial manufacture, use or sale of specified dosages of oxandrolone tablets prior to expiration of our patents. In February 2007, Barr notified us that it amended its ANDA to carve out of its proposed labeling uses for the generic oxandrolone tablet that would infringe our issued use patents. As a result, we have agreed to dismiss the action without prejudice.

The introduction of generic forms of Oxandrin on the market by two competitors, and the possible introduction by a third competitor, will negatively affect our results of operations and may render our existing Oxandrin inventory obsolete. Net sales of Oxandrin were $47.0 million, $44.4 million, and $53.5 million for the years ended 2006, 2005, and 2004, respectively, representing approximately 99%, 92%, and 90% of our continuing net product sales, respectively. We anticipate that Oxandrin will be a less significant product for our future operating results.

In addition to the expected impact of generic competition, some states, including New York, California and Florida, have eliminated or limited reimbursement of prescription drugs for HIV and AIDS, including Oxandrin and oxandrolone, under their AIDS Drug Assistance Programs (ADAP) or via their state Medicaid programs. There can be no assurances that other state formularies will delete Oxandrin. In addition, the implementation of the Medicare Part D program has created disruption in the market as patients switch to a variety of new prescription coverage programs in all states across the United States.

We have considered the demand deterioration as part of our estimates into our product return; however our demand forecasts are based upon management’s best estimates. As of December 31, 2006 and 2005, our allowance for product returns was $2.5 million and $2.9 million, respectively. Future product returns in excess of our historical reserves could reduce our revenues and adversely affect our results of operations.

If third parties on which we rely for distribution of our generic version of oxandrolone do not perform as contractually required or as we expect, our results of operations may be harmed.

We do not have the ability to independently distribute our generic version of oxandrolone tablets. In response to the generic competition that Oxandrin experienced in December 2006, we immediately launched, through our distribution partner, Watson Pharmaceuticals, a generic version of oxandrolone tables, USP (C-III), an Oxandrin brand equivalent product manufactured and supplied by us. We depend on Watson to distribute this product for us, and we have a supply and distribution agreement with Watson. We do not control

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many aspects of Watson’s activities. If Watson fails to carry out its obligations, does not devote sufficient resources to the distribution of oxandrolone, or does not carry out its responsibilities in the manner we expect, our generic version of oxandrolone may not compete successfully against other generics of oxandrolone, and our results of operations could be harmed.

We operate in a highly competitive market. Our competitors may develop alternative technologies or safer or more effective products before we are able to do so.

The pharmaceutical and biotechnology industries are intensely competitive. The technological areas in which we work continue to evolve at a rapid pace. Our future success will depend upon our ability to compete in the research, development and commercialization of products and technologies in our areas of focus. Competition from pharmaceutical, chemical and biotechnology companies, universities and research institutions is intense and we expect it to increase. Many of these competitors are substantially larger than we are and have substantially greater capital resources, research and development capabilities and experience and manufacturing, marketing, financial and managerial resources than we do. Acquisitions of competing companies by large pharmaceutical companies or other companies could enhance the financial, marketing and other resources available to these competitors.

Rapid technological development may result in our product candidates in development becoming obsolete before we can begin marketing these product candidates or before we are able to recover a significant portion of the research, development and commercialization expenses incurred in the development of those products. For example, since our launch of Oxandrin, a significant portion of Oxandrin sales has been for treatment of patients suffering from HIV-related weight loss. These patients’ needs for Oxandrin have decreased as a result of the development of safer or more effective treatments, such as protease inhibitors. In fact, since January 2001, growth in the AIDS-related weight loss market has slowed substantially and actually began to decline as a result of improved therapies to treat HIV-related weight loss.

If and when commercialized, Puricase will be launched in the gout treatment-failure population, an indication for which there is currently no product commercially available. Products used to treat the symptoms of gout, such as gout flares and synovitis, could be used concomitantly in patients also using Puricase, as long as symptoms and signs of the disease persist. Other uric acid lowering therapies, such as probenecid, oxypurinol, and allopurinol, have not been tested for use in combination with Puricase.

Our products must compete favorably to gain market acceptance and market share. An important factor in determining how well our products compete is the timing of market introduction of competitive products. For example, the most recent competitors to enter the oxandrolone market were Sandoz and Upsher-Smith with their introductions of generic oral products containing oxandrolone. We expect these products, as well as our generic version of oxandrolone, to displace Oxandrin. Additional competition also occurs with the entry of therapeutic options, for example, Par Pharmaceutical Companies, Inc. (“Par”) introduced megace ES in June 2005. Megase ES is primarily displacing generic megace which represents 75% of the involuntary weight loss market, but also has an effect on Oxandrin sales. Accordingly, the relative speed with which we and competing companies can develop other products, complete the clinical testing and approval processes, and supply commercial quantities of the products to the market will be an important element of market success.

Our competitors may develop safer, more effective or more affordable products or achieve earlier product development completion, patent protection, regulatory approval or product commercialization than we do. These companies also compete with us to attract qualified personnel and to attract third parties for acquisitions, joint ventures or other collaborations. Our competitors’ achievement of any of these goals could have a material adverse effect on our business.

Manufacturing our products requires us to meet stringent quality control standards. In addition, we depend on third parties to manufacture our products and plan to rely on third parties to manufacture any future products. If these third party suppliers, and particularly our sole source supplier for Puricase, fail to

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supply us for any reason, our revenues and product development efforts may be materially adversely affected.

We depend on third parties for the supply of our products. Failure of any third party to meet applicable regulatory requirements may adversely affect our results of operations or result in unforeseen delays or other problems beyond our control.

The manufacture of our products involves a number of technical steps and requires our third party suppliers and manufacturers to meet stringent quality control and quality assurance specifications imposed by us or by governmental regulatory bodies. In the event of a natural disaster, equipment failure, strike, war or other difficulty, our suppliers may be unable to manufacture our products in a manner necessary to fulfill demand. Our inability to fulfill market demand, or the inability of our third party manufacturers to meet our demands will have a direct and adverse impact on our sales and may also permit our licensees and distributors to terminate their agreements.

Other risks involved with engaging third party suppliers include:

•  reliance on the third party for regulatory compliance and quality control assurance;

•  the possible breach of the manufacturing agreement by the third party or the inability of the third party to meet our production schedules because of factors beyond our control, such as shortages in qualified personnel; and

•  the possibility of termination or non-renewal of the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us.

We rely on a single source supplier for the manufacture of our product candidate Puricase and have a single source supplier of a key active ingredient contained in Puricase with which we currently have no long term supply agreement. In addition, we have entered into an arrangement with BTG-Israel, to serve as the initial primary manufacturer of our product candidate, Puricase. The continued ability of BTG-Israel to consistently perform manufacturing activities for us may be affected by economic, military and political conditions in Israel and in the Middle East in general. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and neighboring countries. These hostilities have, at times, caused security and economic problems in Israel.

The nature and scope of the technology transfer required to manufacture the product outside of BTG-Israel make it unlikely that we will be able to identify sources of supply of Puricase other than BTG-Israel, prior to 2010. Escalating hostilities involving Israel could adversely affect BTG-Israel’s ability to supply adequate quantities of the product under our agreement and in turn affect our ability to complete the clinical development of Puricase. While we are seeking to identify additional secondary sources of supply of Puricase and concluding a long term supply agreement with the supplier of the key active ingredients for the product, the completion of the process to successfully identify and reach agreement with such additional secondary source and the time to conduct a technology transfer to enable the secondary source to scale up and validate its manufacturing processes for Puricase will be lengthy. If we experience an interruption in the supply of Puricase from BTG-Israel or the active ingredients from other third party suppliers before we have succeeded in concluding long term supply arrangements and entering into and validating a secondary supply arrangement for Puricase it may materially adversely affect our financial results, possibly materially.

The manufacture and packaging of pharmaceutical products are subject to the requirements of the FDA and similar foreign regulatory bodies. If we or our third party suppliers fail to satisfy these requirements, our business operations may be materially harmed.

The manufacturing process for pharmaceutical products is highly regulated. Manufacturing activities must be conducted in accordance with the FDA’s current Good Manufacturing Practices, and comparable requirements of foreign regulatory bodies.

Failure by our third party suppliers to comply with applicable regulations, requirements, or guidelines could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of regulatory

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authorities to grant marketing approval of our products, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business. Other than by contract, we do not have control over the compliance by our third party suppliers with these regulations and standards.

Changes in manufacturing processes or procedures, including changes in the location where an API or a finished product is manufactured or changes in a third party supplier may require prior FDA or other governmental review or approval or revalidation of the manufacturing process. This is particularly an issue with biologic products, such as our product candidate Puricase. This review or revalidation may be costly and time-consuming.

Because there are a limited number of manufacturers that operate under applicable regulatory requirements, it may be difficult for us to change a third party supplier if we are otherwise required to do so.

We may not be successful in establishing strategic alliances, which could adversely affect our ability to develop and commercialize products and services.

Part of our strategic plan to focus on product development involves entering into strategic alliances for the development and commercialization of products and services when we believe that doing so will maximize product value. For example, we plan to seek development and commercial partners to commercialize Puricase outside the United States.

If we are unsuccessful in reaching an agreement with a suitable collaborator or collaborators for our current or future product candidates, we may fail to meet our business objectives for the applicable product or program. We face significant competition in seeking appropriate collaborators. Moreover, these alliance arrangements are complex to negotiate and time-consuming to document. We may not be successful in our efforts to establish strategic alliances or other alternative arrangements. The terms of any strategic alliances or other arrangements that we establish may not be favorable to us. Moreover, such strategic alliances or other arrangements may not be successful.

The risks that we are likely to face in connection with any future strategic alliances include the following:

•  strategic alliance agreements are typically for fixed terms and are subject to termination under various circumstances, including, in many cases without cause;

•  we may rely on collaborators to manufacture the products covered by our alliances;

•  the areas of research, development and commercialization that we may pursue, either alone or in collaboration with third parties, may be limited as a result of non-competition provisions of our strategic alliance agreements; and

•  failure to establish steady supply of essential raw materials from vendors.

Our sales depend on payment and reimbursement from third party payors and a reduction in the payment or reimbursement rate could result in decreased use or sales of our products.

Most patients rely on Medicare and Medicaid, private health insurers and other third party payors to pay for their medical needs, including any drugs we or our collaborators may market. If third party payors do not provide adequate coverage or reimbursement for any products that we may develop, our revenues and prospects for profitability will suffer. The United States Congress enacted a limited prescription drug benefit for Medicare recipients in the Medicare Prescription Drug and Modernization Act of 2003 which was expanded by the Medicare Part D prescription plan that went into effect January 1, 2006. As a result, in some cases our prices are negotiated with drug procurement organizations for Medicare beneficiaries and are likely to be lower than if we did not participate in this program. Non-Medicare third party drug procurement organizations may also base the price they are willing to pay on the rate paid by drug procurement organizations for Medicare beneficiaries.

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A primary trend in the United States healthcare industry is toward cost containment. In addition, in some foreign countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take six to twelve months or longer after the receipt of regulatory marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of our product candidates or products to other available therapies. The conduct of such a clinical trial could be expensive and result in delays in commercialization of our products.

Third party payors, states, and federally subsidized programs are challenging the prices charged for medical products and services, and many third party payors, states, and federally subsidized programs consistently limit reimbursement for newly approved healthcare products, including Oxandrin. In particular, third party payors may limit the indications for which they will reimburse patients who use any products we may develop. Cost control initiatives could decrease the price we might establish for products that we may develop, which would result in lower product revenues to us.

If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop or commercialize our product candidates.

Our ability to successfully develop and commercialize our products will depend on our ability to attract, retain and motivate highly qualified personnel and to establish and maintain continuity and stability within our management team. There is a great deal of competition from other companies and research and academic institutions for the limited number of pharmaceutical development professionals with expertise in the areas of our activities. We generally do not enter into employment agreements with any of our product development personnel. In addition, we do not maintain, and have no current intention of obtaining, “key man” life insurance on any of our employees. If we cannot continue to attract and retain, on acceptable terms, the qualified personnel necessary for the continued development of our business and products, we may not be able to sustain our operations and execute our business plan.

We may incur substantial costs related to product liability.

The testing and marketing of our products entail an inherent risk of product liability and associated adverse publicity. Pharmaceutical product liability exposure could be extremely large and poses a material risk.

We currently have product liability insurance coverage in place, which is subject to coverage limits and deductibles. We might not be able to maintain existing insurance or obtain additional insurance on acceptable terms, or at all. It is possible that a single product liability claim could exceed our insurance coverage limits, and multiple claims are possible. Any successful product liability claim made against us could substantially reduce or eliminate any stockholders’ equity we may have and could materially harm our financial results. Product liability claims, regardless of their merit, could be costly and divert management’s attention, and adversely affect our reputation and the demand for our products.

The ultimate outcome of pending securities litigation is uncertain.

After the restatement of our financial statements for the years ended December 31, 1999, 2000 and 2001 and the first two quarters of 2002, we and some of our former officers were named in a series of similar purported securities class action lawsuits. The complaints in these actions, which have been consolidated into one action, allege violations of U.S. securities law through alleged material misrepresentations and omissions and seek an unspecified award of damages.

In August 2005, citing the failure of the plaintiff’s amended complaint to set forth particularized facts that give rise to a strong inference that the defendants acted with the required state of mind, the district court granted our motion to dismiss the action, without prejudice, and granted plaintiffs leave to file an amended complaint. In October 2005 the plaintiffs filed a second amended complaint, again seeking unspecified compensatory damages, purporting to set forth particularized facts to support their allegations of violations of Sections 10(b) and 20(a) of the Exchange Act by us and our former officers. In December 2005 we filed a motion to dismiss the second amended complaint which has now been fully briefed by both us and the

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plaintiffs and is pending a decision by the Court. On October 26, 2006, the district court granted our motion to dismiss, with prejudice, plaintiff’s second amended complaint. The district court declined to allow plaintiffs to file another amended complaint. The plaintiffs have filed an appeal in the United States Court of Appeals for the Third Circuit, which is currently pending. We intend to contest the appeal vigorously. However, should the appeal prove successful and an adverse decision in this case is ultimately made, we could be adversely affected financially. We have referred these claims to our directors and officers insurance carrier, which has reserved its rights as to coverage with respect to this action.

Tax requirements and audits could impact our results of operations.

The Company is subject to the tax laws of various jurisdictions. Our results of operations could be materially affected with a change in tax law or in the interpretation of tax law. This also includes the risk of changes in tax rates and the risk of failure to comply with procedures required by the taxing authorities. Failure to manage our tax strategies could lead to an additional tax charge. We are currently under examination by various state taxing authorities for certain tax years. Any material disagreement with taxing authorities could result in cash expenditures and adversely affect our results of operations and financial condition.

Risks Related to Previous Weaknesses in our Internal Controls

We have previously identified material weaknesses in our internal controls over financial reporting. Although these material weaknesses have been fully remediated we may experience additional material weaknesses in the future. Any material weaknesses in our internal control over financial reporting or our failure to remediate such material weaknesses could result in a material misstatement in our financial statements not being prevented or detected and could adversely affect investor confidence in the accuracy and completeness of our financial statements, as well as our stock price.

We have previously identified material weaknesses in our internal control over financial reporting. These material weaknesses have been fully remediated as described further in Item 9A in this Annual Report on Form 10-K. Additional material weaknesses in our internal control over financial reporting could result in material misstatements in our financial statements not being prevented or detected and could harm investor confidence in the accuracy and completeness of our financial statements, which in turn could harm our business and have an adverse effect on our stock price and our ability to raise additional funds.

Risks Relating to Intellectual Property

If we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights that are important to our business.

We intend to become a party to various license agreements. We expect that our future licenses will impose various diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license, in which event we might not be able to market any product that is covered by the licensed patents.

If we are unable to obtain and maintain protection for the intellectual property relating to our technology and products, the value of our technology and products will be adversely affected.

Our success will depend in large part on our ability to obtain and maintain protection in the United States and other countries for the intellectual property covering or incorporated into our technology and products. The patent situation in the field of biotechnology and pharmaceuticals is highly uncertain and involves complex legal and scientific questions. We may not be able to obtain additional issued patents relating to our technology or products. Even if issued, patents may be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of term of patent protection we may have for our products. Generic forms of our product Oxandrin are now being introduced, and as a result, our results of operations have been harmed. Changes in either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.

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Our patents also may not afford us protection against competitors with similar technology. Because patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing, or in some cases not at all, and because publications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions claimed in issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in these patent applications.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected.

In addition to patented technology, we rely upon unpatented proprietary technology, processes and know-how. We seek to protect this information in part by confidentiality agreements with our employees, consultants and third parties. These agreements may be breached and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently developed by competitors. If our confidential information or trade secrets become publicly known, they may lose their value to us.

If we infringe or are alleged to infringe intellectual property rights of third parties, our business may be adversely affected.

Our development and commercialization activities, as well as any product candidates or products resulting from these activities, may infringe or be claimed to infringe patents or patent applications under which we do not hold licenses or other rights. We are aware of patent applications filed by, or patents issued to, other entities with respect to technology potentially useful to us and, in some cases, related to products and processes being developed by us. Third parties may own or control these patents and patent applications in the United States and abroad. These third parties could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

As a result of patent infringement claims, or in order to avoid potential claims, we or our collaborators may choose or be required to seek a license from the third party and be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our collaborators were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations if, as a result of actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on acceptable terms. This could harm our business significantly.

There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biopharmaceutical industries. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the United States Patent and Trademark Office and opposition proceedings in the European Patent Office or in another patent office, regarding intellectual property rights with respect to our products and technology. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could adversely affect our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.

In the future we may be involved in costly legal proceedings to enforce or protect our intellectual property rights or to defend against claims that we infringe the intellectual property rights of others.

Litigation is inherently uncertain and an adverse outcome could subject us to significant liability for damages or invalidate our proprietary rights. Legal proceedings that we initiate to protect our intellectual

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property rights could also result in counterclaims or countersuits against us. Any litigation, regardless of its outcome, could be time-consuming and expensive to resolve and could divert our management’s time and attention. Any intellectual property litigation also could force us to take specific actions, including:

•  cease selling products or undertaking processes that are claimed to be infringing a third party’s intellectual property;

•  obtain licenses to make, use, sell, offer for sale or import the relevant technologies from the intellectual property’s owner, which licenses may not be available on reasonable terms, or at all;

•  redesign those products or processes that are claimed to be infringing a third party’s intellectual property; or

•  pursue legal remedies with third parties to enforce our indemnification rights, which may not adequately protect our interests.

We have been involved in several lawsuits and disputes regarding intellectual property in the past. We could be involved in similar disputes or litigation with other third parties in the future. An adverse decision in any intellectual property litigation could have a material adverse effect on our business, results of operations and financial condition.

Regulatory Risks

We are subject to stringent governmental regulation, and our failure to comply with applicable regulations could adversely affect our ability to conduct our business.

Virtually all aspects of our business are subject to extensive regulation by numerous federal and state governmental authorities in the United States, such as the FDA, as well as by foreign countries where we manufacture or distribute our products. Of particular significance are the requirements covering research and development, testing, manufacturing, quality control, labeling, promotion and distribution of pharmaceutical products for human use. All of our products, manufacturing processes and facilities require governmental licensing, registration or approval prior to commercial use, and maintenance of those approvals during commercialization. Our prescription pharmaceutical products cannot be marketed in the United States until they have been approved by the FDA, and then can only be marketed for the indications and claims approved by the FDA. As a result of these requirements, the length of time, the level of expenditures and the laboratory and clinical information required for approval of an NDA or a BLA are substantial. The approval process applicable to products of the type being developed by us usually takes many years from the commencement of human clinical trials and typically requires substantial expenditures. We may encounter significant delays or excessive costs in our or their respective efforts to secure necessary approvals or licenses. Before obtaining regulatory approval for the commercial sale of our products, we are required to conduct pre-clinical and clinical trials to demonstrate that the product is safe and efficacious for the treatment of the target indication. The timing of completion of clinical trials depends on a number of factors, many of which are outside our control. In addition, we may encounter delays or rejections based upon changes in the policies of regulatory authorities. The FDA and foreign regulatory authorities have substantial discretion to terminate clinical trials, require additional testing, delay or withhold registration and marketing approval, and mandate product withdrawals.

Regulation by governmental authorities in the United States and other countries is a significant factor affecting our ability to commercialize our products, the timing of such commercialization, and our ongoing research and development activities. The timing of regulatory approvals, if any, is not within our control. Failure to obtain and maintain requisite governmental approvals, or failure to obtain approvals of the scope requested, could delay or preclude us from marketing our products, could limit the commercial use of the products and could also allow competitors time to introduce competing products ahead of product introductions by us. Even after regulatory approval is obtained, use of the products could reveal side effects that, if serious, could result in suspension of existing approvals and delays in obtaining approvals in other jurisdictions.

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Failure to comply with applicable regulatory requirements can, among other things, result in significant fines or other sanctions, termination of clinical trials, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, imposition of operating restrictions, civil penalties and criminal prosecutions. We or our employees might not be, or might fail to be, in compliance with all potentially applicable federal and state regulations, which could adversely affect our business.

In addition, all pharmaceutical product promotion and advertising activities are subject to stringent regulatory requirements and continuing regulatory review. Violations of these regulations could result in substantial monetary penalties, and civil penalties which can include costly mandatory compliance programs and exclusion from federal healthcare programs.

Further, FDA policy or similar policies of regulatory agencies in other countries may change and additional governmental requirements may be established that could prevent or delay regulatory approval of our products. Moreover, from time to time legislation is drafted and introduced in Congress that could also significantly change the statutory provisions governing the approval, manufacturing and marketing of drug and biologic products. We cannot predict what effect changes in regulations, enforcement positions, statutes or legal interpretations, when and if promulgated, adopted or enacted, may have on our business in the future. Changes could, among other things, require changes to manufacturing methods or facilities, expanded or different labeling, new approvals, the recall, replacement or discontinuance of certain products, additional record keeping and expanded scientific substantiation requirements. These changes, or new legislation, could adversely affect our business.

Risks Relating to an Investment in Our Common Stock

Our stock price is volatile, which could adversely affect your investment.

Our stock price is volatile. Since January 1, 2005, our common stock had traded as high as $15.75 per share and as low as $2.25 per share. The market price of our common stock may be influenced by many factors, including:

•  our ability to successfully implement our strategic business plan;

•  announcements of technological innovations or new commercial products by us or our competitors;

•  announcements by us or our competitors of results in pre-clinical testing and clinical trials;

•  regulatory developments;

•  patent or proprietary rights developments;

•  public concern as to the safety or other implications of biotechnology products;

•  changes in our earnings estimates and recommendations by securities analysts;

•  period-to-period fluctuations in our financial results; and

•  general economic, industry and market conditions.

The volatility of our common stock imposes a greater risk of capital losses on our stockholders than a less volatile stock would. In addition, volatility makes it difficult to ascribe a stable valuation to a stockholder’s holdings of our common stock. The stock market in general and the market for pharmaceutical and biotechnology companies in particular have also experienced significant price and volume fluctuations that are often unrelated to the operating performance of particular companies. In the past, following periods of volatility in the market price of the securities of pharmaceutical and biotechnology companies, securities class action litigation has often been instituted against these companies. Such litigation would result in substantial costs and a diversion of management’s attention and resources, which could adversely affect our business.

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We expect our quarterly results to fluctuate, which may cause volatility in our stock price.

Our revenues and expenses have in the past and may in the future continue to display significant variations. These variations may result from a variety of factors, including:

•  the amount and timing of product sales;

•  changing demand for our products;

•  our inability to provide adequate supply for our products;

•  changes in wholesaler buying patterns;

•  returns of expired product;

•  changes in government or private payor reimbursement policies for our products;

•  increased competition from new or existing products, including generic products;

•  the timing of the introduction of new products;

•  the timing and realization of milestone and other payments from licensees;

•  the timing and amount of expenses relating to research and development, product development and manufacturing activities;

•  the timing and amount of expenses relating to sales and marketing;

•  the timing and amount of expenses relating to general and administrative activities;

•  the extent and timing of costs of obtaining, enforcing and defending intellectual property rights; and

•  any charges related to acquisitions.

Because many of our expenses are fixed, particularly in the short-term, any decrease in revenues will adversely affect our earnings until revenues can be increased or expenses reduced. We also expect that our revenues and earnings will be adversely affected now that generic versions of Oxandrin have been introduced. Because of fluctuations in revenues and expenses, it is possible that our operating results for a particular quarter or quarters will not meet the expectations of public market analysts and investors, which could cause the market price of our common stock to decline. We believe that period-to-period comparisons of our operating results are not a good indication of our future performance and stockholders should not rely on those comparisons to predict our future operating or share price performance.

Effecting a change of control of our company could be difficult, which may discourage offers for shares of our common stock.

Our certificate of incorporation and the Delaware General Corporation Law contain provisions that may delay or prevent an attempt by a third party to acquire control of us. These provisions include the requirements of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits designated types of business combinations, including mergers, for a period of three years between us and any third party that owns 15% or more of our common stock. This provision does not apply if:

•  our board of directors approves the transaction before the third party acquires 15% of our stock;

•  the third party acquires at least 85% of our stock at the time its ownership goes past the 15% level; or

•  our board of directors and two-thirds of the shares of our common stock not held by the third party vote in favor of the transaction.

We have also adopted a stockholder rights plan intended to deter hostile or coercive attempts to acquire us. Under the plan, if any person or group acquires more than 20% of our common stock without approval of our board of directors under specified circumstances, our other stockholders have the right to purchase shares of our common stock, or shares of the acquiring company, at a substantial discount to the public market price. As a result, the plan makes an acquisition much more costly to a potential acquirer.

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Our certificate of incorporation also authorizes us to issue up to 4 million shares of preferred stock in one or more different series with terms fixed by our board of directors. Stockholder approval is not necessary to issue preferred stock in this manner. Issuance of these shares of preferred stock could have the effect of making it more difficult for a person or group to acquire control of us. No shares of our preferred stock are currently outstanding. While our board of directors has no current intention or plan to issue any preferred stock, issuance of these shares could also be used as an anti-takeover device.

ITEM 2.   PROPERTIES

Our corporate headquarters are located in East Brunswick, New Jersey, where we lease approximately 53,000 square feet of office space. The lease expires in March 2013 and has two five-year renewal options. Effective as of March 1, 2006, we have subleased approximately 12,400 square feet of our corporate headquarters office space for an initial term of 5 years, terminable after 3 years at the option of the subtenant.

We also lease an office in San Diego, California which is utilized for research and development purposes. We lease this office space on an annual basis at a base annual rental expense of $10,200. The lease expires on May 1, 2007 with an option to extend the term available for an additional one year period. The extended term would renew at the current base rent plus a seven percent increase.

ITEM 3.   LEGAL PROCEEDINGS

Patent Related Litigation

We are aware of patent applications filed by, or patents issued to, other entities with respect to technology potentially useful to us and, in some cases, related to products and processes being developed by us. We cannot presently assess the effect, if any, that these patents may have on our operations. The extent to which efforts by other researchers have resulted or will result in patents and the extent to which the issuance of patents to others would have a materially adverse effect on us or would force us to obtain licenses from others is currently unknown. See “Item 1A. Risk Factors — Risks Relating to Intellectual Property” for further discussion.

On September 26, 2006, the Company filed a lawsuit against Barr Laboratories, Inc. (“Barr”), a wholly-owned subsidiary of Barr Pharmaceuticals, Inc., for infringement of certain of the Company’s patents related to various methods of using Oxandrin. The action is pending under the caption Savient Pharmaceuticals, Inc. v. Barr Laboratories, Inc. in the U.S. District Court for the District of New Jersey. The suit was brought under the Hatch-Waxman Act in response to Barr’s filing of an Abbreviated New Drug Application with the FDA seeking approval to engage in the commercial manufacture, use and sale of specified dosages of oxandrolone tablets prior to expiration of the Company’s patents, all of which are listed in Approved Drug Products with Therapeutic Equivalence Evaluations for Oxandrin. Subsequent to this, in February 2007 Barr notified us that they amended their ANDA to carve out of their proposed labeling uses for the generic oxandrolone tablet intending to avoid the particular uses covered by our method of use. As a result, we have agreed to dismiss the action without prejudice at this time.

On December 1, 2006, the Food and Drug Administration denied two Citizens Petitions filed by us, which had been pending since February 2004 and September 2005, requesting that the Commissioner of Food and Drugs not approve any abbreviated new drug applications (“ANDAs”) for generic oral products containing oxandrolone until (i) agency adopted bioequivalence standards and a requirement for any generic product to have completed a trial determining whether it may safely be used by patients who take the prescription blood thinner warfarin are satisfied and (ii) prior to the expiration of our exclusive labeling for geriatric dosing of Oxandrin on June 20, 2008. Also on December 1, 2006, the FDA approved the ANDAs previously filed by Sandoz for 2.5 mg and 10 mg, and Upsher-Smith for 2.5 mg, dosage forms of generic oral products containing oxandrolone.

Following the FDA’s actions, on December 4, 2006 we filed a lawsuit in the U.S. District Court for the District of New Jersey (the “District Court”) against Sandoz Pharmaceuticals Corp. (“Sandoz”) and Upsher-Smith Laboratories, Inc. (“Upsher”) claiming that their generic oxandrolone products infringe our patents

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related to various methods of using Oxandrin. We also filed a motion seeking a temporary restraining order and preliminary injunction to restrain Sandoz and Upsher from marketing and selling their generic formulations of Oxandrin. On December 12, 2006 the United States Court of Appeals for the Federal Circuit in Washington, D.C. (the “Federal Circuit”) issued an order temporarily enjoining all sales of generic oxandrolone tablets by Sandoz and Upsher-Smith until the Federal Circuit had the opportunity to review this matter. The order was issued by the Federal Circuit as a result of an appeal filed that same day by us of the order on December 8 of the District Court lifting its December 4 restraining order. On December 28, 2006 the Court of Appeals denied our motion for a preliminary injunction. Following this, we launched an authorized generic of oxandrolone tablets, (USP) C-III, an Oxandrin-brand equivalent product in both the 2.5 mg and 10 mg dosages in December 2006 which is distributed by Watson Pharmaceuticals. The launch of oxandrolone is in response to generic competition to Oxandrin from Sandoz and Upsher-Smith. In the interim we filed a petition for reconsideration with the FDA regarding their rejection of our citizen petitions on the basis that FDA failed to adequately consider the significant safety and legal issues raised by permitting approval of generic oxandrolone drug products without the inclusion of labels that contain full geriatric dosing and safety information. We have not received a decision or other communication regarding this petition for reconsideration to date.

Non-Patent Related Litigation

On December 20, 2002, a purported shareholder class action was filed against the Company and three of its former officers. The action was pending under the caption In re Bio-Technology General Corp. Securities Litigation, in the U.S. District Court for the District of New Jersey. Plaintiff alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and sought unspecified compensatory damages. The plaintiff purported to represent a class of shareholders who purchased shares of the Company between April 19, 1999 and August 2, 2002. The complaint asserted that certain of the Company’s financial statements were materially false and misleading because the Company restated its earnings and financial statements for the years ended 1999, 2000 and 2001, as described in the Company’s Current Report on Form 8-K dated, and its press release issued, on August 2, 2002. Five nearly identical actions were filed in January and February 2003, in each instance claiming unspecified compensatory damages. In September 2003, the actions were consolidated and co-lead plaintiffs and co-lead counsel were appointed in accordance with the Private Securities Litigation Reform Act. The parties subsequently entered into a stipulation which provided for the lead plaintiff to file an amended consolidated complaint. Plaintiffs filed such amended complaint and the Company filed a motion to dismiss the action. On August 10, 2005, citing the failure of the amended complaint to set forth particularized facts that give rise to a strong inference that the defendants acted with the required state of mind, the Court granted the Company’s motion to dismiss the action without prejudice and granted plaintiffs leave to file an amended complaint. On October 11, 2005, the plaintiffs filed a second amended complaint, again seeking unspecified compensatory damages, purporting to set forth particularized facts to support their allegations of violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by the Company and its former officers. On December 13, 2005, the Company filed a motion to dismiss the second amended complaint. On October 26, 2006, the United States District Court for the District of New Jersey dismissed, with prejudice, the second amended complaint. The district court declined to allow plaintiffs to file another amended complaint. The plaintiffs have filed an appeal in the United States Court of Appeals for the Third Circuit, which is currently pending. We intend to contest the appeal vigorously. We have referred these claims to our directors and officers insurance carrier, which has reserved its rights as to coverage with respect to this action.

From time to time we become subject to legal proceedings and claims in the ordinary course of business. Such claims, even if without merit, could result in the significant expenditure of our financial and managerial resources.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of stockholders during the fourth quarter of 2006.

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PART II

ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is quoted on The Nasdaq Global Market under the symbol “SVNT”, and prior to June 23, 2003, it was quoted under the symbol “BTGC.” The following table sets forth, for the periods indicated, the high and low closing prices per share of our common stock from January 1, 2005 through December 31, 2006 as reported by The Nasdaq Global Market.

	High		Low
2006
First Quarter	$	5.33	$	3.77
Second Quarter		6.01		5.02
Third Quarter		6.54		5.10
Fourth Quarter		12.18		6.69
2005
First Quarter	$	3.31	$	2.40
Second Quarter		4.41		2.61
Third Quarter		4.58		3.41
Fourth Quarter		3.97		3.02

The number of stockholders of record of our common stock on March 8, 2007 was approximately 989.

We have never declared or paid a cash dividend on our common stock, and we do not expect that cash dividends will be paid to the holders of our common stock in the foreseeable future.

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ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA

The Consolidated Statements of Operations Data for each of the years in the five-year period ended December 31, 2006 and the Balance Sheet Data as of December 31, 2006, 2005, 2004, 2003 and 2002 are derived from the Company’s audited Consolidated Financial Statements. The Selected Consolidated Financial Data should be read in conjunction with the Company’s Consolidated Financial Statements and the Notes to the Consolidated Financial Statements and ”Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	Year Ended December 31,
	2002(1)			2003(1)			2004(1)			2005(1)			2006(1)
	(In thousands, except per share data)
Statement of Operations Data:
Product sales, net	$	60,226		$	68,909		$	59,401		$	48,043		$	47,351
Other revenues		4,399			5,048			2,952			1,452			163
Total revenues		64,625			73,957			62,353			49,495			47,514
Cost of goods sold and expenses		67,280			74,753			81,969			63,975			64,519
Operating loss		(2,655	)		(796	)		(19,616	)		(14,480	)		(17,005	)
Other income (expense), net and investment income		2,189			105			(734	)		14,157			15,566
Income tax expense (benefit)		2,267			(153	)		13,063			146			25
Loss from continuing operations		(2,733	)		(538	)		(33,413	)		(469	)		(1,464	)
Income from discontinued operations		11,412			12,992			5,898			6,437			61,789
Net income (loss)	$	8,679		$	12,454		$	(27,515	)	$	5,968		$	60,325
Loss per common share from continuing operations:
Basic	$	(0.05	)	$	(0.01	)	$	(0.56	)	$	(0.01	)	$	(0.03	)
Diluted	$	(0.05	)	$	(0.01	)	$	(0.56	)	$	(0.01	)	$	(0.03	)
Earnings per common share from discontinued operations:
Basic	$	0.20		$	0.22		$	0.10		$	0.11		$	1.06
Diluted	$	0.20		$	0.22		$	0.10		$	0.11		$	1.06
Earnings (loss) per common share:
Basic	$	0.15		$	0.21		$	(0.46	)	$	0.10		$	1.03
Diluted	$	0.15		$	0.21		$	(0.46	)	$	0.10		$	1.03
Weighted average number of common and common equivalent shares:
Basic		58,480			59,194			60,066			60,837			58,538
Diluted		58,480			59,194			60,066			60,837			58,538

(1) Selected consolidated financial data includes retrospective reclassifications from continuing operations to discontinued operations as a result of certain divestitures (BTG-Israel in 2005 and Rosemont in 2006) as disclosed in the footnotes to our consolidated financial statements.

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	As of December 31,
	2002			2003			2004			2005			2006
	(In thousands)
Balance Sheet Data(2):
Cash, cash equivalents and short-term investments	$	16,547		$	22,801		$	25,282		$	75,372		$	179,396
Accounts receivable, net		35,764			33,375			25,078			11,716			3,517
Inventories, net		16,271			18,622			17,090			9,419			4,203
Total current assets		76,942			84,180			71,700			105,863			194,858
Goodwill		40,080			40,121			40,121			40,121			—
Other intangibles, net		79,878			75,743			71,688			67,638			—
Total assets		285,520			290,747			257,205			222,691			197,893
Total current liabilities		49,558			48,806			43,664			20,866			20,164
Long-term liabilities		12,222			5,903			—			—			43
Accumulated deficit		(32,426	)		(19,972	)		(47,487	)		(41,519	)		(14,316	)
Stockholders’ equity		182,502			199,389			174,384			181,394			177,686

(2) Selected consolidated balance sheet data includes BTG-Israel and Rosemont for year ends prior to their date of divestiture.

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a specialty biopharmaceutical company engaged in developing and marketing pharmaceutical products that target unmet medical needs in both niche and broader markets.

We currently sell and distribute branded and distribute a generic version of oxandrolone (“oxandrolone”), which is used to promote weight gain following involuntary weight loss. We sell and distribute the branded version of oxandrolone in the United States under the name Oxandrin^®, and we distribute the generic version of oxandrolone through an agreement with Watson Pharmaceuticals, Inc. (“Watson”). We launched oxandrolone in December 2006 in response to the approval and launch of generic competition to Oxandrin by two generic companies. We plan to continue to market and distribute the Oxandrin brand product directly through wholesalers

We are currently developing Puricase^®, a drug targeting the control of elevated levels of uric acid in the blood, or hyperuricemia, in patients with symptomatic gout in whom conventional treatment is contraindicated or has been shown to be ineffective. Puricase is in Phase 3 clinical development and has received “orphan drug” designation by the Food and Drug Administration to Puricase (FDA). Orphan drug designation may prevent competitive products that are not shown to be clinically superior from receiving FDA approval for the same indication for a period of seven years from time of PDA authorization for marketing. Our strategic plan is to advance the development of Puricase and expand our product portfolio by in-licensing late-stage compounds and exploring co-promotion and co-development opportunities that fit our expertise in specialty pharmaceuticals and biopharmaceuticals with an initial focus in rheumatology.

Prior to August 2006, we also marketed more than 100 pharmaceutical products in oral liquid form in the United Kingdom and some EU countries through our former United Kingdom subsidiary, Rosemont Pharmaceuticals, Ltd (Rosemont). In 2004 we commenced a repositioning of our commercial and development operations to focus on the development and commercialization of new pharmaceutical and biopharmaceutical products, such as Puricase. As a result of this repositioning, we sold Rosemont in August 2006, and prior to that, in July 2005 we sold our former global biologics manufacturing business, which operated primarily through our former subsidiary, Bio-Technology General (Israel) Ltd. (BTG-Israel).

Also, in January 2006 we completed the sale to Indevus Pharmaceuticals, Inc. (“Indevus”) of Delatestryl, our former injectable testosterone product for male hypogonadism. Under the terms of the sale, Indevus paid us an initial payment of $5 million and a portion of net sales of the product for the first three years following closing of the transaction based on an escalating scale. A $5.9 million gain on the sale of Delatestryl was recorded in the first quarter of 2006.

We have restructured our commercial operations in 2006 and early 2007 such that we currently operate within one “Specialty Pharmaceutical” segment which includes sales of Oxandrin and oxandrolone, and the research and development activities of Puricase. As part of this restructuring, we discontinued our 19 person Oxandrin field sales force in January 2007. The results of our former Rosemont and BTG-Israel subsidiaries are included as part of discontinued operations in our consolidated financial statements.

We were founded in 1980 as Bio-Technology General Corp. and changed our name to Savient Pharmaceuticals, Inc. in June 2003. We conduct our administration, finance, business development, clinical development, sales, marketing, quality assurance and regulatory affairs activities primarily from our headquarters in East Brunswick, New Jersey.

Specialty Pharmaceuticals

Our financial results have been dependent on sales of Oxandrin since its product launch in December 1995. Sales of Oxandrin accounted for 99% and 92% of our continuing net product sales for years ended December 31, 2006 and 2005, respectively. Generic competition for Oxandrin began in December 2006. Introduction of these generic products will cause a significant decrease in our Oxandrin revenues, which will adversely affect us financially and could require us to scale back some of our business activities. As a result,

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we anticipate that Oxandrin will be a less significant product for our future operating results. We do, however, have sufficient cash on hand that will be sufficient to fund our ongoing operations and Puricase clinical trials for at least the next twenty-four months. Our generic competitors since December 2006 are Sandoz Pharmaceuticals which received FDA approval to market both the 2.5 mg and 10.0 mg dosage forms of oxandrolone and Upsher-Smith Laboratories which received FDA approval to market only the 2.5 mg dosage form of the drug.

In response to the generic competition that Oxandrin experienced in December 2006, we immediately launched, through our distribution partner Watson Pharmaceuticals, an authorized generic of oxandrolone tablets, (USP) C-III, an Oxandrin brand equivalent product manufactured and supplied by us. We believe we will capture a significant portion of the generic market through this product launch. The authorized generic of oxandrolone tablets will meet all quality control standards of the Oxandrin brand and will contain the same active and inactive pharmaceutical ingredients. We have a supply and distribution agreement in effect with Watson Pharmaceuticals which provides for us to receive a significant portion of the gross margin earned by Watson on sales of oxandrolone.

In January 2007, as part of a restructuring of our commercial operations in response to generic competition impacting Oxandrin, we discontinued the 19 person Oxandrin field sales force.

In May 2006, we received written notification of approval from the FDA of a Special Protocol Assessment (“SPA”) for Puricase. We have implemented the protocols in support of a marketing application for the orphan drug indication of the control of hyperuricemia in patients with treatment-failure gout in whom conventional therapy is contraindicated or has been ineffective. In June 2006, we began patient dosing in our Phase 3 clinical studies of Puricase. Patient recruitment for the clinical trials was completed in March 2007. Subject to successful completion of our Phase 3 clinical trials, we are targeting to file a Biologic License Application (“BLA”) for Puricase with the FDA in early 2008 and expect an FDA action date by early 2009.

In January 2006, we completed the sale to Indevus Pharmaceuticals, Inc. (“Indevus”) of Delatestryl, our former injectable testosterone product for male hypogonadism. Under the terms of the sale, Indevus paid us an initial payment of $5 million and a portion of net sales of the product for the first three years following closing of the transaction based on an escalating scale. A $5.9 million gain on the sale of Delatestryl was recorded in the first quarter of 2006. Prior to the sale, product sales of Delatestryl had decreased significantly as a result of the FDA’s allowance of the reintroduction of a generic version of Delatestryl into the market in March 2004.

Impact of Oxandrin Generic Competition

Generic competition for Oxandrin began in December 2006. Introduction of generic products will cause a significant decrease in our Oxandrin revenues, which will adversely affect us financially and could require us to scale back some of our business activities. As a result, we anticipate that Oxandrin will be a less significant product for our future operating results. In anticipation of this we discontinued our 19 person Oxandrin field sales force in January 2007.

We have evaluated the impact of the generic competition as it relates to current demand for Oxandrin. We have increased valuation reserves related to Oxandrin inventory in the amount of $2.6 million, increased reserves related to product returns in the amount of $0.4 million and have recorded certain accruals related to purchase commitments in the amount of $2.0 million for product that we are committed to produce, but may not be able to sell based upon current demand forecasts. The total adjustment related to the release of Oxandrin generics resulted in a charge to income of approximately $5.0 million in the fourth quarter of 2006. This may increase if our demand forecasts are not accurate.

The introduction of Oxandrin generics will result in lower demand for Oxandrin. As a result we anticipate that sales will trend downward with a significant reduction in near term shipments in order to ensure that product currently at the wholesalers and retailers will have ample expiration dating. We expect demand to continue to deteriorate which will result in a long-term downward sales trend.

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Savient’s authorized generic oxandrolone will compete with third party generics. As a generic product, we anticipate to yield lower selling prices than our Oxandrin product and therefore it is not expected to materially offset the anticipated reduction of Oxandrin revenues.

Discontinued Operations

During August 2006, we sold our oral liquid pharmaceuticals business in the United Kingdom to Ingleby (1705) Limited (Close Brothers Private Equity) (“Close Brothers”). Under the terms of the sale, Close Brothers paid to us an aggregate purchase price of $176.0 million for the issued share capital of Rosemont’s parent company and certain other related assets. Net proceeds from the transaction after selling costs and taxes were $151.6 million. Additionally, Close Brothers purchased certain intellectual property and other assets and rights from us which relate to the business of Rosemont, including certain intellectual property related to the Soltamox product. The pre-tax gain on disposition of the oral liquid pharmaceuticals business was $77.2 million.

During July 2005, we sold our former global biologics manufacturing business which primarily operated in Israel through BTG-Israel. Financial results related to BTG-Israel are included in discontinued operations for the years ended December 31, 2004 and 2005. The loss on disposition of the BTG-Israel business was $4,000.

Revenue from discontinued operations, operating income from discontinued operations, and income from discontinued operations for the years ended December 31, 2006, 2005 and 2004 are as follows:

	Year Ended December 31
	2004		2005		2006
	(In thousands)
Revenues from discontinued operations	$	61,542	$	51,088	$	24,224
Operating income from discontinued operations	$	6,600	$	9,851	$	5,415
Income from discontinued operations	$	5,898	$	6,437	$	61,789

Revenues from discontinued operations decreased by $26.9 million, or 53%, for the year ended 2006, as compared to the year ended 2005. Our discontinued operations during 2005 included revenues from BTG-Israel and Rosemont, whereas our revenues during 2006 only included revenues from Rosemont up until its sale in August 2006. Discontinued operations revenues decreased by $10.5 million, or 17%, for the year ended December 31, 2005, as compared to the year ended December 31, 2004. This decrease was primarily attributable to BTG-Israel as 2004 included a full year of revenues and 2005 included revenues only through July, when we divested this business.

Operating income from discontinued operations decreased by $4.4 million, or 45% for the year ended December 31, 2006, as compared to the same period in 2005. This decrease was primarily attributable to a partial period of operations during the year ended December 31, 2006, for Rosemont, which was sold in August 2006, as compared to a full year of operations for the same period of 2005. Operating income from discontinued operations increased by $3.3 million, or 49% for the year ended December 31, 2005 as compared to the same period of 2004. The increase was attributable to a reduction in research and development and general and administrative expenses in BTG-Israel.

Income from discontinued operations increased $55.4 million for the year ended December 31, 2006, as compared to the same period of 2005. This increase was primarily attributable to a $56.5 million gain on the sale of Rosemont, net of income taxes. Income tax expense for the year ended December 31, 2006 related to discontinued operations was $21.3 million as compared to income tax expense for the year ended December 31, 2005 of $3.3 million. The 2006 discontinued operations income tax expense primarily related to the gain on sale of Rosemont and the 2005 discontinued operations income tax expense primarily related to operating profit generated by Rosemont and to a lesser extent BTG-Israel. Income from discontinued operations increased by $0.5 or 9% for the year ended December 31, 2005 as compared to the same period of 2004. This increase was primarily attributable to higher operating income at BTG-Israel.

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The results of discontinued operations are not included in the discussion entitled “Results of Operations.”

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. Applying these principles requires our judgment in determining the appropriateness of acceptable accounting principles and methods of application in diverse and complex economic activities. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of revenues, expenses, assets and liabilities, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 1 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, we believe the following accounting policies include management estimates that are most critical to our reported financial results:

Product revenue recognition.  Product sales are generally recognized when title to the product has transferred to our customers in accordance with the terms of the sale. During 2006, we began shipping oxandrolone to our distributor and have accounted for this on a consignment basis until the product is sold into the retail market. We have deferred the recognition of revenue related to these shipments until we confirm that the product has been sold into the retail market and all other revenue recognition criteria has been met. We recognize revenue in accordance with the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition in Financial Statements,” as amended by SAB No. 104 (together, “SAB 104”), and Statement of Financial Accounting Standards (SFAS) No. 48 “Revenue Recognition When Right of Return Exists.” SAB 104 states that revenue should not be recognized until it is realized or realizable and earned. Revenue is realized or realizable and earned when all of the following criteria are met:

(1) persuasive evidence of an arrangement exists;

(2) delivery has occurred or services have been rendered;

(3) the seller’s price to the buyer is fixed and determinable; and

(4) collectibility is reasonably assured.

SFAS No. 48 states that revenue from sales transactions where the buyer has the right to return the product shall be recognized at the time of sale only if:

(1) the seller’s price to the buyer is substantially fixed or determinable at the date of sale;

(2) the buyer has paid and the obligation is not contingent on resale of the product;

(3) the buyer’s obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product;

(4) the buyer acquiring the product for resale has economic substance apart from that provided by the seller;

(5) the seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer; and

(6) the amount of future returns can be reasonably estimated.

Our net product revenues represent total product revenues less allowances for returns, Medicaid rebates, other government rebates, discounts, and distribution fees.

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Allowances for returns.  In general, we provide credit for product returns that are returned six months prior to or up to twelve months after the product expiration date. Our product sales in the United States primarily relate to the following products:

Product	Expiration (in years)
Oxandrin and oxandrolone 2.5 mg		5
Oxandrin and oxandrolone 10 mg(1)		3
Delatestryl(2)		5

(1)	In 2006, the Company determined, based on its review of stability data, that the Oxandrin 10 mg dosage form demonstrated stability over a three-year shelf life and thus the Company modified the product’s label to indicate a 3 year expiration date. Product with three-year expiration dating was first sold to our customers in May 2006.
(2)	On January 9, 2006, the Company completed its sale of Delatestryl to Indevus Pharmaceuticals, Inc. We continue to evaluate product returns on sales of Delatestryl that occurred prior to the sale date to Indevus.

Upon sale, we estimate an allowance for future returns. We provide additional reserves for contemporaneous events that were not known and knowable at the time of shipment. In order to reasonably estimate future returns, we analyze both quantitative and qualitative information including, but not limited to, actual return rates by lot productions, the level of product manufactured by us, the level of product in the distribution channel, expected shelf life of the product, current and projected product demand, the introduction of new or generic products that may erode current demand, and general economic and industry wide indicators. Certain specifics regarding these analyses are as follows:

•  Actual return rates — We track actual returns by product and analyze historical return trends. We use these historical trends as part of our overall process of estimating future returns.

•  The level of product manufactured — The level of product produced has an impact on the valuation of that product. For productions that exceed anticipated future demand, a valuation adjustment will be required. Generally, this valuation adjustment occurs as an offset to gross inventory. Currently, we have mandated that product with less than twelve months of expiry dating will not be sold into the distribution channel.

•  Level of product in the distribution channel — We review wholesaler inventory and third-party prescription data to ensure that the level of product in the distribution channel is at a reasonable level. Currently, the level of product in the distribution channel appears reasonable for five-year and three-year expiration product. The five-year expiration product currently has higher levels of inventory in the distribution channel as compared to historical trends.

•  Estimated shelf life — Product returns generally occur due to product expiration. Therefore, it is important for us to ensure that product sold into the distribution channel has excess dating that will allow the product to be sold through the distribution channel without nearing its expiration date. Currently we have mandated that product with less than twelve months of expiry dating will not be sold into the distribution channel. We have taken the appropriate measures to enforce this policy, including setting up certain controls with our third party distributor. In addition, we entered into a distributor service agreement with one of our large wholesalers which limits the level of product at the wholesaler. The terms of this agreement are consistent with the industry’s movement toward a fee-for-service approach which we believe has resulted in better distribution channel inventory management, higher levels of distribution channel transparency, and more consistent buying and selling patterns. Since a majority of our sales flow through three large wholesalers, we expect that these industry changes will have a direct impact on our future sales to wholesalers, inventory management, product returns and estimation capabilities.

•  Current and projected demand — We analyze prescription demand data provided by industry standard third-party sources. This data is used to estimate the level of product in the distribution channel and to determine future sales trends.

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•  Product launches and new product introductions — For future product launches, we will analyze projected product demand and production levels in order to estimate return and inventory reserve allowances. New product introductions, including generics, will be monitored for market erosion and adjustments to return estimates will be made accordingly.

We also utilize the guidance provided in SFAS No. 48 and SAB 104 in establishing our return estimates. SFAS No. 48 discusses potential factors that may impair the ability to make a reasonable estimate including:

(1) the susceptibility of the product to significant external factors, such as technological obsolescence or changes in demand,

(2) relatively long periods in which a particular product may be returned,

(3) absence of historical experience with similar types of sales of similar products, or inability to apply such experience because of changing circumstances, for example, changes in the selling enterprise’s marketing policies or relationships with its customers, and

(4) absence of a large volume of relatively homogeneous transactions.

SAB 104 provides additional factors that may impair the ability to make a reasonable estimate including:

(1) significant increases in or excess levels of inventory in a distribution channel,

(2) lack of “visibility” into or the inability to determine or observe the levels of inventory in a distribution channel and the current level of sales to end users,

(3) expected introductions of new products that may result in the technological obsolescence of and larger than expected returns of current products,

(4) the significance of a particular distributor to the registrant’s (or a reporting segment’s) business, sales and marketing,

(5) the newness of a product,

(6) the introduction of competitors’ products with superior technology or greater expected market acceptance, and

(7) other factors that affect market demand and changing trends in that demand for the registrant’s products.

As a result of Oxandrin generic competition that began in December 2006, we analyzed the impact on product returns considering the product currently at wholesalers and retailers, and the current demand forecasts. As a result, we recorded an additional product returns reserve of $0.4 million for the year ended December 31, 2006

The aggregate net return allowance reserves as of December 31, 2006 and 2005 was $2.5 million and $2.9 million, respectively. A tabular rollforward of the activity related to the allowance for returns is as follows:

			Expense Provisions				Actual Deductions
	Balance		Related to		Related to		Related to		Related to					Balance at
	Beginning		Current		Prior		Current Year		Prior			Other		End of
Description	of Period		Year Sales		Period Sales		Sales		Period Sales			Deductions		Period
							(In thousands)
Allowance for sales returns:
2005	$	3,259		1,808		—		—		(2,179	)		—	$	2,888
2006	$	2,888		1,309		1,065		—		(2,810	)		—	$	2,452

Allowances for Medicaid and other government rebates.  Our contracts with Medicaid and other government agencies such as the Federal Supply System commit us to providing those agencies with our most favorable pricing. This ensures that our products remain eligible for purchase or reimbursement under these government-funded programs. Based upon our contracts and the most recent experience with respect to sales

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through each of these channels, we provide an allowance for rebates. We monitor the sales trends and adjust the rebate percentages on a regular basis to reflect the most recent rebate experience. The aggregate net rebate accrual balances as of December 31, 2006 and December 31, 2005 was $1.3 million and $2.5 million, respectively. A tabular rollforward of the activity related to the allowances for Medicaid and other government rebates is as follows:

			Expense Provisions					Actual Deductions
	Balance		Related to		Related to			Related to			Related to					Balance at
	Beginning		Current		Prior			Current Year			Prior Period			Other		End of
Description	of Period		Year Sales		Period Sales			Sales			Sales			Deductions		Period
								(In thousands)
Allowance for rebates:
2005	$	3,360		5,541		(27	)		(3,051	)		(3,332	)		—	$	2,491
2006	$	2,491		2,516		(171	)		(1,263	)		(2,320	)		—	$	1,253

Inventory valuation.  We state inventories at the lower of cost or market. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, we record reserves for the difference between the cost and the market value. We determine these reserves based on estimates.

As a result of Oxandrin generic competition that began in December 2006, we analyzed the impact on inventory reserves considering the Oxandrin inventory currently on hand, inclusive of raw materials and finished goods, and the current demand forecasts. As a result, we recorded an additional inventory reserve of $2.6 million for the year ended December 31, 2006.

The aggregate net inventory valuation reserves as of December 31, 2006 and 2005 were $8.3 million and $7.7 million, respectively.

In addition, we have committed to minimum purchase requirements of Oxandrin raw material inventory in the future that, based on current demand forecasts, is not expected to be sold. Although we are currently in negotiations with these suppliers there is no guarantee that we will be able to reduce our obligations. As a result, we accrued for these costs and recorded a charge to cost of goods sold of $2.0 million for the year ended December 31, 2006.

Share Based Compensation.  Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, (“SFAS No. 123(R)”) using the modified-prospective-transition method. Under this transition method, compensation cost in 2006 includes cost for options granted prior to, but not amortized, as of December 31, 2005. The modified-prospective-transition method does not result in the restatement of prior periods which were accounted for under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. Options are granted to certain employees and directors at prices equal to the market value of the stock on the dates the options are granted. The options granted have a term of 10 years from the grant date and granted options for employees generally vest ratably over a four year period. The fair value of each option is amortized into compensation expense on a straight-line basis between the grant date for the option and each vesting date. We have estimated the fair value of all stock option awards as of the date of the grant by applying the Black-Scholes pricing valuation model. The application of this valuation model involves assumptions that are highly subjective, judgmental and sensitive in the determination of compensation expense, including the option’s expected term and the price volatility of the underlying stock.

The cumulative effect on income from continuing operations and net income for year ended December 31, 2006 related to the adoption of SFAS No. 123(R) is approximately $1.3 million which includes both stock option and employee stock purchase plan expenses. As of December 31, 2006, there was $3.9 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to unamortized stock option compensation which is expected to be recognized over a weighted average period of approximately 1.8 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

During 2006, we issued performance share awards to certain employees which could result in the issuance of up to 430,500 shares of restricted stock if identified performance objectives are achieved at designated

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target levels. Compensation cost related to performance shares is based upon the grant date fair value of the shares and management’s best estimate as to whether or not the performance criteria will be satisfied. This amount is recognized ratably over the performance period. During the year ended December 31, 2006 approximately $0.7 million of deferred performance share compensation cost has been amortized to expense. Compensation cost adjustments will be made based upon changes in estimates of whether the performance criteria will be satisfied. During the year ended December 31, 2006 no restricted stock shares have been vested related to the performance shares award program.

Results of Operations

We have historically derived our revenues from product sales as well as from collaborative arrangements with third parties. The sources of revenue under our historical third party arrangements included up-front contract fees, funding for additional research, and reimbursement for producing certain experimental materials, milestone payments and royalties on sales of product. Our funding for additional research conducted by our former BTG-Israel subsidiary includes funding that we historically received from the Office of the Chief Scientist of the State of Israel. Following the sale of our Israeli business operations, the revenue from the historical third party arrangements and future funding from the Office of the Chief Scientist are not available to us.

Our revenues and expenses have in the past displayed, and may in the future continue to display, significant variations. These variations may result from a variety of factors, including:

•  the timing and amount of product sales;

•  changing demand for our products;

•  our inability to provide adequate supply for our products;

•  changes in wholesaler buying patterns;

•  returns of expired product;

•  changes in government or private payor reimbursement policies for our products;

•  increased competition from new or existing products, including generic products;

•  the timing of the introduction of new products;

•  the timing and realization of milestone and other payments from licensees;

•  the timing and amount of expenses relating to research and development, product development and manufacturing activities;

•  the extent and timing of costs of obtaining, enforcing and defending intellectual property rights; and

•  any charges related to acquisitions.

The following table summarizes net sales of our commercialized products and their percentage of net product sales for the periods indicated:

	Year Ended December 31,
	2004				2005				2006
	(Dollars in thousands)
Oxandrin	$	53,520	90.1	%	$	44,405	92.4	%	$	46,965		99.2	%
Oxandrolone(1)		—	—			—	—			469		1.0
Delatestryl(2)		5,881	9.9			3,638	7.6			(83	)	(0.2	)
	$	59,401	100.0	%	$	48,043	100.0	%	$	47,351		100.0	%

(1)	On December 29, 2006, we launched our authorized generic of Oxandrin® which is distributed through Watson Pharmaceuticals.
(2)	On January 9, 2006, we completed the sale of Delatestryl to Indevus Pharmaceuticals, Inc.

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We believe that our product performance will vary from period to period based on the purchasing patterns of our customers, particularly related to wholesaler inventory management trends, and our focus on:

•  maintaining or increasing business with our existing products;

•  expanding into new markets; and

•  commercializing additional products.

Results of Operations for the Years Ended December 31, 2006 and December 31, 2005

Revenues

Total revenues were $47.5 million and $49.5 million for the years ended December 31, 2006 and 2005, respectively, a decrease of $2.0 million, or 4%. This decrease resulted from a decrease in other revenues of $1.3 million or 89% and a decrease in product sales of $0.7 million or 1%.

Product sales were $47.3 million and $48.0 million for years ended December 31, 2006 and 2005, respectively. The decrease in product sales was primarily attributable to lower sales of our former product, Delatestryl which was sold to Indevus Pharmaceuticals in January, 2006, partially offset by an increase in sales of Oxandrin and oxandrolone.

•  Sales of Oxandrin were $47.0 million and $44.4 million for the years ended December 31, 2006 and 2005, respectively, an increase of $2.6 million, or 6%. This increase was primarily attributable to price increases instituted during 2006, stronger sales and marketing programs, and a reduction in the level of Medicaid rebates due in part to the initiation of Medicare Part D program and with Oxandrin being one of numerous products placed upon greater restriction for reimbursement in Florida. Partially offsetting these increases in sales was the impact of lower total prescription volume of 18% for 2006 versus 2005. This compares with an overall decline in the involuntary weight loss market of 1%. With Oxandrin now experiencing generic competition, we expect that sales will decline in future periods. This level of decline will be dependent on factors including the pricing of generic products and the number of generic products in the marketplace.

•  Sales of Delatestryl decreased $3.7 million for the year ended December 31, 2006 versus 2005. On January 9, 2006, we completed the sale of Delatestryl to Indevus Pharmaceuticals, Inc. which terminated our sales of this product. As part of the Delatestryl sale agreement, we receive royalty payments on net sales generated by Indevus.

•  On December 29, 2006, we launched authorized generic product via our distribution partner, Watson Pharmaceuticals. Sales of oxandrolone, authorized generic product, which was launched by Watson in December 2006, were $0.5 million for the year ended December 31, 2006. As Oxandrin is now experiencing generic competition, we expect Oxandrin branded sales to drop and sales of our generic from Watson to increase in future periods.

Other revenues were $0.2 million and $1.5 million for the years ended December 31, 2006 and 2005, respectively, a decrease of $1.3 million. This decrease was attributable to lower royalties which resulted from our sale of the exclusive rights to certain intellectual property in December 2005 as part of a litigation settlement.

Cost of goods sold

Cost of goods sold was $8.5 million and $5.3 million for the years ended December 31, 2006 and 2005, respectively, an increase of $3.2 million. Cost of goods sold as a percentage of product sales increased from 11% for the year ended 2005 to 18% for the year ended 2006. This increase was due primarily to $2.6 million of inventory valuation adjustments recorded in the fourth quarter of 2006 relating to Oxandrin raw material and finished goods inventory on hand at December 31, 2006 that is in excess of expected future product demand due to the launch of generics. The excess inventory levels resulted from generic competition to Oxandrin which began in December 2006 and which the Company believes will lower future demand.

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Additionally, as a result of generic competition related to Oxandrin, a $2.0 million reserve was recorded in the fourth quarter of 2006 related to future raw material purchase commitments that will not be required based on lower demand forecasts for Oxandrin and oxandrolone. Partially offsetting the higher cost of goods sold variance from the inventory valuation adjustment and reserves recorded in 2006 was a $1.4 million inventory valuation adjustment recorded in 2005 related to the production of oxandrolone, which was not being marketed at that time.

Research and development expenses

Research and development expenses were $21.4 million and $17.0 million for the years ended December 31, 2006 and 2005, respectively, an increase of $4.4 million, or 26%. This increase was primarily attributable to clinical development expenses for Puricase due to the initiation of Phase 3 clinical studies in May 2006 and higher manufacturing process development costs related to Puricase.

Selling and marketing expenses

Selling and marketing expenses were $10.7 million and $14.8 million for the years ended December 31, 2006 and 2005, respectively, a decrease of $4.1 million, or 28%. This decrease was primarily attributable to a planned reduction in the sales force in August 2005 and corresponding marketing expenses as a result of a strategic change to target only high volume prescribers of Oxandrin.

General and administrative expenses

General and administrative expenses were $23.9 million and $21.9 million for the years ended December 31, 2006 and 2005, respectively, an increase of $2.0 million, or 9%. This increase was primarily due to increased legal fees of $1.0 million related to the filing of two lawsuits for infringement of the Company’s patents related to various methods of using Oxandrin and $1.1 million of higher compensation expense related to the impact of expensing stock options as per FAS 123-R.

Commissions and royalties expenses

Commissions and royalties expenses were $5,000 and $5.1 million for the years ended December 31, 2006 and 2005, respectively, a decrease of $5.1 million. This decrease was primarily attributable to the termination of our agreement within Ross Products division of Abbott Laboratories (Ross) on sales of Oxandrin for the long-term care market and an elimination of the royalties that we previously paid related to arrangements involving our former products, Delatestryl and Mircette.

Investment income

Investment income was $7.2 million and $0.8 million for the years ended December 31, 2006 and 2005, respectively, an increase of $6.4 million. This increase primarily resulted from significantly higher cash balances on hand in 2006 and higher effective interest rates. Additionally, $0.5 million of investment income was recorded for a realized gain related to the investment in Omrix common stock as this security was sold in November 2006.

Other income (expense), net

Other income (expense) represented income of $8.3 million and $13.4 million for the years ended December 31, 2006 and 2005, respectively, a decrease in income in 2006 of $5.1 million. In 2006, the other income is primarily attributable to the gain on the sale of Delatestryl of approximately $5.9 million, a $1.3 million settlement due from Ross related to commission payment overcharges in 2006, $0.6 million of income from the receipt of Omrix stock from Catalyst Investments, L.P. as part of the February 2005 agreement with Catalyst and $0.5 million of income related to a human growth hormone intellectual property dispute settlement with Novo Nordisk. In 2005, other income primarily reflected $10.6 million of income related to a patent infringement legal settlement on the Company’s former product, Mircette, and the successful settlement of intellectual property litigation with Novo Nordisk for $3.0 million.

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Income tax expense

Income tax expense was $25,000 and $146,000 for the years ended December 31, 2006 and 2005, respectively, a decrease of $121,000. This decrease was primarily attributable to an increase in the loss from continuing operations before income taxes for the year ended 2006 as compared to year ended 2005. The Company also incurred a significant income tax expenses for the years ended December 31, 2006 and 2005 related to discontinued operations. See “Discontinued Operations” section above for further discussion.

Results of Operations for the Years Ended December 31, 2005 and December 31, 2004

Revenues

Total revenues were $49.5 million and $62.4 million for the years ended December 31, 2005 and 2004, respectively, a decrease of $12.9 million, or 21%. This decrease resulted primarily from lower product sales of $11.4 million or 19% and a decrease in other revenues of $1.5 million or 51%.

Product sales were $48.0 million and $59.4 million for the years ended December 31, 2005 and 2004, respectively. The decrease in product sales was primarily attributable to lower sales of Oxandrin and our former product, Delatestryl.

•  Sales of Oxandrin were $44.4 million and $53.5 million for the years ended December 31, 2005 and 2004, respectively, a decrease of $9.1 million, or 17%. This decrease was primarily attributable to lower customer and prescription demand. Oxandrin total prescriptions declined 10% in 2005 as compared to 2004. As a comparison, the involuntary weight loss market declined by 1% for the same period.

•  Sales of Delatestryl were $3.6 million and $5.9 million for the years ended 2005 and 2004, respectively, a decrease of $2.3 million, or 38%. The decrease in Delatestryl sales resulted primarily from the reintroduction of a competing generic product into the market in March 2004. We sold Delatestryl to Indevus Pharmaceuticals on January 9, 2006.

Other revenues were $1.5 million and $3.0 million for the years ended December 31, 2005 and 2004, respectively, a decrease of $1.5 million. This decrease was attributable to $0.9 million of lower revenues related to funded research and development projects from the Office of the Chief Scientist of the State of Israel and $0.6 million of decreased royalties from our former product, Mircette.

Cost of goods sold

Cost of goods sold was $5.3 million and $11.5 million for the years ended December 31, 2005 and 2004, respectively, a decrease of $6.2 million. Cost of goods sold as a percentage of product sales decreased from 19% for year ended 2004 to 11% for year ended 2005 due primarily to inventory valuation adjustments recorded during 2004 related to Oxandrin and our former product, Delatestryl.

Research and development expenses

Research and development expenses were $17.0 million and $19.2 million for the years ended December 31, 2005 and 2004, respectively, a decrease of $2.2 million, or 12%. This decrease was primarily attributable to a reduction in toxicology studies for Prosaptide, for which development efforts were terminated in December 2005, offset partially by an increase in Puricase Phase 2 clinical development expenses in 2005.

Selling and marketing expenses

Selling and marketing expenses were $14.8 million and $17.0 million for the years ended December 31, 2005 and 2004, respectively, a decrease of $2.2 million, or 13%. This decrease was primarily attributable to lower marketing and consulting fees related to Oxandrin and our former product, Delatestryl.

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General and administrative expenses

General and administrative expenses were $21.9 million and $26.4 million for the years ended December 31, 2005 and 2004, respectively, a decrease of $4.5 million, or 17%. This decrease was primarily attributable to a $3.0 reduction in legal reserves for patent litigation, $1.2 million for a reduction in work force restructuring expenses, a $1.0 million decrease in sales tax audit expenses and a decrease in legal expenses of $1.8 million, offset partially by a $2.0 million increase in salary and benefit costs.

Retirement expense

Retirement expense of $2.1 million for the year ended December 31, 2004 related to a retirement payment and other related benefits in connection with the retirement agreement of our former Chairman and Chief Executive Officer. In June 2004, this former executive elected to receive the retirement payment in one lump sum.

Commissions and royalties expenses

Commissions and royalties expenses were $5.1 million and $5.8 million for the years ended December 31, 2005 and 2004, respectively, a decrease of $0.7 million. This decrease was primarily attributable to reduced commissions paid to the Ross on sales of Oxandrin for the long-term care market and a decrease in royalties that we were previously required to pay for our former products, Delatestryl and Mircette, due to a decrease in sales of these products.

Investment income (loss)

Investment income was $0.8 million for the year ended December 31, 2005 and investment loss was $0.6 million for the year ended December 31, 2004. The $1.4 million absolute increase primarily resulted from significantly higher cash balances on hand in 2005 and higher effective interest rates and the impact of specific investment write-downs in 2004.

Other income (expense), net

Other income (expense) represented income of $13.4 million and expense of $0.1 million for the years ended December 31, 2005 and 2004, respectively, an increase in income in 2005 of $13.5 million. In 2005, other income primarily reflected $10.6 million of income related to a patent infringement legal settlement on the Company’s former Mircette product coupled with the successful settlement of intellectual property litigation with Novo Nordisk for $3.0 million. In 2004, the Company had minimal other income activity.

Income tax expense

Income tax expense was $0.1 million and $13.1 million for the years ended December 31, 2005 and 2004, respectively, a decrease of $13.0 million. The decrease in provision for income taxes was primarily attributable to the recording of a valuation allowance as of December 31, 2004 to reflect the uncertainty of our being able to use the benefits of our deferred tax assets in the future.

Liquidity and Capital Resources

Our historic cash flows have fluctuated significantly as a result of changes in our revenues, operating expenses, capital spending, working capital requirements, the issuance of common stock, the divestiture of subsidiaries, the repurchase of our common stock, and other financing activities. We expect that cash flows in the near future will be primarily determined by the levels of our net income, working capital requirements, asset purchases and/or divestitures and milestone payment obligations and financings, if any. At December 31, 2006, we had $179.4 million in cash, cash equivalents and short-term investments. We primarily invest our cash equivalents and short-term investments in highly liquid, interest-bearing, investment grade and government securities in order to preserve principal.

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2006 Cash Flows

At December 31, 2006, the Company’s cash and cash equivalents increased by $102.1 million to $177.3 million. This was primarily due to the sale of Rosemont in August 2006 for $176 million. Net proceeds from the transaction after selling costs and taxes were $151.6 million.

In January 2006, the Company sold its Delatestryl product to Indevus Pharmaceuticals, Inc. for net proceeds of $5.5 million. Additionally during 2006, the Company received $6.7 million from the collection of a note receivable issued in connection with the sale of the BTG-Israel.

Net income from operations for the year ended December 31, 2006 was $60.3 million which provided a use in cash from operating activities of $18.7 million after reflecting non-cash items and changes in working capital.

In September 2006 we repurchased and retired 10 million shares of our common stock at a price of $6.80 per share through a modified “Dutch auction” tender offer. This resulted in a use of cash of $69.3 million, including professional fees of $1.3 million.

Capital expenditures for the year ended December 31, 2006 were $2.7 million which primarily related to manufacturing equipment acquisitions at Rosemont.

2005 Cash Flows

At December 31, 2005, the Company’s cash and cash equivalents increased by $52.7 million to $75.2 million. This was primarily due to the sale of BTG-Israel in July 2005 for $51.8 million.

Net income from operations for the year ended December 31, 2005 was $6.0 million which provided cash from operating activities of $8.3 million after reflecting non-cash items and changes in working capital.

For the year ended December 31, 2005, the Company repaid long-term debt in the amount of $5.9 million related to BTG-Israel.

Capital expenditures for the year ended December 31, 2005 were $2.2 million which primarily related to manufacturing equipment acquisitions at Rosemont.

Other Liquidity and Capital Resources

We expect that the Company will incur substantial operating losses sufficient in 2007 (due primarily to research and development spending on Puricase) to allow it to file for a refund of a significant portion of the federal income taxes paid in 2006 of approximately $20 million. The taxes paid in 2006 primarily related to the gain on sale of Rosemont and was recorded as income tax expense within discontinued operations during 2006.

We believe that our cash sources as of December 31, 2006, together with anticipated revenues and expenses, will be sufficient to fund our ongoing operations for at least the next twenty-four months. However, we may fail to achieve our anticipated liquidity levels as a result of unexpected events or failure to achieve our goals. Our future capital requirements will depend on many factors, including the following:

•  the level of sales deterioration as a result of Oxandrin generic competition;

•  continued progress in our research and development programs, particularly with respect to Puricase;

•  the timing of, and the costs involved in, obtaining regulatory approvals, including regulatory approvals for Puricase, and any other product candidates that we may seek to develop in the future;

•  the quality and timeliness of the performance of our third party suppliers and distributors;

•  the cost of commercialization activities, including product marketing, sales and distribution;

•  the costs involved in preparing, filing, prosecuting, maintaining, and enforcing patent claims and other patent related costs, including litigation costs and the results of such litigation;

•  the outcome of pending legal actions and the litigation costs with respect to such actions;

•  our ability to establish and maintain collaborative arrangements; and

•  our ability to in-license other products or technology which will require marketing or clinical development resources.

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If we are required to seek additional funding for our operations, we might not be able to obtain such additional funds or, if such funds are available, such funding might be on unacceptable terms. We continue to seek additional collaborative research and development and licensing arrangements in order to provide revenue from sales of certain products and funding for a portion of the research and development expenses relating to the products covered. However, we may not be able to enter into any such agreements.

Below is a table that presents our contractual obligations and commitments as of December 31, 2006:

Payments Due by Period

			Less Than						After
Contractual Obligations	Total		One Year		1-3 Years		4-5 Years		5 Years
	(In thousands)
Capital lease obligations	$	78	$	14	$	28	$	28	$	8
Operating lease obligations(1)		11,759		1,939		3,729		3,757		2,334
Purchase commitment obligations		3,090		985		2,105		—		—
Total	$	14,927	$	2,938	$	5,862	$	3,785	$	2,342

(1) Includes rent commitments on a gross basis that are partially offset by proceeds recovered under a sublease arrangement in the Company’s consolidated financial statements.

Rent expense related to continuing operations was approximately $1,701,000, $1,927,000, and $2,172,000 for the years ended December 31, 2006, 2005 and 2004, respectively. The 2006 rent expense is presented net of a sublease arrangement.

  Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Recently Issued Accounting Standards

In December 2004 the FASB issued SFAS No. 123(R) (revised 2004), “Share-Based Payment” (SFAS No. 123(R). SFAS No. 123(R) replaced SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123), and superseded Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). In March 2005 the SEC issued Staff Accounting Bulletin No. 107 (SAB 107), which expresses views of the SEC staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations, and provides the staff’s views regarding the valuation of share-based payment arrangements for public companies. SFAS No. 123(R) requires compensation cost related to share-based payment transactions to be recognized in the financial statements. SFAS No. 123(R) requires public companies to apply SFAS No. 123(R) in the first interim or annual reporting period beginning after June 15, 2005. In April 2005 the SEC approved a new rule that delays the effective date, requiring public companies to apply SFAS No. 123(R) in their next fiscal year, instead of the next interim reporting period, beginning after June 15, 2005. As permitted by SFAS No. 123, the Company elected to follow the guidance of APB 25, which allowed companies to use the intrinsic value method of accounting to value their share-based payment transactions with employees. SFAS No. 123(R) requires measurement of the cost of share-based payment transactions to employees at the fair value of the award on the grant date and recognition of expense over the requisite service or vesting period. SFAS No. 123(R) requires implementation using a modified version of prospective application, under which compensation expense of the unvested portion of previously granted awards and all new awards will be recognized on or after the date of adoption. SFAS No. 123(R) also allows companies to adopt SFAS No. 123(R) by restating previously issued statements, basing the amounts on the expense previously calculated and reported in their pro forma footnote disclosures required under SFAS No. 123. The Company has adopted SFAS No. 123(R) in the first quarter of fiscal 2006 utilizing the transition guidance set forth in SAB 107, particularly with respect to option valuation model variable inputs. In addition, SFAS No. 123(R) requires estimates of grants forfeitures, while SFAS No. 123 allowed forfeitures to be considered as they occurred. The adoption of SFAS No. 123(R) has had a material impact on the Company’s

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financial statements in fiscal 2006 (see Note 10 of our consolidated financial statements within “Item 8, Financial Statements and Supplementary Data” of this Annual Report on Form 10-K).

In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, Accounting Changes and Error Corrections — A replacement of APB Opinion No. 20 and FASB Statement No. 3 (“SFAS No. 154”). SFAS No. 154 changes the requirement for the accounting for and reporting of a change in accounting principle. This statement applies to all voluntary changes in accounting principles and changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS No. 154 is effective for accounting changes and error corrections made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 has not had a material impact on the Company’s consolidated financial statements.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 creates a single model for accounting and disclosure of uncertain tax positions. This interpretation prescribes the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. Additionally, FIN 48 provides guidance on derecognition, measurement, classification, interest and penalties, and transition of uncertain tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006. We will adopt FIN 48 as of January 1, 2007, with any cumulative effect of the adoption recorded as an adjustment to beginning retained earnings. We are currently finalizing our evaluation of the impact of the adoption and believe that FIN 48 could have a negative effect on our financial position.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements; rather, it applies under other accounting pronouncements that require or permit fair value measurements. The provisions of SFAS No. 157 are to be applied prospectively as of the beginning of the fiscal year in which it is initially applied, with any transition adjustment recognized as a cumulative-effect adjustment to the opening balance of retained earnings. The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007. We are currently evaluating the standard.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, (SFAS No. 159) which provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS No. 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 does not eliminate any disclosure requirements included in other accounting standards. We have not yet determined if we will elect to apply the options presented in SFAS No. 159, the earliest effective date that we can make such an election is January 1, 2008.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB No. 108”). SAB No. 108 was issued in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. It requires quantification of financial statement misstatements based on the effects of the misstatements on each of the company’s financial statements and the related financial statement disclosures. The provisions of SAB No. 108 must be applied to annual financial statements no later than the first fiscal year ending after November 15, 2006. We have determined that SAB No. 108 does not have a material impact on our financial statements.

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ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. To date our exposure to market risk has been limited. We do not currently hedge any market risk, although we may do so in the future. We do not hold or issue any derivative financial instruments for trading or other speculative purposes.

Interest Rate Risk

Our interest bearing assets consist of cash and cash equivalents, which currently consist of money market funds, commercial paper and other liquid short-term debt instruments, and short-term investments, which currently consist primarily of investments in mutual funds, corporate bonds and short-term certificates of deposit. Our interest income is sensitive to changes in the general level of interest rates, primarily US interest rates and other market conditions.

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ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

	Page
Reports of Independent Registered Public Accounting Firms		48-51
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2005 and 2006		52
Consolidated Statements of Operations for the years ended December 31, 2004, 2005 and 2006		53
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2004, 2005 and 2006		54
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2005 and 2006		55
Notes to Consolidated Financial Statements		56
Schedule II — Valuations and Qualifying Accounts		86

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Savient Pharmaceuticals, Inc.

East Brunswick, NJ

We have audited the consolidated balance sheet of Savient Pharmaceuticals, Inc. and subsidiaries as of December 31, 2006, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year then ended. Our audit also included the financial statement schedule of Savient Pharmaceuticals, Inc. listed in Item 15(a). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Savient Pharmaceuticals and subsidiaries as of December 31, 2006, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 10 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standard No. 123(R), “Share-Based Payment”, using the modified prospective method.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Savient Pharmaceuticals Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2006, based on criteria established in “Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)” and our report dated March 16, 2007 expressed an unqualified opinion on management’s assessment of the effectiveness of Savient Pharmaceutical Inc. and subsidiaries’ internal control over financial reporting and an unqualified opinion on the effectiveness of Savient Pharmaceuticals Inc. and subsidiaries’ internal control over financial reporting.

/s/  McGladrey & Pullen, LLP

New York, NY

March 16, 2007

48

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Savient Pharmaceuticals, Inc. and subsidiaries

East Brunswick, NJ

We have audited management’s assessment, included in the accompanying Management’s Report On Internal Control Over Financial Reporting, that Savient Pharmaceuticals, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in “Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Savient Pharmaceuticals Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment, and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Savient Pharmaceuticals, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in “Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Also in our opinion, Savient Pharmaceuticals, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in “Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).”

49

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Savient Pharmaceuticals, Inc. and subsidiaries and our report dated March 16, 2007 expressed an unqualified opinion.

/s/  McGladrey & Pullen, LLP

New York, NY

March 16, 2007

50

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Savient Pharmaceuticals, Inc.

We have audited the accompanying consolidated balance sheet of Savient Pharmaceuticals, Inc. and Subsidiaries as of December 31, 2005, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Savient Pharmaceuticals, Inc. and Subsidiaries as of December 31, 2005 and the consolidated results of their operations and their consolidated cash flows for each of the two years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 6 — Discontinued Operations, the consolidated financial statements as of December 31, 2005 and for the two years then ended have been recast to reflect discontinued operations.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The Schedule II — Valuation and Qualifying Accounts is presented for purposes of additional analysis and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/  Grant Thornton LLP

New York, New York

March 27, 2006

(except with respect to

the matters described in

the fourth paragraph above,

as to which the date is

March 16, 2007)

51

SAVIENT PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	December 31,			December 31,
	2005			2006
ASSETS
Current Assets:
Cash and cash equivalents	$	75,181		$	177,293
Short-term investments		191			2,103
Accounts receivable, net		11,716			3,517
Notes receivable		6,635			644
Inventories, net		9,419			4,203
Prepaid expenses and other current assets		2,721			7,098
Total current assets		105,863			194,858
Property and equipment, net		6,144			1,139
Goodwill		40,121			—
Other intangibles, net		67,638			—
Other assets		2,925			1,896
Total assets	$	222,691		$	197,893
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	5,745		$	4,552
Deferred revenues		—			416
Other current liabilities		15,121			15,196
Total current liabilities		20,866			20,164
Other liabilities		—			43
Deferred income taxes		20,431			—
Commitments and contingencies
Stockholders’ Equity:
Preferred stock — $.01 par value 4,000,000 shares authorized; no shares issued		—			—
Common stock — $.01 par value 150,000,000 shares authorized; issued and outstanding 61,523,000 in 2005; 52,309,000 in 2006		615			523
Additional paid in capital		221,622			189,496
Deferred compensation		(686	)		—
Accumulated deficit		(41,519	)		(14,316	)
Accumulated other comprehensive income		1,362			1,983
Total stockholders’ equity		181,394			177,686
Total liabilities and stockholders’ equity	$	222,691		$	197,893

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

52

SAVIENT PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Year Ended December 31,
	2004			2005			2006
Revenues:
Product sales, net	$	59,401		$	48,043		$	47,351
Other revenues		2,952			1,452			163
		62,353			49,495			47,514
Cost and expenses:
Cost of goods sold		11,492			5,252			8,506
Research and development		19,249			16,980			21,412
Selling and marketing		16,957			14,774			10,683
General and administrative		26,416			21,875			23,913
Retirement expense		2,085			—			—
Commissions and royalties		5,770			5,094			5
		81,969			63,975			64,519
Operating loss from continuing operations		(19,616	)		(14,480	)		(17,005	)
Investment income (loss), net		(624	)		776			7,233
Other income (expense), net		(110	)		13,381			8,333
Loss from continuing operations before income taxes		(20,350	)		(323	)		(1,439	)
Income tax expense		13,063			146			25
Loss from continuing operations		(33,413	)		(469	)		(1,464	)
Income from discontinued operations, net of income taxes (includes gain (loss) on sale of discontinued operations) (Note 6)		5,898			6,437			61,789
Net income (loss)	$	(27,515	)	$	5,968		$	60,325
Loss per common share from continuing operations:
Basic	$	(0.56	)	$	(0.01	)	$	(0.03	)
Diluted	$	(0.56	)	$	(0.01	)	$	(0.03	)
Earnings per common share from discontinued operations:
Basic	$	0.10		$	0.11		$	1.06
Diluted	$	0.10		$	0.11		$	1.06
Earnings (loss) per common share:
Basic	$	(0.46	)	$	0.10		$	1.03
Diluted	$	(0.46	)	$	0.10		$	1.03
Weighted average number of common and common equivalent shares:
Basic		60,066			60,837			58,538
Diluted		60,066			60,837			58,538

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

53

SAVIENT PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

	Common Stock															Accumulated
							Additional									Other			Total
				Par			Paid in			Deferred			Accumulated			Comprehensive			Stockholders’
	Shares			Value			Capital			Compensation			Deficit			Income			Equity
Balance, December 31, 2003		59,618		$	595		$	216,706		$	—		$	(19,972	)	$	2,060		$	199,389
Comprehensive loss:
Net loss		—			—			—			—			(27,515	)		—			(27,515	)
Unrealized loss on marketable securities, net		—			—			—			—			—			(413	)		(413	)
Currency translation adjustment		—			—			—			—			—			919			919
Total comprehensive loss																				(27,009	)
Issuance of common stock		775			10			1,521			—			—			—			1,531
Tax benefit of stock options								278			—			—			—			278
Exercise of stock options		64			1			194			—			—			—			195
Balance, December 31, 2004		60,457			606			218,699			—			(47,487	)		2,566			174,384
Comprehensive income:
Net income		—			—			—			—			5,968			—			5,968
Unrealized gain on marketable securities, net		—			—			—			—			—			20			20
Currency translation adjustment		—			—			—			—			—			(1,224	)		(1,224	)
Total comprehensive income																				4,764
Restricted stock grants		477			4			1,282			(1,286	)		—			—			—
Amortization of deferred compensation		—			—			—			282			—			—			282
Forfeiture of restricted stock grants		(119	)		(1	)		(317	)		318			—			—			—
Non-cash compensation — stock options granted to non-employees		—			—			30			—			—			—			30
Issuance of common stock		471			4			1,235			—			—			—			1,239
Tax benefit of stock options		—			—			32			—			—			—			32
Exercise of stock options		237			2			661			—			—			—			663
Balance, December 31, 2005		61,523			615			221,622			(686	)		(41,519	)		1,362			181,394
Comprehensive income:
Net income		—			—			—			—			60,325			—			60,325
Unrealized gain on marketable securities, net		—			—			—			—			—			2,032			2,032
Currency translation adjustment		—			—			—			—			—			(1,411	)		(1,411	)
Total comprehensive income																				60,946
Transition effect of adoption of SFAS No. 123(R)		—			—			(686	)		686			—			—			—
Restricted stock grants		312			3			(3	)		—			—			—			—
Amortization of deferred compensation		—			—			1,118			—			—			—			1,118
Forfeiture of restricted stock grants		(83	)		(1	)		1			—			—			—			—
Issuance of common stock		174			2			546			—			—			—			548
Repurchase and retirement of common stock		(10,000	)		(100	)		(36,095	)		—			(33,122	)		—			(69,317	)
ESPP compensation expense		—			—			192			—			—			—			192
Stock option compensation expense		—			—			1,151			—			—			—			1,151
Tax benefit of share-based compensation		—			—			296			—			—			—			296
Exercise of stock options		383			4			1,354			—			—			—			1,358
Balance, December 31, 2006		52,309		$	523		$	189,496		$	—		$	(14,316	)	$	1,983		$	177,686

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

54

SAVIENT PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2004			2005			2006
Cash flows from operating activities:
Net income (loss)	$	(27,515	)	$	5,968		$	60,325
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		6,696			3,310			1,433
Amortization of intangible assets		4,050			4,050			2,417
Deferred income taxes		17,500			(1,218	)		(755	)
Gain related to receipt of Omrix shares		—			—			(575	)
Gain on sale of oral liquid pharmaceutical business		—			—			(77,174	)
Loss on sale of global biologics manufacturing business		—			4			—
Gain on sale of Delatestryl		—			—			(5,884	)
Unrealized gain on trading securities		(539	)		—			—
(Gain) loss on sales of trading securities		(19	)		289			(520	)
(Gain) loss on sales of fixed assets		504			525			—
Proceeds from sales of trading securities		—			2,375			1,129
Common stock issued as payment for services		106			173			135
Amortization of deferred compensation related to restricted stock (including performance shares)		—			282			1,118
Provision for certain litigation settlements		3,000			—			—
Stock option and ESPP compensation		—			—			1,343
Write down of investment		1,375			—			—
Provision for severance pay		773			—			—
Changes in:
Accounts receivables, net		8,297			7,768			2,343
Inventories, net		1,532			1,489			1,004
Prepaid expenses and other current assets		(790	)		(4,096	)		(7,577	)
Accounts payable		(7,462	)		(2,688	)		(145	)
Income taxes payable		—			—			552
Other current liabilities		882			(9,365	)		(268	)
Deferred revenues		2,608			(616	)		2,373
Net cash provided by (used in) operating activities		10,998			8,250			(18,726	)
Cash flows from investing activities:
Proceeds from the sale of oral liquid pharmaceutical business		—			—			176,000
Proceeds from sale of investment in Omrix		—			1,625			—
Proceeds from sale of global biologics manufacturing business		—			51,844			—
Proceeds from the collection of note receivable issued in connection with the sale of global biologics manufacturing business		—			—			6,700
Proceeds from sale of Delatestryl		—			—			5,531
Proceeds from sales of short-term investments		3,729			—			—
Capital expenditures		(3,583	)		(2,178	)		(2,679	)
Severance pay funded		(285	)		(3,679	)		—
Changes in short-term investments		(1,046	)		—			81
Changes in other long-term assets		(104	)		1,697			1,688
Net cash provided by (used in) investing activities		(1,289	)		49,309			187,321
Cash flows from financing activities:
Repurchase and retirement of common stock		—			—			(69,317	)
Repayment of long-term debt		(7,020	)		(5,903	)		—
Proceeds from issuance of common stock		1,620			1,792			1,771
Additional paid in capital excess tax benefit		—			—			296
Net cash used in financing activities		(5,400	)		(4,111	)		(67,250	)
Effect of exchange rate changes		919			(714	)		767
Net increase in cash and cash equivalents		5,228			52,734			102,112
Cash and cash equivalents at beginning of period		17,219			22,447			75,181
Cash and cash equivalents at end of period	$	22,447		$	75,181		$	177,293
Supplementary Information
Other information:
Income tax paid	$	3,991		$	4,352		$	23,847
Interest paid	$	302		$	70		$	2

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

55

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Organization and Summary of Significant Accounting Policies

Savient Pharmaceuticals, Inc. (“Savient”), and its wholly-owned subsidiaries (the “Company”), are engaged in developing and distributing pharmaceutical products that target unmet medical needs in both niche and broader markets. The Company currently distributes Oxandrin in the United States which is used to promote weight gain following involuntary weight loss. In December 2006, the Company launched an authorized generic of oxandrolone tablets (“oxandrolone”), (USP) C-III, an Oxandrin-brand equivalent product in both the 2.5 mg and 10 mg dosages which is distributed by Watson Pharmaceuticals, Inc. (“Watson Pharmaceuticals”). The launch of oxandrolone was in response to generic competition to Oxandrin from third parties. The Company will also continue to market and distribute the Oxandrin brand product.

The Company is currently developing Puricase^®, a drug targeting the control of elevated uric acid levels in the blood, or hyperuricemia, in patients with symptomatic gout in whom conventional treatment is contraindicated or has been shown to be ineffective. Puricase is in Phase 3 clinical development and has received “orphan drug” designation by the Food and Drug Administration (FDA). Orphan drug designation may prevent competitive products that are not shown to be clinically superior to Puricase from receiving FDA approval for the same indication for a period of seven years from the time of PDA authorization for marketing. The Company’s strategic plan is to advance the development of Puricase and expand its product portfolio by in-licensing late-stage compounds and exploring co-promotion and co-development opportunities that fit its expertise in specialty pharmaceuticals and biopharmaceuticals with an initial focus in rheumatology.

Savient and its former global biologics manufacturing business, Bio-Technology General (Israel) Ltd. (“BTG-Israel” or “global biologics manufacturing business”), was formed in 1980 to develop, manufacture and market products through the application of genetic engineering and related biotechnologies. On March 19, 2001, Savient acquired Myelos Corporation (“Myelos”), a privately-held biopharmaceutical company focused on the development of novel therapeutics to treat diseases of the nervous system. Myelos is a wholly-owned subsidiary of Savient. On September 30, 2002, Savient, through its wholly-owned subsidiary Acacia Biopharma Limited, acquired Rosemont Pharmaceuticals Limited (“Rosemont” or “oral liquid pharmaceutical business”), a specialty pharmaceutical company located in the United Kingdom that develops, manufactures and markets pharmaceutical products in oral liquid form. On June 6, 2006, Savient contributed 100% of the stock in Acacia Biopharma Limited into Savient Pharma Holdings, Inc. (“Holdings”), a wholly-owned subsidiary of Savient. Additionally, Myelos contributed certain other intellectual property assets into Holdings. On July 18, 2005, the Company sold BTG-Israel to Ferring B.V. and Ferring International Centre S.A. and on August 4, 2006, the Company sold Rosemont to Ingleby (1705) Limited (Close Brothers Private Equity) (see Note 6).

The Company currently operates within one “Specialty Pharmaceutical” segment which includes sales of Oxandrin and oxandrolone, and the research and development activities of Puricase. The results of the Company’s former Rosemont and BTG-Israel subsidiaries are included as part of discontinued operations in the Company’s consolidated financial statements.

The Company was founded in 1980 as Bio-Technology General Corp. and changed its name to Savient Pharmaceuticals, Inc. in June 2003. Savient conducts its administration, finance, business development, clinical development, sales, marketing, quality assurance and regulatory affairs activities primarily from its headquarters in East Brunswick, New Jersey.

Basis of consolidation

The consolidated financial statements include the accounts of Savient, Myelos and Holdings. In addition, discontinued operations include the Company’s former subsidiaries, Rosemont and BTG-Israel. All material intercompany transactions and balances have been eliminated.

56

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Certain prior period amounts have been reclassified to conform to current year presentations. This includes reclassifications for discontinued operations (see Note 6 for discontinued operations disclosure, Note 16 for reportable segment reclassifications, and Note 17 for quarterly data reclassifications) and for restructuring charges (see Note 18).

Translation of foreign currency

The functional currency of the Company’s former subsidiary, BTG-Israel which was divested during 2005, is the US dollar. Accordingly, its transactions and balances are remeasured in dollars, and translation gains and losses (which were immaterial for all periods presented) are included in the statements of operations. The functional currency of the Company’s former subsidiary, Rosemont which was divested during 2006, is the British pound sterling and its translation gains and losses are included in accumulated other comprehensive income.

Cash and cash equivalents

At December 31, 2006 and 2005, cash and cash equivalents included cash of $290,000 and $7,939,000, respectively, and cash equivalent money market funds, commercial paper, overnight sweeps, and other liquid short-term debt instruments (with maturities at date of purchase of ninety days or less) of $177,003,000 and $67,242,000, respectively. All 2006 cash and cash equivalents are in U.S. dollar accounts. Cash and cash equivalents at December 31, 2005 include $7,153,000 denominated in currencies other than the US dollar. A majority of the Company’s cash balance at December 31, 2006 is concentrated in one financial institution.

Short-term investments

The Company classifies investments as “available-for-sale securities” or “trading securities” pursuant to Statement of Financial Accounting Standard (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” which provides that investments that are bought and held principally for the purpose of selling them in the near-term are classified as trading securities and marked to fair value through earnings. Investments not classified as trading securities are considered to be available-for-sale securities and marked to fair value through other comprehensive income unless an other than temporary decline in fair value is determined which would be marked to fair value through earnings.

At December 31, 2006 and 2005, the cost basis of the securities available for sale was $120,000 and $286,000, respectively. The Company did not have any trading securities on its balance sheets as of December 31, 2006 and 2005, respectively. See Note 2.

Accounts receivable, net

The Company extends credit to customers based on its evaluation of the customer’s financial condition. The Company generally does not require collateral from its customers when credit is extended. Accounts receivable are usually due within 30 days and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The Company assesses the need for an allowance by considering a number of factors, including the length of time trade accounts receivable are past due, previous loss history, the customer’s current ability to pay its obligation and the condition of the general economy and the industry as a whole. The Company will write off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to recovery of accounts written off. During 2006 and 2005, the Company primarily sold to wholesalers of which three large wholesalers accounted for approximately 87% of total gross sales in 2006 and 86% in 2005. In general, we have experienced minimal collection issues with these large customers. During 2006, 2005 and 2004, the Company recorded an allowance for doubtful accounts provision from continuing operations of approximately $468,000, $740,000 and $0, respectively, primarily related to certain balances that are currently being pursued for collection. These balances generally represent the aggregation of

57

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

miscellaneous disputes and thus it was determined that complete collection cannot be assured. At December 31, 2006 and 2005 the balance of the Company’s allowance for doubtful accounts was $1,036,000 and $1,062,000, respectively.

Inventories, net

At December 31, 2006 and 2005, inventories at cost, net of reserves, were as follows:

	December 31,
	2005			2006
	(In thousands)
Raw materials	$	3,960		$	4,501
Work-in-process		141			186
Finished goods		13,058			7,821
Inventory reserves		(7,740	)		(8,305	)
Total	$	9,419		$	4,203

An allowance is established when management determines that certain inventories may not be saleable. The Company states inventories at the lower of cost or market. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the cost and the market value. These reserves are recorded based on estimates.

As a result of Oxandrin generic competition that began in December 2006, the Company analyzed the impact on inventory reserves considering the Oxandrin inventory currently on hand, inclusive of raw materials and finished goods, and the current demand forecasts. As a result, the Company recorded an additional inventory reserve of $2.6 million for the year ended December 31, 2006.

The aggregate inventory valuation reserves as of December 31, 2006 and 2005 were $8,305,000 and $7,740,000, respectively.

In addition, the Company has future commitments to minimum purchase requirements of Oxandrin raw material inventory which, based on current demand forecasts, is not expected to be sold. Although the Company is currently in negotiations with these suppliers, there is no guarantee that it will be able to reduce these obligations. As a result, the Company accrued for these costs and recorded a charge to cost of goods sold of $2.0 million for the year ended December 31, 2006.

Property and equipment, net of accumulated depreciation and amortization

Property and equipment are stated at cost. Depreciation has been calculated using the straight-line method over the estimated useful lives of the assets, ranging from 3 to 10 years. Leasehold improvements are amortized over the lives of the respective leases, which are shorter than the useful life. The cost of maintenance and repairs is expensed as incurred. Construction-in-progress is not depreciated until the assets are placed in service.

Intangible assets

At December 31, 2005, intangible assets consist mainly of developed products, trademarks and several patents related to our former subsidiary, Rosemont, and were amortized, using the straight-line method, over the estimated useful life of approximately 20 years. The estimation of the useful life of the intangible assets was determined by the Company based on an independent appraisal and available information. These intangible assets were eliminated as part of the August 4, 2006 divestiture of Rosemont.

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Long-lived assets

The Company’s long-lived assets include property and equipment, intangible assets and goodwill. As of January 1, 2002, the Company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets” which supersedes SFAS No. 121, “Accounting for the Impairment of Long-lived Assets to be Disposed of.” Under SFAS No. 144, intangible assets other than goodwill are reviewed on a periodic basis for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. Such events or changes in circumstances include, but are not limited to:

(a) a significant decrease in the market price of a long-lived asset (or asset group),

(b) a significant adverse change in the extent or manner in which a long-lived asset (or asset group) is being used or in its physical condition,

(c) a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (or asset group), including an adverse action or assessment by a regulator,

(d) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (or asset group),

(e) a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (or asset group) and

(f) a current expectation that, more likely than not, a long-lived asset (or asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company believes that no such event or change has occurred.

Revenue recognition

Product sales

Product sales are generally recognized when title to the product has transferred to our customers in accordance with the terms of the sale. During 2006, the Company began shipping oxandrolone to our distributor and have accounted for this on a consignment basis until product is sold into the retail market. The Company has deferred the recognition of revenue related to these shipments until the Company confirms that the product has been sold into the retail market and all other revenue recognition criteria has been met. The Company recognizes revenue in accordance with the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition in Financial Statements” as amended by SAB No. 104 (together, “SAB 104”), and Statement of Financial Accounting Standards (SFAS) No. 48 “Revenue Recognition When Right of Return Exists.” SAB 104 states that revenue should not be recognized until it is realized or realizable and earned. Revenue is realized or realizable and earned when all of the following criteria are met:

(1) persuasive evidence of an arrangement exists,

(2) delivery has occurred or services have been rendered,

(3) the seller’s price to the buyer is fixed and determinable, and

(4) collectibility is reasonably assured.

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SFAS No. 48 states that revenue from sales transactions where the buyer has the right to return the product shall be recognized at the time of sale only if;

(1) the seller’s price to the buyer is substantially fixed or determinable at the date of sale,

(2) the buyer has paid the seller, or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product,

(3) the buyer’s obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product,

(4) the buyer acquiring the product for resale has economic substance apart from that provided by the seller,

(5) the seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer, and

(6) the amount of future returns can be reasonably estimated.

The Company’s net product revenues represent total product revenues less allowances for returns, Medicaid rebates, other government rebates, other rebates, discounts, and distribution fees.

Allowance for returns — In general, the Company provides credit for product returns that are returned six months prior to and up to twelve months after the product expiration date. The Company’s product sales in the United States primarily relate to Oxandrin. Upon sale, the Company estimates an allowance for future product returns. The Company provides additional reserves for contemporaneous events that were not known and knowable at the time of shipment. In order to reasonably estimate future returns, the Company analyzed both quantitative and qualitative information including, but not limited to, actual return rates by lot productions, the level of product manufactured by the Company, the level of product in the distribution channel, expected shelf life of the product, current and projected product demand, the introduction of new or generic products that may erode current demand, and general economic and industry wide indicators. The Company also utilizes the guidance provided in SFAS No. 48 and SAB 104 in establishing its return estimates. SFAS No. 48 discusses potential factors that may impair the ability to make a reasonable estimate including:

(1) the susceptibility of the product to significant external factors, such as technological obsolescence or changes in demand,

(2) relatively long periods in which a particular product may be returned,

(3) absence of historical experience with similar types of sales of similar products, or inability to apply such experience because of changing circumstances, for example, changes in the selling enterprise’s marketing policies or relationships with its customers, and

(4) absence of a large volume of relatively homogeneous transactions.

SAB 104 provides additional factors that may impair the ability to make a reasonable estimate including:

(1) significant increases in or excess levels of inventory in a distribution channel,

(2) lack of “visibility” into or the inability to determine or observe the levels of inventory in a distribution channel and the current level of sales to end users,

(3) expected introductions of new products that may result in the technological obsolescence of and larger than expected returns of current products,

(4) the significance of a particular distributor to the registrant’s (or a reporting segment’s) business, sales and marketing,

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(5) the newness of a product,

(6) the introduction of competitors’ products with superior technology or greater expected market acceptance, and

(7) other factors that affect market demand and changing trends in that demand for the registrant’s products.

As a result of Oxandrin generic competition that began in December 2006, The Company analyzed the impact on product returns considering the product currently at wholesalers and retailers, and the current demand forecasts. As a result, the Company recorded an additional product returns reserve of $0.4 million for the year ended December 31, 2006.

The allowance for product returns at December 31, 2006 and 2005 was $2.5 million and $2.9 million, respectively. This allowance is included in other current liabilities on the Company’s balance sheet.

Allowances for Medicaid, other government rebates and other rebates — The Company’s contracts with Medicaid, other government agencies such as the Federal Supply System and other non-governmental entities commit us to providing those entities with our most favorable pricing. This ensures that the Company’s products remain eligible for purchase or reimbursement under these programs. Based upon our contracts and the most recent experience with respect to sales through each of these channels, the Company provides an allowance for rebates. The Company monitors the sales trends and adjusts the rebate percentages on a regular basis to reflect the most recent rebate experience. The allowance for rebates as of December 31, 2006 and December 31, 2005 was $1.3 million and $2.5 million, respectively. This allowance is included in other current liabilities on the Company’s balance sheet.

Commercial discounts — The Company sells directly to drug wholesalers. Terms of these sales vary, but generally provide for invoice discounts for prompt payment. These discounts are recorded by the Company at the time of sale. Gross product revenue is also reduced for promotions and pricing incentives.

Distribution fees — The Company has a distribution arrangement with a third party which includes payment terms equal to a flat monthly fee plus a per transaction fee for specified services. The Company also records distribution fees associated with wholesaler distribution services from one of its largest customers.

Other revenues

Other revenues primarily represent royalty income which is recognized as earned upon receipt of confirmation of payment from contracting third parties. In 2005, other revenues also represented funds received by the Company for research and development projects. The Company recognized revenues upon performance of such funded research. The Company did not have revenue related to research and development projects in 2006.

Discontinued operations included contract fee revenue which consisted of a license for marketing and distribution rights and research and development projects. In accordance with SAB 104 contract fee revenues were recognized over the estimated term of the related agreements which ranged from 5 to 16 years. Discontinued operations also included royalties from third parties that were recognized as earned upon receipt of confirmation of payment from contracting parties.

Share-based compensation

At December 31, 2006, the Company has share-based compensation plans, which are described more fully in Notes 10 and 11. Prior to January 1, 2006, the Company accounted for share-based compensation under the recognition and measurement provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by SFAS No. 123,

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Accounting for Stock-Based Compensation. No share-based employee compensation cost was recognized in the Statement of Operations for any periods ending prior to January 1, 2006 as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. Effective January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payment, using the modified-prospective-transition method. Under this transition method, compensation cost in 2006 includes costs for options granted prior to, but not amortized as of, December 31, 2005. The modified-prospective-transition method does not result in the restatement of prior periods.

Research and development

All research and development costs are expensed as incurred.

Income taxes

Deferred income taxes are recognized for the tax consequences of temporary differences by applying the enacted statutory tax rates to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and for capital and net operating losses and tax credit carryforwards. When it is not considered more likely than not that a part or the entire deferred tax asset will be realized, a valuation allowance is recognized.

Our former subsidiaries BTG-Israel and Rosemont file separate income tax returns and provide for taxes under local laws. Income taxes related to these former subsidiaries are included in discontinued operations.

Accumulated other comprehensive income

Accumulated other comprehensive income consisted of unrealized gains (losses) on available for sale marketable securities and currency translation adjustments from the translation of financial statements related to our former subsidiary, Rosemont, from British pound sterling to US dollars.

Earnings per common share

Net earnings per common share amounts (“basic EPS”) are computed by dividing net earnings by the weighted average number of common shares outstanding and exclude any potential dilution from the exercise of stock options. Net earnings per common share amounts assuming dilution (“diluted EPS”) are computed by reflecting potential dilution from the exercise of stock options.

A reconciliation between the numerators and denominators of the basic and diluted EPS computations for continuing operations is as follows:

	Year Ended December 31, 2004								Year Ended December 31, 2005								Year Ended December 31, 2006
	Income			Shares		Per Share			Income			Shares		Per Share			Income			Shares		Per Share
	(Numerator)			(Denominator)		Amounts			(Numerator)			(Denominator)		Amounts			(Numerator)			(Denominator)		Amounts
	(In thousands, except per share data)
Loss from continuing operations	$	(33,413	)						$	(469	)						$	(1,464	)
Basic EPS
Loss from continuing operations attributable to common stock		(33,413	)		60,066	$	(0.56	)		(469	)		60,837	$	(0.01	)		(1,464	)		58,538	$	(0.03	)
Effect of Dilutive Securities
Common stock equivalents					—								—								—
Diluted EPS
Loss from continuing operations attributable to common stock and common stock equivalents	$	(33,413	)		60,066	$	(0.56	)	$	(469	)		60,837	$	(0.01	)	$	(1,464	)		58,538	$	(0.03	)

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The difference between basic and diluted weighted average common shares generally results from the assumption that dilutive stock options outstanding were exercised and dilutive restricted stock had vested. For the years ended 2006, 2005, and 2004, the Company reported a loss from continuing operations. Therefore, all dilutive stock options and restricted stock as of such date were excluded from the computation of diluted earnings per share as their effect would have been anti-dilutive. For the years ended 2005 and 2004, earnings per share for continuing and discontinued operations were restated to reflect the divestiture of the Rosemont business.

Use of estimates in preparation of financial statements

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, The Company evaluates its estimates, including those related to investments, accounts receivable, reserve for product returns, inventories, rebates, property and equipment, share based compensation and income taxes. The Company based its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Results may differ from these estimates due to actual outcomes being different from those on which The Company based its assumptions.

Fair value of financial instruments

The carrying amounts of cash and cash equivalents, short-term investments, notes receivable, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term investments and accounts receivable. The Company places its cash and cash equivalents and short-term investments with high quality financial institutions and limits the amount of credit exposure to any one institution, except for U.S. Treasury or Government Agency issues. There is no limit as to the amount that can be invested in short-term money market funds. Concentration of credit risk with respect to accounts receivable is discussed in Note 14. Generally, the Company does not require collateral from its customers; however, collateral or other security for accounts receivable may be obtained in certain circumstances when considered necessary.

New accounting pronouncements

In December 2004 the FASB issued SFAS No. 123(R) (revised 2004), “Share-Based Payment” (SFAS No. 123(R). SFAS No. 123(R) replaced SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123), and superseded Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). In March 2005 the SEC issued Staff Accounting Bulletin No. 107 (SAB 107), which expresses views of the SEC staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations, and provides the staff’s views regarding the valuation of share-based payment arrangements for public companies. SFAS No. 123(R) requires compensation cost related to share-based payment transactions to be recognized in the financial statements. SFAS No. 123(R) requires public companies to apply SFAS No. 123(R) in the first interim or annual reporting period beginning after June 15, 2005. In April 2005 the SEC approved a new rule that delays the effective date, requiring public companies to apply SFAS No. 123(R) in their next fiscal year, instead of the next interim reporting period, beginning after June 15,

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2005. As permitted by SFAS No. 123, the Company elected to follow the guidance of APB 25, which allowed companies to use the intrinsic value method of accounting to value their share-based payment transactions with employees. SFAS No. 123(R) requires measurement of the cost of share-based payment transactions to employees at the fair value of the award on the grant date and recognition of expense over the requisite service or vesting period. SFAS No. 123(R) requires implementation using a modified version of prospective application, under which compensation expense of the unvested portion of previously granted awards and all new awards will be recognized on or after the date of adoption. SFAS No. 123(R) also allows companies to adopt SFAS No. 123(R) by restating previously issued statements, basing the amounts on the expense previously calculated and reported in their pro forma footnote disclosures required under SFAS No. 123. The Company has adopted SFAS No. 123(R) in the first quarter of fiscal 2006 utilizing the transition guidance set forth in SAB 107, particularly with respect to option valuation model variable inputs. In addition, SFAS No. 123(R) requires estimates of grants forfeitures, while SFAS No. 123 allowed forfeitures to be considered as they occurred. The adoption of SFAS No. 123(R) has had a material impact on the Company’s financial statements in fiscal 2006 (see Note 10).

In May 2005, FASB issued SFAS No. 154, Accounting Changes and Error Corrections — A replacement of APB Opinion No. 20 and FASB Statement No. 3 (“SFAS No. 154”). SFAS No. 154 changes the requirement for the accounting for and reporting of a change in accounting principle. This statement applies to all voluntary changes in accounting principles and changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS No. 154 is effective for accounting changes and error corrections made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 has not had a material impact on the Company’s consolidated financial statements.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 creates a single model for accounting and disclosure of uncertain tax positions. This interpretation prescribes the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. Additionally, FIN 48 provides guidance on derecognition, measurement, classification, interest and penalties, and transition of uncertain tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company will adopt FIN 48 as of January 1, 2007, with any cumulative effect of the adoption recorded as an adjustment to beginning retained earnings. The Company is currently finalizing our evaluation of the impact of the adoption and believes that FIN 48 could have a negative effect on our financial position.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements; rather, it applies under other accounting pronouncements that require or permit fair value measurements. The provisions of SFAS No. 157 are to be applied prospectively as of the beginning of the fiscal year in which it is initially applied, with any transition adjustment recognized as a cumulative-effect adjustment to the opening balance of retained earnings. The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the standard.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB No. 108”). SAB No. 108 was issued in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. It requires quantification of financial statement misstatements based on the effects of the misstatements on each of the company’s financial statements and the related financial statement disclosures. The provisions of SAB No. 108 must be applied to annual financial statements

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no later than the first fiscal year ending after November 15, 2006. The Company has determined that SAB No. 108 does not have a material impact on its financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, (SFAS No. 159) which provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS No. 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 does not eliminate any disclosure requirements included in other accounting standards. The Company has not yet determined if it will elect to apply the options presented in SFAS No. 159, the earliest effective date that the Company can make such an election is January 1, 2008.

Note 2 — Short-Term Investments

Investment in Omrix Biopharmaceuticals, Inc.

In February 2005, the Company sold to Catalyst Investments, L.P. (“Catalyst”) all of its holdings of Omrix Biopharmaceuticals, Inc. (“Omrix”) common stock for $1,625,000, plus the right to receive additional consideration or shares of Omrix common stock in the event that Catalyst was able to realize a gain on its Omrix investment on specified terms. Based upon the sale to Catalyst, the Company wrote down its investment by $375,000 in 2004.

On April 21, 2006, Omrix completed its initial public offering. Pursuant to the terms of the Company’s agreement with Catalyst, Catalyst satisfied its obligations in full by transferring to the Company 52,725 shares of Omrix common stock. The Company recorded the value of the Omrix stock based upon a basis value of $10.90 per share. The shares were subject to a lock-up period that expired in October 2006. Prior to the end of 2006, the Company sold all of its Omrix shares and recorded a realized gain of approximately $520,000 which is included in investment income for the year ended December 31, 2006. For the year ended December 31, 2006, the Company included approximately $575,000 in other income related to the Company’s increase in basis in the Omrix shares.

Investment in Neuro-Hitech Pharmaceuticals, Inc.

In 2003 the Company agreed to purchase up to an aggregate of $1.5 million in Marco Hi-Tech JV, Ltd. (“Marco”) preferred stock and it acquired an option to market Marco’s Huperzine-A product candidate for the treatment of Alzheimer’s disease. As of March 31, 2004, the Company had invested $1.0 million in Marco. In the second quarter of 2004, the Company elected not to make the final $500,000 investment in Marco. As a result, the Company’s holdings of Marco preferred stock were converted into 654,112 shares of Marco common stock, or approximately 8% of Marco’s fully-diluted outstanding common stock, the option to market Huperzine-A terminated and the Company wrote off its $1.0 million investment in Marco.

On January 24, 2006, Marco entered into a merger agreement with Neurotech Pharmaceuticals, Inc. which later changed its name to Neuro-Hitech Pharmaceuticals, Inc. (“Neuro-Hitech”). Pursuant to the terms of this merger agreement, each share of Marco converted into .583033 common shares of Neuro-Hitech or 381,362 shares. Neuro-Hitech went public in February 2006 and trades on the Over the Counter Bulletin Board. The market value of this investment was approximately $1,983,000 as of December 31, 2006. The Company has classified this investment as an available for sale security as per SFAS No. 115, and the unrealized appreciation of $1,983,000 has been included in other comprehensive income within equity and does not have an impact on cash flows from operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other-than-temporary adjustment

The Company recorded an other-than-temporary valuation adjustment of $130,000 based on the fair value of certain available for sale securities at December 31, 2006.

Note 3 — Property and Equipment, Net

	December 31,
	2005			2006
	(In thousands)
Office equipment	$	17,833		$	7,679
Office equipment — capital leases		—			56
Leasehold improvements		2,079			1,184
		19,912			8,919
Accumulated depreciation		(13,768	)		(7,808	)
		6,144			1,111
Construction in progress		—			28
Total	$	6,144		$	1,139

Depreciation expense was approximately $1,433,000, $3,310,000 and $6,696,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

Note 4 — Acquired Intangible Assets

The following summarizes the carrying amounts of acquired intangible assets and related amortization.

	December 31,
	2005		2006
	(In thousands)
Amortized intangible assets:
Developed products	$	76,700	$	—
Trademarks		3,300		—
Patents		1,559		—
Total gross carrying amount		81,559		—
Accumulated amortization		13,921		—
Net	$	67,638	$	—
Unamortized intangible assets:
Goodwill	$	40,121	$	—
Amortization Expense:
For the years ended December 31, 2005 and 2006	$	4,050	$	2,417

The amortization expense in 2004 was $4,050,000. All acquired intangible assets relate to the 2002 acquisition of Rosemont. On August 4, 2006, the Company sold Rosemont and eliminated all net acquired intangible assets from its balance sheet.

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Note 5 — Other Current Liabilities

	December 31,
	2005		2006
	(In thousands)
Salaries and related expenses	$	2,808	$	2,541
Allowance for returns		2,888		2,452
Accrued taxes		1,956		1,310
Allowance for rebates		2,491		1,253
Litigation, legal and professional fee accruals		1,507		1,194
Purchase commitment accrual		—		2,010
Puricase manufacturing accrual		282		1,729
Clinical research organization accrual		—		1,041
Royalties and commissions		1,362		—
Other		1,827		1,666
Total	$	15,121	$	15,196

Note 6 — Discontinued Operations

On August 4, 2006, the Company entered into a Purchase and Sale Agreement (the “Agreement”) with Ingleby (1705) Limited (Close Brothers Private Equity) (“Close Brothers”) for the sale of Rosemont Pharmaceuticals Ltd, the Company’s oral liquid pharmaceuticals business in the United Kingdom. Under the terms of the sale, Close Brothers paid to the Company an aggregate purchase price of $176 million for the issued share capital of Rosemont’s parent company and certain other related assets. Net proceeds from the transaction after selling costs and taxes were $151.6 million. Additionally, Close Brothers purchased certain intellectual property and other assets and rights from the Company which relate to the business of Rosemont, including certain intellectual property related to the Soltamox product. The pre-tax gain on disposition of Rosemont was $77.2 million.

On July 18, 2005, the Company announced that it had completed the sale of BTG-Israel to Ferring B.V. and Ferring International Centre S.A. for $80 million cash plus the assumption by the Ferring entities of certain liabilities. In connection with the closing, Savient’s co-promotion agreement with Ferring Pharmaceuticals, Inc. (“FPI”) for Euflexxa (1% Sodium Hyaluronate), which was previously referred to as Nuflexxa, also became effective on July 18, 2005. Under the original agreement, the Company was obligated to invest up to $20 million in its sales force and other marketing contributions over the first two calendar years of the agreement. In December 2005, the Company determined that it is best to exit this agreement and allow the Company to fully focus its efforts and resources on its clinical development program for Puricase. Also in December 2005, the Company and FPI entered into a master agreement pursuant to which the Company exited the co-promotion agreement for Euflexxa. Pursuant to this master agreement, in lieu of the Company’s $20 million obligation under the co-promotion agreement, on December 15, 2005, the Company paid FPI $15.6 million, which represented a $17.8 million termination payment less accrued expenses to date under the agreement of approximately $2.2 million. The master agreement also provided for the modification and acceleration of the total post-closing payments required by Ferring International Centre, as evidenced by the two promissory notes, in connection with its acquisition of the global biologics manufacturing business. In lieu of these post-closing payments, Ferring International Centre paid $15.7 million to the Company in December 2005, and paid $6.7 million to the Company during 2006. Finally, the master agreement confirmed the resolution by Ferring B.V. and the Company of the post-closing working capital calculation relating to Ferring’s acquisition of the global biologics manufacturing business, resulting in a $755,000 payment by Ferring B.V. to Savient in December 2005. The Company also realized $10.7 million of previously deferred

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revenues with respect to certain long-term contracts of the business within the net loss on disposition of the global biologics manufacturing business. The net loss on sale was $4,000.

A summary statement of discontinued operations of the former BTG-Israel and Rosemont businesses for the years ended 2006, 2005, and 2004, as it was included in the consolidated financial statements of the Company, is shown below. As BTG-Israel was sold in July 2005, its operations are only included for the years ended 2005 and 2004.

	Year Ended December 31,
	2004			2005			2006
	(In thousands)
Revenues:
Product sales, net	$	57,228		$	48,067		$	24,181
Other revenues		4,314			3,021			43
		61,542			51,088			24,224
Cost and expenses:
Cost of goods sold		28,040			19,707			8,403
Research and development		8,551			4,331			1,996
Selling and marketing		6,641			7,014			4,092
General and administrative		7,198			6,077			1,901
Amortization of intangibles		4,050			4,050			2,417
Commissions and royalties		462			58			—
		54,942			41,237			18,809
Operating income from discontinued operations		6,600			9,851			5,415
Other income (expense), net		(22	)		(81	)		507
Gain on disposition of Rosemont		—			—			77,174
Loss on disposition of BTG-Israel		—			(4	)		—
Income from discontinued operations before income taxes		6,578			9,766			83,096
Income tax expense		680			3,329			21,307
Income from discontinued operations	$	5,898		$	6,437		$	61,789

All revenues included in discontinued operations primarily relate to non-U.S. customers.

Note 7 — Long-term Debt

At December 31, 2006 and 2005, the Company had no long-term debt and minimal capital lease obligations.

Note 8 — Commitments and Contingencies

Savient’s administrative offices are located in East Brunswick, New Jersey, where it has leased approximately 53,000 square feet of office space. The lease has a base average annual rental expense of approximately $1,728,000 and expires in March 2013. There are two five year renewal options. In connection with this lease arrangement, the Company was required to provide a security deposit by way of an irrevocable letter of credit for $1,280,000, which is secured by a cash deposit of $1,280,000 and is reflected in other assets (as restricted cash) on the balance sheet at December 31, 2006 and 2005. Effective as of March 1, 2006 the Company has subleased approximately 12,400 square feet of its administrative offices in East Brunswick, NJ

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at a base average annual rental of $340,000 for an initial term of 5 years, terminable after 3 years at the option of the subtenant.

The Company is also obligated to pay its share of operating maintenance and real estate taxes with respect to its leased property.

Rent expense from continuing operations was approximately $1,701,000, $1,927,000 and $2,172,000 for the years ended December 31, 2006, 2005 and 2004, respectively. The 2006 rent expense is presented net of the sublease arrangement.

The future annual minimum rentals (exclusive of amounts for real estate taxes, maintenance, etc.) for each of the following years are:

	($ in thousands)
2007	$	1,814
2008	$	1,814
2009	$	1,814
2010	$	1,854
2011	$	1,867
2012 – 2013	$	2,333

At December 31, 2006, the Company had employment agreements with six senior officers. Under these agreements, the Company has committed to total aggregate base compensation per year of approximately $2,073,000 plus other normal customary fringe benefits and bonuses. These employment agreements generally have an initial term of three years and are automatically renewed thereafter for successive one-year periods unless either party gives the other notice of non-renewal.

On December 20, 2002, a purported shareholder class action was filed against the Company and three of its former officers. The action was pending under the caption In re Bio-Technology General Corp. Securities Litigation, in the U.S. District Court for the District of New Jersey. Plaintiff alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and sought unspecified compensatory damages. The plaintiff purported to represent a class of shareholders who purchased shares of the Company between April 19, 1999 and August 2, 2002. The complaint asserted that certain of the Company’s financial statements were materially false and misleading because the Company restated its earnings and financial statements for the years ended 1999, 2000 and 2001, as described in the Company’s Current Report on Form 8-K dated, and its press release issued, on August 2, 2002. Five nearly identical actions were filed in January and February 2003, in each instance claiming unspecified compensatory damages. In September 2003, the actions were consolidated and co-lead plaintiffs and co-lead counsel were appointed in accordance with the Private Securities Litigation Reform Act. The parties subsequently entered into a stipulation which provided for the lead plaintiff to file an amended consolidated complaint. Plaintiffs filed such amended complaint and the Company filed a motion to dismiss the action. On August 10, 2005, citing the failure of the amended complaint to set forth particularized facts that give rise to a strong inference that the defendants acted with the required state of mind, the Court granted the Company’s motion to dismiss the action without prejudice and granted plaintiffs leave to file an amended complaint. On October 11, 2005, the plaintiffs filed a second amended complaint, again seeking unspecified compensatory damages, purporting to set forth particularized facts to support their allegations of violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by the Company and its former officers. On December 13, 2005, the Company filed a motion to dismiss the second amended complaint. On October 26, 2006, the United States District Court for the District of New Jersey dismissed, with prejudice, the second amended complaint. The plaintiffs have filed an appeal in the United States Court of Appeals for the Third Circuit, which is currently pending. The Company intends to contest the appeal vigorously and has

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referred these claims to its directors and officers’ insurance carrier, which has reserved its rights as to coverage with respect to this action.

In September 2006 the Company filed a lawsuit against Barr Laboratories, Inc. (“Barr”) for infringement of certain patents related to various methods of using Oxandrin. The suit was brought in response to Barr’s filing of an Abbreviated New Drug Application (ANDA) with the FDA seeking approval to engage in the commercial manufacture, use or sale of specified dosages of oxandrolone tablets prior to expiration of the Company’s patents, all of which are listed in Approved Drug Products with Therapeutic Equivalence Evaluations for Oxandrin. Subsequent to this in February 2007, Barr notified the Company that they amended their ANDA to carve out of their proposed labeling uses for the generic oxandrolone tablet intending to avoid the particular uses covered by the Company’s method of use. As a result, the Company agreed to dismiss the action without prejudice at this time.

On December 4, 2006 the Company filed a lawsuit in the U.S. District Court for the District of New Jersey (the “District Court”) against Sandoz Pharmaceuticals (“Sandoz”) and Upsher-Smith Laboratories, Inc. (“Upsher”) claiming that their generic oxandrolone products infringe on the Company’s patents related to various methods of using Oxandrin. The Company also filed a motion seeking a temporary restraining order and preliminary injunction to restrain Sandoz and Upsher from marketing and selling their generic formulations of Oxandrin. On December 12, 2006 the United States Court of Appeals for the Federal Circuit in Washington, D.C. (the “Federal Circuit”) issued an order temporarily enjoining all sales of generic oxandrolone tablets by Sandoz and Upsher-Smith until the Federal Circuit had the opportunity to review this matter. The order was issued by the Federal Circuit as a result of an appeal filed that same day by the Company of the order on December 8 of the District Court lifting its December 4 restraining order. On December 28, 2006 the Court of Appeals denied our motion for a preliminary injunction. Subsequently, the Company filed a petition for reconsideration with the FDA regarding the rejection of its citizen petitions on the basis that FDA failed to adequately consider the significant safety and legal issues raised by permitting approval of generic oxandrolone drug products without the inclusion of labels that contain full geriatric dosing and safety information. The Company has not received a decision or other communication regarding this petition for reconsideration to date.

During the first quarter of 2005, the Company settled the outstanding patent litigation with Genentech which had been pending in Israel with respect to certain methods relating to genetically engineered products and human growth hormone. The claim was settled for a payment of $2.25 million which was fully reserved at the end of the year 2004.

In January 2005, the Company and Berna Biotech Ltd. agreed to terminate their existing Technology Transfer and License Agreement whereupon Berna returned its license to the Company’s Hepatitis B vaccine program in exchange for a payment of $750,000 which was fully reserved at the end of 2004.

From time to time the Company becomes subject to legal proceedings and claims in the ordinary course of business. Such claims, even if without merit, could result in the significant expenditure of our financial and managerial resources. The Company is not aware of any legal proceedings or claims that it believes will, individually or in the aggregate, materially harm its business, results of operations, financial condition or cash flows.

The Company is obligated under certain circumstances to indemnify certain customers for certain or all expenses incurred and damages suffered by them as a result of any infringement of third party patents. In addition the Company is obligated to indemnify its officers and directors against all reasonable costs and expenses related to stockholder and other claims pertaining to actions taken in their capacity as officers and directors which are not covered by the Company’s directors and officers’ insurance policy. These indemnification obligations are in the regular course of business and in most cases do not include a limit on a maximum potential future payments, nor are there any recourse provisions or collateral that may offset the cost. As of

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December 31, 2006, the Company has not recorded a liability for any obligations arising as a result of these indemnification obligations.

In June 2006 the Company entered into a supply and distribution agreement with Watson granting them exclusive U.S. distribution rights to its authorized generic of oxandrolone tablets, an Oxandrin-brand equivalent product, which will be manufactured and supplied to Watson through us.

At December 31, 2006 and 2005, the Company had purchase commitments of $2.0 million and $9.7 million, respectively, for oxandrolone, the active ingredient in Oxandrin. As of December 31, 2006 the Company has recorded a purchase commitment accrual for $2.0 million based upon current demand forecasts that resulted from the introduction of competitive generics in December 2006. As of December 31, 2005, the Company determined that a purchase commitment accrual was not necessary based upon forecasted demand at that time.

Note 9 — Stockholders’ Equity

In 1998 the Company adopted a stockholder rights plan intended to deter hostile or coercive attempts to acquire the Company. Under the plan, if any person or group acquires more than 20% of the Company’s common stock without approval of the board of directors under specified circumstances, the Company’s other stockholders have the right to purchase shares of the Company’s common stock, or shares of the acquiring company, at a substantial discount to the public market price. The stockholder rights plan is intended to ensure fair value to all stockholders in the event of an unsolicited takeover offer.

In September, 2006, the Company repurchased and retired 10 million shares of its common stock in order to reduce the dilution of its common stock and increase shareholder value at a price of $6.80 per share through a modified “Dutch auction” tender offer. This resulted in a cash outlay of approximately $69.3 million, including professional fees of approximately $1.3 million associated with conducting the tender offer. The Company allocated the excess of the purchase price over par value between additional paid in capital and accumulated deficit. The portion of the excess allocated to additional paid in capital was based upon the pro rata portion of the additional paid in capital of the shares repurchased.

Note 10 — Share-Based Compensation

In the years ended December 31, 2006, 2005 and 2004, the Company issued 383,000 shares, 237,000 shares, and 64,000 shares, respectively, of the Company’s common stock upon the exercise of outstanding stock options and received proceeds of $1,358,000, $663,000, and $195,000, respectively.

In 2001 the Company adopted the 2001 Stock Option Plan (the “2001 Stock Option Plan”). The 2001 Stock Option Plan permits the granting of options to purchase up to an aggregate of 10,000,000 shares of the Company’s common stock to employees (including employees who are directors) and consultants of the Company. Under the 2001 Stock Option Plan, the Company may grant either incentive stock options, at an exercise price of not less than 100% of the fair market value of the underlying shares on the date of grant, or non-qualified stock options, at an exercise price not less than 85% of the fair market value of the underlying shares on the date of grant. Options generally become exercisable ratably over two or four-year periods, with unexercised options expiring after the earlier of 10 years or shortly after termination of employment. Terminated options are available for reissuance.

In 2004, the Company adopted the 2004 Incentive Plan which superceded the 2001 Stock Option Plan. The 2004 Incentive Plan allows the Compensation Committee to award stock appreciation rights, restricted stock awards, performance-based awards and other forms of equity-based and cash incentive compensation, in addition to stock options. Under this plan, 5.1 million shares remain available for future grant at December 31, 2006.

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Stock Options

Prior to January 1, 2006, the Company accounted for share-based compensation under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by SFAS No. 123, Accounting for Stock-Based Compensation. No share-based employee compensation cost was recognized in the Statement of Operations for any periods ending prior to January 1, 2006 as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. Effective January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payment, using the modified-prospective-transition method. Under this transition method, compensation cost in 2006 includes costs for options granted prior to, but not amortized as of, December 31, 2005. The modified-prospective-transition method does not result in the restatement of prior periods.

The adoption of SFAS No. 123(R) resulted in a decrease in both income from continuing operations and net income of approximately $1.2 million for the year ended December 31, 2006. Prior to the adoption of SFAS No. 123(R), the Company disclosed the share-based compensation pro forma expense effect on net loss and earnings per share which for the years ended December 31, 2005 and 2004 is illustrated below (for the purposes of this pro forma disclosure, the value of the options is estimated using a Black-Scholes option-pricing model and amortized to expense over the options vesting periods):

	Year Ended December 31,
	2004			2005
	(In thousands)
Net income (loss) as reported	$	(27,515	)	$	5,968
Deduct:
Total share-based compensation expense determined under fair value based method for all awards, net of related tax effects		2,707			1,396
Pro forma net income (loss)	$	(30,222	)	$	4,572
Income (loss) per share:
Basic — as reported	$	(0.46	)	$	0.10
Basic — pro forma	$	(0.50	)	$	0.08
Diluted — as reported	$	(0.46	)	$	0.10
Diluted — pro forma	$	(0.50	)	$	0.08

As of December 31, 2006, there was $3.9 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to unamortized stock option compensation which is expected to be recognized over a weighted average period of approximately 1.8 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. In addition, as future grants are made, additional compensation costs will be incurred.

Options are granted to certain employees and directors at prices equal to the closing market value of the stock on the dates the options are granted. The options granted have a term of 10 years from the grant date. Options granted to employees generally vest ratably over a four year period and options granted to board members have a one year vesting period. The fair value of each option is amortized into compensation expense on a straight-line basis between the grant date for the option and each vesting date. The Company has estimated the fair value of all stock option awards as of the date of the grant by applying the Black-Scholes pricing valuation model. The application of this valuation model involves assumptions that are highly subjective, judgmental and sensitive in the determination of compensation expense. The weighted average key

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assumptions used in determining the fair value of options granted during the years ended December 31, 2006, 2005 and 2004 and the weighted average fair market value of options granted during the years ended December 31, 2006, 2005 and 2004 are as follows:

	Year Ended December 31,
	2004			2005			2006
Weighted-average volatility		63	%		64	%		64	%
Weighted-average risk-free interest rate		4.1	%		4.1	%		4.7	%
Weighted average expected life in years		7.0			7.0			6.1
Dividend yield		0.0	%		0.0	%		0.0	%
Weighted average fair market value	$	2.19		$	2.15		$	5.23

Historical information was the primary basis for the selection of the expected volatility and expected dividend yield. The expected lives of the options are based upon the simplified method as set forth by SAB No. 107 issued by the SEC which estimates expected life as the midpoint between vesting and the grant contractual life. The risk-free interest rate was selected based upon yields of U.S. Treasury issues with a term equal to the expected life of the option being valued.

Stock option activity during the year ended December 31, 2006 is as follows:

						Weighted		Aggregate
				Weighted		Average		Intrinsic
				Average		Remaining		Value of
	Number of			Exercise		Contractual		In-the-Money
	Shares			Price		Term (in yrs)		Options
	(In thousands, except weighted average data)
Outstanding at December 31, 2005		3,030		$	4.97		6.95
Granted		1,276			8.27
Exercised		(383	)		3.54
Cancelled		(609	)		5.11
Outstanding at December 31, 2006		3,314		$	6.29		7.29	$	17,136
Exercisable at December 31, 2006		1,708		$	5.40		5.58	$	10,274

The aggregate intrinsic value in the previous table reflects the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price of the options, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all option holders exercised their options on December 31, 2006. The intrinsic value of the Company’s stock options change based on the closing price of the Company’s stock. The total intrinsic value of options exercised during the period was approximately $2.9 million. The intrinsic value is calculated as the difference between the market value as of December 31, 2006 and the exercise price of the shares. The closing price per share of the Company’s common stock on December 29, 2006, the last trading day of 2006, was $11.21.

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A summary of the status of the Company’s nonvested stock options as of December 31, 2005, and changes during the year ended December 31, 2006, is presented below:

	Number of			Weighted Average Grant
	Shares			Date Fair Value
	(In thousands)
Nonvested at December 31, 2005		1,206		$	2.20
Granted		1,276			5.23
Vested		(570	)		2.22
Forfeited		(306	)		2.20
Nonvested at December 31, 2006		1,606		$	4.60

Restricted Stock and Performance-Based Restricted Stock

Starting in 2005, the Company issued restricted stock awards to certain of its employees. Restricted stock awards are recorded as deferred compensation and amortized to compensation expense over the life of the vesting period which have ranged from one to four years in duration. For the year ended December 31, 2006, the Company issued 312,000 shares of restricted stock to its employees at a weighted average grant date fair value of $8.96 amounting to approximately $2.8 million. These shares vest over a two to four year period (daily pro rata vesting is calculated for employees terminated involuntarily without cause) and are expensed, based on the closing market price of the Company’s stock on the date of issuance, on a straight-line basis over the vesting period. During the year ended December 31, 2006 and 2005 approximately $410,000 and $282,000, respectively, of deferred restricted stock compensation cost has been amortized to expense. At December 31, 2006, approximately 488,000 shares remained unvested and there was approximately $2.8 million of unrecognized compensation cost related to restricted stock. A summary of the status of the Company’s nonvested restricted shares as of December 31, 2005, and changes during the year ended December 31, 2006, is presented below:

	Number of			Weighted Average Grant
	Shares			Date Fair Value
	(In thousands)
Nonvested at December 31, 2005		358		$	2.70
Granted		312			8.96
Vested		(99	)		2.74
Forfeited		(83	)		2.96
Nonvested at December 31, 2006		488		$	6.65

During 2006, the Company granted performance based restricted stock to certain employees which could result in the issuance of up to 430,500 shares of restricted stock if performance objectives are achieved. Compensation cost related to performance shares is based upon the grant date fair value of the shares and management’s best estimate as to whether the performance criteria will be satisfied. This amount is recognized ratably over the performance period. During the year ended December 31, 2006, approximately $708,000 of deferred performance share compensation cost has been amortized to expense. Compensation cost adjustments will be made based upon changes in estimates of whether the performance criteria will be satisfied. During the year ended December 31, 2006, no restricted stock shares have been vested related to the performance based restricted stock award.

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Additional Paid In Capital Excess Tax Benefit Pool

In November 2005, the FASB issued FASB Staff Position No. 123(R)-3 (“FSP No. 123(R)-3”), Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards. FSP No. 123(R)-3 provides an elective alternative transition method for calculating the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of SFAS No. 123(R). Based upon this alternative transition method, the Company has determined that an excess tax benefit pool was not available as of January 1, 2006. Beginning in 2006, any excess tax benefits were used to create an additional paid in capital pool and any tax deficiencies were used to offset the pool, if available, or recorded as an additional charge to tax expense during the year. As of December 31, 2006, the additional paid in capital excess tax benefit pool available to absorb future tax deficiencies was approximately $0.3 million.

Note 11 — Employee Benefits

Employee Stock Purchase Plan

In April 1998, the Company adopted its 1998 Employee Stock Purchase Plan (the “1998 ESPP”). The 1998 ESPP is qualified as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended. Prior to the adoption of SFAS No. 123(R), and under the accounting guidance that preceded SFAS No. 123(R), the 1998 ESPP was considered to be non-compensatory. Under the 1998 ESPP, the Company will grant rights to purchase shares of common stock under the 1998 ESPP (“Rights”) at prices not less than 85% of the lesser of (i) the fair market value of the shares on the date of grant of such Rights or (ii) the fair market value of the shares on the date such Rights are exercised. Therefore, the 1998 ESPP is considered compensatory under SFAS No. 123(R) since, along with other factors, it includes a purchase discount of greater than 5%. During the year ended December 31, 2006, the Company recorded approximately $192,000 of compensation expense related to participation in the 1998 ESPP which resulted in a decrease in income from continuing operations and net income.

401(k) Profit-Sharing Plan

Savient has a 401(k) profit-sharing plan. As of December 31, 2006, the 401(k) plan permits employees who meet the age and service requirements to contribute up to $15,000 of their total compensation on a pretax basis, which is matched 50% by Savient. Savient’s contribution to the plan amounted to approximately $414,000, $328,000, and $359,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

Note 12 — Investment Income (loss), Net

	Year Ended December 31,
	2004			2005			2006
	(In thousands)
Interest and dividend income from cash equivalents	$	405		$	984		$	6,808
Realized and unrealized gains on short-term investments		537			80			555
Realized and unrealized losses on short-term investments		(1,566	)		(288	)		(130	)
Total investment income (loss), net	$	(624	)	$	776		$	7,233

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Note 13 — Other Income (Expense), Net

	Year Ended December 31,
	2004			2005			2006
	(In thousands)
Novo Nordisk settlement	$	—		$	3,000		$	500
Ross commission repayment		—			—			1,300
Gain on sale of Delatestryl		—			—			5,884
Receipt of Omrix shares		—			—			575
Mircette settlement		—			10,619			—
Other legal settlements		—			43			—
Other non-operating expenses		(110	)		(281	)		74
Total income (expense), net	$	(110	)	$	13,381		$	8,333

On December 1, 2005, the Company concluded an agreement with Duramed Pharmaceuticals, Inc., a subsidiary of Barr Pharmaceuticals, Inc., Organon USA Inc. and Organon (Ireland) Ltd. for the settlement of ongoing patent litigation in the US District Court for the District of New Jersey regarding Duramed’s generic version of Mircette^®, which Duramed markets under the trade name Kariva^®. Under the terms of the agreement in addition to agreeing to the settlement of its damage claims in the patent litigation, the Company consented to Duramed’s acquisition of the exclusive rights to Organon’s Mircette (desogestrel/ethinyl estradiol) oral contraceptive product. In exchange for its agreement and consent, the Company received a payment of $13.75 million as settlement of patent litigation which yielded the Company approximately $10.6 million after the payment of pass-through revenue sharing to the inventor from whom the Company acquired the patents covering Mircette. The proceeds included a $1.8 million legal fee reimbursement of which approximately $150,000 related to 2005 and was offset to general and administrative expense. The remaining net proceeds were recorded within other income (expense), net.

On January 9, 2006, the Company completed its sale to Indevus Pharmaceuticals Inc. (“Indevus”) of Delatestryl, an injectable testosterone product for male hypogonadism. Under the terms of the sale, Indevus paid to the Company an initial payment of $5 million, subject to adjustment based on outstanding trade inventory, and Indevus agreed to pay a portion of the net sales of the product for the first three years following closing of the transaction based on an escalating scale. Additionally, Indevus purchased the entire inventory of finished product from the Company in three installments totaling approximately $1.9 million. As of December 31, 2006, a $1.3 million note receivable was due from Indevus of which $644,000 is included in current assets (and was paid to Savient in 2007) and the remaining is included as long-term other assets. The Company recorded a gain on sale of Delatestryl in the first quarter of 2006. The gain on the sale of Delatestryl of approximately $5.9 million is included in other income for the year ended December 31, 2006.

In January 2005 the Company concluded a partial settlement of its patent infringement and patent interference litigation against Novo Nordisk, receiving $3.0 million for the resolution of the Company’s claims for lost profits and attorney’s fees. In February 2006, the Company received an additional payment of $0.5 million related to this litigation. The proceeds were included in other income.

In December 2005, the Oxandrin co-promotion agreement with Ross terminated. Final reconciliation of the agreement determined that Ross had overcharged Savient in error by approximately $1.3 million. Ross agreed to compensate the Company for this error and as such, the Company recognized the $1.3 million in the first quarter of 2006 which is included in other income for the year ended December 31, 2006. Ross satisfied its obligation to the Company in October 2006 via a combination of a cash payment and an accounts receivable credit.

See Note 2 for discussion regarding receipt of Omrix shares.

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Note 14 — Concentrations

In the United States, the Company primarily sells Oxandrin which accounted for 99%, 92% and 90% of net product sales from continuing operations during 2006, 2005 and 2004, respectively. Until September of 2002, the Company’s sales were primarily to a single distributor. Thereafter, the Company engaged that same distributor to fulfill orders and invoice drug wholesaler customers on its behalf. In 2005, the Company replaced that sole distributor with Integrated Commercialization Services, Inc. The Company’s gross sales to AmerisourceBergen Corp. , the parent of Integrated Commercialization Services, Inc., were 26%, 28% and 20% of total gross sales in 2006, 2005 and 2004, respectively. The Company’s gross sales to Cardinal Health were 39%, 30% and 39% of total gross sales in 2006, 2005 and 2004, respectively. The Company’s gross sales to McKesson Corp. were 22%, 28% and 27% of total gross sales in 2006, 2005 and 2004, respectively.

Generic competition for Oxandrin began in December 2006. The introduction of generic products will cause a significant decrease in the Company’s Oxandrin revenues, which will have a material adverse effect on the Company’s results of operations, cash flows, financial condition and profitability.

The Company is dependent on third parties for the manufacture of Oxandrin. The Company’s dependence upon third parties for the manufacture of this product may adversely impact its profit margins or result in unforeseen delays or other problems beyond its control. If for any reason the Company is unable to retain these third party manufacturers, or obtain alternate third party manufacturers, on commercially acceptable terms, the Company may not be able to distribute its products as planned. If the Company encounters delays or difficulties with contract manufacturers in producing this product the sale of this product would be adversely affected.

Note 15 — Income Taxes

The components of current and deferred income tax expense (benefit) from continuing operations are as follows:

	Year Ended December 31,
	2004			2005			2006
	(In thousands)
Current
State	$	137		$	402		$	(31	)
Federal		(5,301	)		(384	)		56
Foreign		75			128			—
		(5,089	)		146			25
Deferred
State		1,472			—			—
Federal		16,680			—			—
Foreign		—			—			—
		18,152			—			—
Income tax expense from continuing operations	$	13,063		$	146		$	25

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The domestic and foreign components of loss from continuing operations before income taxes are as follows:

	Year Ended December 31,
	2004			2005			2006
	(In thousands)
Domestic	$	(20,350	)	$	(323	)	$	(1,439	)
Foreign		—			—			—
Loss from continuing operations before income taxes	$	(20,350	)	$	(323	)	$	(1,439	)

Reconciliation of income taxes between the statutory and effective tax rates on income before income taxes is as follows:

	Year Ended December 31,
	2004			2005			2006
	(In thousands)
Income tax at US statutory rate	$	(7,122	)	$	(110	)	$	(503	)
State and local income taxes (net of federal benefit)		1,045			265			(20	)
Non-deductible expenses		308			82			49
Research and experimental credits		(530	)		—			—
Foreign taxes		—			130			—
Employee share based compensation		—			—			172
Valuation allowance against beginning of the year net deferred tax assets		18,152			—			—
Current year operations without tax benefit		2,705			189			—
Change in valuation allowance		—			—			529
Effects of tax rate change		—			—			(164	)
Provision for and settlement of tax examinations		(2,192	)		(386	)		(27	)
Other		697			(24	)		(11	)
Income tax expense from continuing operations	$	13,063		$	146		$	25

78

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The components of deferred income tax assets (liabilities) are as follows:

	Year Ended December 31,
	2005			2006
	(In thousands)
Net operating loss carryforward	$	9,416		$	2,239
State NOL carryforward		753			399
Valuation of securities		390			443
Reserve for returns and discounts		1,168			1,003
Inventories		3,055			4,280
Research and experimental credits		5,155			752
Deferred revenues		—			166
Foreign tax credits		560			130
Accrued amounts		1,436			1,159
Depreciation		165			103
Employee based compensation		—			730
State credits		—			375
Other		542			(4	)
Deferred income tax assets		22,640			11,775
Valuation allowance		(22,640	)		(11,775	)
Net deferred income tax assets		—			—
Deferred income tax liabilities, net	$	—		$	—

The Company has changed its expected federal effective tax rate from 34% to 35% as it is our expectation that our deferred tax assets and liabilities will be settled at the 35% tax rate in the future.

A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefit or if future deductibility is uncertain. The valuation allowance will be reduced when and if the Company determines that the deferred tax assets are more likely than not to be utilized. The Company maintained a full valuation allowance of $11,775,000 in 2006 and $22,640,000 in 2005 against the domestic net deferred tax assets. The change in the valuation allowance from 2006 compared to 2005 is primarily due to the use of the NOL carryforward and research and experimental credits against the income of discontinued operations.

At December 31, 2006, Savient had a federal net operating loss carryover of approximately $6.4 million and a state net operating loss carryover of approximately $8.0 million available to offset future taxable income, which expires at various times through 2026. There is an annual limitation on the utilization of certain federal net operating loss carryover amounts, pursuant to Internal Revenue Code Section 382.

The Company has federal tax credit carryovers of approximately $882,000 which are comprised of credits related to research and experimental expenses and foreign tax payments. These credits are available to reduce future income taxes and expire at various times with respect to various amounts through 2026.

In November 2005, the Internal Revenue Service (IRS) completed its examination of the Company’s 2002-2003 federal income tax returns. The Company made a cash payment of approximately $400,000 in the fourth quarter of 2005 to fully satisfy the liability associated with settling the audit of these taxable periods. In February 2006 the Company received a refund of 2002 taxes of approximately $700,000 from the IRS which was the result of carrying back a portion of the 2004 net operating loss.

79

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company is subject to ongoing tax audits in the State of New Jersey and New York. While the Company believes that its tax reserves reflect the probable outcome of identified tax contingencies, it is reasonably possible that the ultimate resolution of any tax matter may be more or less than the amount accrued. It is, however, the Company’s belief that the results of these audits will not have a material effect on its financial position.

The Company had a net tax receivable due from the Israeli government of approximately $2.1 million as of December 31, 2006 that is included within other current assets. The Company collected the cash from this receivable in January 2007.

The Company had a net tax receivable due from the United Kingdom Inland Revenue of approximately $1.6 million as of December 31, 2006 that is included within other current assets.

Note 16 — Segment Information

The Company has identified one reportable segment which is Specialty Pharmaceutical. In 2006 and 2005 and prior to the sale of Rosemont, the Company identified two reportable segments including Specialty Pharmaceutical and Oral Liquids (Rosemont). Prior to 2005, the Company’s operations were not managed along segment lines. The Specialty Pharmaceutical segment includes products which are branded prescription pharmaceuticals including Oxandrin and our former product Delatestryl and the Company’s Oxandrin-brand generic, oxandrolone. Certain research and development expenses related to Puricase^® are included in the Specialty Pharmaceutical segment. The Company’s former BTG-Israel and Rosemont subsidiaries are included as discontinued operations.

Historically, the Company allocated management fees between its Specialty Pharmaceutical segment and Rosemont based on various factors, including management time. These fees were eliminated in consolidation. With the disposition of Rosemont, the Company has reclassified certain corporate allocations from discontinued operations into continuing operations.

The Company’s Specialty Pharmaceutical segment is operated primarily in the United States. All Specialty Pharmaceutical product revenue was generated in the United States.

Information about the Company’s segment, as reconciled to enterprise totals, is presented below:

	Year Ended December 31, 2006
	Specialty			Discontinued
	Pharmaceutical			Operations		Total
	(In thousands)
Revenues	$	47,514				$	47,514
Operating loss before depreciation and amortization		(16,270	)				(16,270	)
Less:
Depreciation and amortization		735					735
Operating loss as reported		(17,005	)				(17,005	)
Other income, net		15,566					15,566
Income tax expense		(25	)				(25	)
Loss from continuing operations		(1,464	)				(1,464	)
Income from discontinued operations		—			61,789		61,789
Net income (loss)	$	(1,464	)	$	61,789	$	60,325
Segment assets	$	197,893		$	—	$	197,893
Expenditures for segment assets	$	457		$	2,222	$	2,679

80

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Year Ended December 31, 2005
	Specialty			Discontinued
	Pharmaceutical			Operations		Total
	(In thousands)
Revenues	$	49,495				$	49,495
Operating loss before depreciation and amortization		(13,395	)				(13,395	)
Less:
Depreciation and amortization		1,085					1,085
Operating loss as reported		(14,480	)				(14,480	)
Other income, net		14,157					14,157
Income tax expense		(146	)				(146	)
Loss from continuing operations		(469	)				(469	)
Income from discontinued operations		—			6,437		6,437
Net income (loss)	$	(469	)	$	6,437	$	5,968
Segment assets	$	92,791		$	129,900	$	222,691
Expenditures for segment assets	$	101		$	2,077	$	2,178

	Year Ended December 31, 2004
	Specialty			Discontinued
	Pharmaceutical			Operations		Total
	(In thousands)
Revenues	$	62,353				$	62,353
Operating loss before depreciation and amortization		(18,312	)				(18,312	)
Less:
Depreciation and amortization		1,304					1,304
Operating loss as reported		(19,616	)				(19,616	)
Other expense, net		(734	)				(734	)
Income tax expense		(13,063	)				(13,063	)
Loss from continuing operations		(33,413	)				(33,413	)
Income from discontinued operations		—			5,898		5,898
Net income (loss)	$	(33,413	)	$	5,898	$	(27,515	)
Segment assets	$	50,018		$	207,187	$	257,205
Expenditures for segment assets	$	367		$	3,216	$	3,583

Intercompany interest income and expense between Specialty Pharmaceuticals and discontinued operations, respectively, was $2,167,000, $3,769,000 and $3,708,000 for the years ended December 31, 2006, 2005 and 2004, respectively. All intercompany balances have been eliminated in consolidation.

81

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 17 — Quarterly Data (Unaudited)

Following are the quarterly results of operations for the years ended December 31, 2006 and 2005.

	Quarter Ended March 31,
	2005			2006
	(In thousands, except per share data)
Revenues:
Product sales, net	$	11,762		$	9,503
Other revenues		75			—
		11,837			9,503
Cost and expenses:
Cost of goods sold		2,410			858
Research and development		4,215			3,248
Selling and marketing		3,300			2,833
General and administrative		4,612			7,907
Commissions and royalties		1,319			1
		15,856			14,847
Operating loss from continuing operations		(4,019	)		(5,344	)
Investment income (loss), net		(97	)		890
Other income, net		2,255			7,832
Income (loss) from continuing operations before income taxes		(1,861	)		3,378
Income tax expense		27			39
Income (loss) from continuing operations		(1,888	)		3,339
Income from discontinued operations, net of income taxes		1,411			639
Net income (loss)	$	(477	)	$	3,978
Earnings (loss) per common share from continuing operations:
Basic	$	(0.03	)	$	0.05
Diluted	$	(0.03	)	$	0.05
Earnings per common share from discontinued operations:
Basic	$	0.02		$	0.01
Diluted	$	0.02		$	0.01
Earnings (loss) per common share:
Basic	$	(0.01	)	$	0.06
Diluted	$	(0.01	)	$	0.06
Weighted average number of common and common equivalent shares:
Basic		60,545			61,212
Diluted		60,545			62,107

82

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Quarter Ended
	June 30,
	2005			2006
	(In thousands, except per share data)
Revenues:
Product sales, net	$	12,526		$	13,760
Other revenues		764			100
		13,290			13,860
Cost and expenses:
Cost of goods sold		513			1,361
Research and development		4,964			4,166
Selling and marketing		4,516			2,136
General and administrative		4,735			6,403
Commissions and royalties		1,147			4
		15,875			14,070
Operating loss from continuing operations		(2,585	)		(210	)
Investment income, net		82			916
Other income (expense), net		(392	)		465
Income (loss) from continuing operations before income taxes		(2,895	)		1,171
Income tax expense		46			(35	)
Income (loss) from continuing operations		(2,941	)		1,206
Income from discontinued operations, net of income taxes		2,502			2,036
Net income (loss)	$	(439	)	$	3,242
Earnings (loss) per common share from continuing operations:
Basic	$	(0.05	)	$	0.02
Diluted	$	(0.05	)	$	0.02
Earnings per common share from discontinued operations:
Basic	$	0.04		$	0.03
Diluted	$	0.04		$	0.03
Earnings (loss) per common share:
Basic	$	(0.01	)	$	0.05
Diluted	$	(0.01	)	$	0.05
Weighted average number of common and common equivalent shares:
Basic		60,722			61,358
Diluted		60,722			62,456

83

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Quarter Ended September 30,
	2005(1)			2006(1)
	(In thousands, except per share data)
Revenues:
Product sales, net	$	11,082		$	15,889
Other revenues		102			32
		11,184			15,921
Cost and expenses:
Cost of goods sold		1,222			1,351
Research and development		4,029			5,519
Selling and marketing		3,020			2,514
General and administrative		5,610			4,950
Commissions and royalties		1,316			—
		15,197			14,334
Operating income (loss) from continuing operations		(4,013	)		1,587
Investment income, net		263			2,820
Other income (expense), net		53			(28	)
Income (loss) from continuing operations before income taxes		(3,697	)		4,379
Income tax expense (benefit)		(70	)		1,022
Income (loss) from continuing operations		(3,627	)		3,357
Income from discontinued operations, net of income taxes(2)		1,669			58,512
Net income (loss)	$	(1,958	)	$	61,869
Earnings (loss) per common share from continuing operations:
Basic	$	(0.06	)	$	0.06
Diluted	$	(0.06	)	$	0.05
Earnings per common share from discontinued operations:
Basic	$	0.03		$	0.96
Diluted	$	0.03		$	0.96
Earnings (loss) per common share:
Basic	$	(0.03	)	$	1.02
Diluted	$	(0.03	)	$	1.01
Weighted average number of common and common equivalent shares:
Basic		60,934			60,433
Diluted		60,934			61,174

(1)

The Company had previously allocated interest between continuing operations and discontinued operations and has subsequently made certain reclassification adjustments that resulted in offsetting adjustments to income (loss) from continuing operations and income from discontinued operations which had no impact on net income (loss) for the three and nine months ended September 30, 2005 and 2006, respectively. The amounts that were reduced from income (loss) from continuing operations and income from discontinued operations include $0.4 million and $0.9 million, for the three months ended September 30, 2006 and 2005, respectively, and $2.2 million and $2.8 million, for the nine months ended September 30, 2006 and 2005, respectively.

(2)

Income from discontinued operations for the three months ended September 30, 2006 reflects the Company’s sale of Rosemont which resulted in a pre-tax gain on disposition of approximately $77.2 million (see Note 6).

84

SAVIENT PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Quarter Ended December 31,
	2005			2006
	(In thousands, except per share data)
Revenues:
Product sales, net	$	12,673		$	8,199
Other revenues		511			31
		13,184			8,230
Cost and expenses:
Cost of goods sold		1,107			4,936
Research and development		3,772			8,479
Selling and marketing		3,938			3,200
General and administrative		6,918			4,653
Commissions and royalties		1,312			—
		17,047			21,268
Operating loss from continuing operations		(3,863	)		(13,038	)
Investment income, net		528			2,607
Other income, net		11,465			64
Income (loss) from continuing operations before income taxes		8,130			(10,367	)
Income tax expense (benefit)		143			(1,001	)
Income (loss) from continuing operations		7,987			(9,366	)
Income from discontinued operations, net of income taxes		855			602
Net income (loss)	$	8,842		$	(8,764	)
Earnings (loss) per common share from continuing operations:
Basic	$	0.13		$	(0.18	)
Diluted	$	0.13		$	(0.18	)
Earnings per common share from discontinued operations:
Basic	$	0.02		$	0.01
Diluted	$	0.01		$	0.01
Earnings (loss) per common share:
Basic	$	0.15		$	(0.17	)
Diluted	$	0.14		$	(0.17	)
Weighted average number of common and common equivalent shares:
Basic		60,130			51,774
Diluted		61,743			51,774

During the fourth quarter of 2005, the Company settled litigation that resulted in net proceeds of $10.6 million recorded as other income (see Note 13).

Note 18 — Restructuring Charges

In October 2004, the Company incurred a $1,962,000 pre-tax restructuring charge associated with a 9% reduction of the Company’s workforce. The charge included approximately $1,300,000 for severance payments, and approximately $600,000 for lease, inventory and fixed asset charges. These restructuring charges were part of the implementation of the new strategic direction of the Company announced in July 2004. The restructuring charge balance as of December 31, 2005 was $39,000 which was paid in 2006 and therefore all obligations related to the restructuring have been settled as of December 31, 2006. Of the $1,962,000, approximately $1,200,000 related to continuing operations and is presented within general and administrative expenses.

85

SAVIENT PHARMACEUTICALS, INC.

Schedule II — Valuation and Qualifying Accounts

	Balance at		Charged to			Charged to						Balance at
	Beginning of		Costs and			Other						End of
Description	Period		Expenses			Accounts			Deductions			Period
	(In thousands)
Allowance for inventory obsolescence
2004	$	2,210	$	4,204		$	—		$	(355	)	$	6,059
2005		6,059		1,805			—			(124	)		7,740
2006		7,740		2,657			(346	)		(1,746	)		8,305
Allowance for sales returns(1)
2004		4,706		2,248			—			(3,695	)		3,259
2005		3,259		1,808			—			(2,179	)		2,888
2006		2,888		2,374			—			(2,810	)		2,452
Allowance for rebates(1)
2004		3,168		6,917			—			(6,725	)		3,360
2005		3,360		5,514			—			(6,383	)		2,491
2006		2,491		2,345			—			(3,583	)		1,253
Allowance for doubtful accounts
2004		577		58			—			(135	)		500
2005		500		769			—			(207	)		1,062
2006		1,062		468			(435	)		(59	)		1,036
Valuation allowance — Deferred income taxes short term
2004		—		9,092			—			—			9,092
2005		9,092		(3,646	)		—			—			5,446
2006		5,446		559			—			—			6,005
Valuation allowance — Deferred income taxes long term
2004		—		14,100			—			—			14,100
2005		14,100		3,094			—			—			17,194
2006		17,194		(11,424	)		—			—			5,770

(1) Included within other current liabilities in the Company’s consolidated balance sheets.

86

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable

ITEM 9A.   CONTROLS AND PROCEDURES

(a).  Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) as appropriate, to allow timely decisions regarding required disclosure.

Management does not expect that the Company’s disclosure controls and procedures or its internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Management of the Company, with the participation of its CEO and CFO, evaluated the effectiveness of the Company’s disclosure controls and procedures. Based on their evaluation, as of the end of the period covered by this Form 10-K, the Company’s CEO and CFO have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective.

(b).  Management’s Report On Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and is affected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (GAAP) and includes those policies and procedures that:

•  pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

•  provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

87

•  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006 based on the criteria described in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment under the framework in Internal Control — Integrated Framework, management, including the Company’s CEO and CFO, concluded that the Company’s internal control over financial reporting was effective as of December 31, 2006

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006 has been audited by McGladrey & Pullen, LLP, an independent registered public accounting firm, as stated in their report which appears within “Item 8, Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

(c).  Remediation of December 31, 2005 Material Weaknesses

The following is a description of material weaknesses as described in our Annual Report on Form 10-K for the year ended December 31, 2005, and the corrective action that has taken place in 2006:

•  Insufficient personnel resources that are in dedicated permanent positions within the finance function with sufficient skills and industry knowledge of GAAP and tax, which resulted in insufficient documentation and monitoring over the financial statement close and restatement of quarterly financial reporting attributed to (a) deficiencies in the analysis of estimates relating to product returns, inventory obsolescence and rebates and (b) errors in the income tax provision.

The Company has strengthened its financial staff with the hiring of an Interim Chief Financial Officer in October 2005, to coordinate the financial restatement effort (completed January 2006) and to strengthen financial controls and procedures. In July 2006 the Company hired a permanent Senior Vice President and Chief Financial Officer with significant pharmaceutical industry and SEC experience. The Company further strengthened its financial staff with the hiring of a Vice President of Finance and Controller in February 2006. The accounting staff has been strengthened with the addition of individuals responsible for financial reporting, budgeting and financial analysis. The finance organization is also supported by financial consultants on an as needed basis.

The finance organization is comprised of a self sufficient tax department which coordinates all tax financial reporting matters and tax compliance processes.

With the additions made to the financial staff, the Company has enhanced its segregation of duties internally.

Management believes that changes necessary to fully remediate this weakness were in place by September 30, 2006 and testing to confirm operating effectiveness was successfully completed by December 31, 2006.

•  There were deficiencies in the income tax analysis consisting of (a) insufficient review of the U.K. tax provision by Rosemont management in the U.K. and by the corporate tax function, (b) insufficient monitoring of U.K. tax regulation changes and (c) inaccurate calculation of quarterly tax provision.

We retained a U.K. tax specialist during the first quarter of 2006 to review our U.K. subsidiary’s tax provision and to provide technical tax expertise as needed. We engaged external tax consultants in the U.S. in the first quarter of 2006 to provide additional tax expertise related to the 2005 year end closing process and to provide on going tax support. We acquired research tools and tax provision and preparation software and enhanced our review procedures related to both domestic and foreign tax

88

calculations. We established periodic meetings to discuss tax issues and tax implications of business activities.

Management believes that changes necessary to correct this weakness have been implemented, and testing to confirm operating effectiveness was successfully performed by June 30, 2006. Management believes that the changes in internal controls implemented to remediate this weakness continue to operate effectively as of December 31, 2006.

•  There was insufficient communication at the intercompany and intradepartmental level and between us and our third-party service and data providers. At the intradepartmental level, inconsistent exchange of important financial information between our finance and operating functions led to errors in reporting.

We have instituted communication protocols that will foster improved shared intelligence between the finance function and other departments including, but not limited to, legal, commercial operations, research and development and executive management. We have conducted reviews of significant contracts by the accounting department for completeness, accuracy and proper accounting treatment, including accounting input into the contract terms prior to the execution of contracts. Prior to the sale of our U.K. subsidiary on August 4, 2006, we had commenced an increase in the communication level between parent and subsidiary personnel, including the establishment of standardized periodic meetings to discuss business results and objectives.

With regard to improving communications with third parties, we established periodic meetings with third party process providers in order to educate these parties regarding our enhanced policies and procedures. We have had third party process providers educate us on the level of data that they provide, the controls over their processes, and how we can better utilize the information that is currently available. Included within this education process were visits by Company personnel to the third party process providers servicing locations. We instituted monthly reporting standards from third party process providers and third party vendors/ customers that will enhance our estimation capabilities. We have historically received many of these reports; however, standards related to these reports will assist us with financial reporting timing and accuracy.

Management believes that the changes necessary to correct this weakness were in place and operating effectively as of September 30, 2006 and considers this issue to be fully resolved as of September 30, 2006. There was no change in this assessment as of December 31, 2006.

•  There were insufficient controls over the Cash and Treasury process including (a) authorization, monitoring and segregation of duties over wire transfers, (b) non-timely revision of signature authority over our bank accounts and (c) monitoring and segregation of duties with respect to access to check stock at our U.K. subsidiary.

The Company has evaluated the segregation of duties and has implemented changes that personnel generating wire transfers are independent from the authorization and reconciliation processes. The Company has implemented additional procedures to provide timely updating of bank signature cards, and updated applicable bank signature cards. Prior to the sale of its U.K. subsidiary on August 4, 2006, the Company implemented improved check stock access control and monitoring at Rosemont during the second quarter of 2006.

Management believes that changes in internal control necessary to correct this weakness have been implemented, and testing to confirm operating effectiveness was successfully performed as of September 30, 2006. Management considered this issue to be fully resolved as of September 30, 2006 and there was no change in this assessment as of December 31, 2006.

•  There was insufficient control over the authorization of the Employee Stock Purchase Plan purchases and accounting for pro forma stock-based compensation expense in accordance with SFAS No. 123, Accounting for Stock Based Compensation, the latter of which resulted in errors to and restatement of the historically reported pro forma stock-based compensation expense disclosures. The insufficient

89

coordination of data exchanged between us and certain third party service providers resulted in certain errors in the administration of the stock incentive award programs.

The Company implemented controls so that quarterly Employee Stock Purchase Plan purchases are reviewed and approved by senior management. The Company has hired consultants to provide guidance regarding SFAS No. 123(R) implementation as well as improved the level of expertise in the accounting department with the hiring of senior accounting personnel. The Company has increased communication frequency and manages the relationship more effectively with its third party stock award administrator to coordinate all stock award activity and to assist with software applications related to share-based expense calculations and related share-based accounting requirements.

Management believes that changes necessary to fully remediate this weakness were successfully completed and in place by December 31, 2006.

No other change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended December 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

(d).  Reports of Independent Registered Public Accounting Firms

Reports of Independent Registered Public Accounting Firms are included within “ITEM 8, Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

ITEM 9B.   OTHER INFORMATION

Not Applicable

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors

The information concerning directors of Savient required under this Item is incorporated herein by reference from our definitive proxy statement, to be filed pursuant to Regulation 14A, related to our 2007 Annual Meeting of Stockholders to be held on May 15, 2007 (our “2007 Proxy Statement”).

Information regarding the Company’s director nomination process, audit committee and audit committee financial expert as required by the SEC’s Regulation S-K 407(c)(3), 407(d)(4) and 407(d)(5), is set forth in our 2007 Proxy Statement and is incorporated herein by reference.

Executive Officers

The information concerning executive officers of Savient required under this Item is contained in the discussion under the heading Our Executive Officers in Part I of this Annual Report on Form 10-K.

Section 16(a) Compliance

Information concerning compliance with Section 16(a) of the Securities Exchange Act of 1934 is set forth in the Section 16(a) Beneficial Ownership Reporting Compliance segment of our 2007 Proxy Statement and is incorporated herein by reference.

Code of Ethics

We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer and all other Savient employees performing similar functions. This code of ethics has been posted on our website, which can be found at http://www.savientpharma.com. We intend to satisfy

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the disclosure requirement under Item 10 of Form 8-K regarding an amendment to or waiver from a provision of our code of ethics by posting such information on our website at the address specified above.

We have filed as exhibits to this Annual Report on Form 10-K for the year ended December 31, 2006, the certifications of our Principal Executive Officer and Principal Financial Officer required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

ITEM 11.   EXECUTIVE COMPENSATION

The information concerning executive compensation for Savient required under this Item is incorporated herein by reference from our 2007 Proxy Statement.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information concerning security ownership of certain beneficial owners and management required under this Item is incorporated herein by reference from our 2007 Proxy Statement.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information concerning certain relationships and related transactions required under this Item is incorporated herein by reference from our 2007 Proxy Statement.

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information concerning principal accountant fees and services required under this Item is incorporated herein by reference from our 2007 Proxy Statement.

PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements

(1) and (2) See “Index to Consolidated Financial Statements” contained in Item 8 of this Annual Report on Form 10-K.

(b) Exhibits

Certain exhibits presented below contain information that has been granted or is subject to a request for confidential treatment. Such information has been omitted from the exhibit. Exhibit Nos. 10.4, 10.5, 10.6, 10.7, 10.8, 10.9, 10.10, 10.11, 10.12, 10.13, 10.14, 10.15 and 10.16 are management contracts, compensatory plans or arrangements.

Exhibit
No.			Description
	2	.1	Agreement and Plan of Reorganization, dated as of February 21, 2001, by and among Bio-Technology General Corp., MYLS Acquisition Corp. and Myelos Corporation.*(1)
	2	.2	Share Purchase Agreement, dated September 20, 2002, relating to Rosemont Pharmaceuticals Ltd, between NED-INT Holdings Ltd, Akzo Nobel N.V. and Bio-Technology General Corp.*(2)
	2	.3	Share Purchase Agreement, dated March 23, 2005, between the Registrant and Ferring B.V.*(3)
	2	.4	Asset Purchase Agreement, dated March 23, 2005, between the Registrant and Ferring International Centre SA.*(3)
	3	.1	Certificate of Incorporation of the Registrant, as amended.*(4)
	3	.2	By-laws of the Registrant, as amended.*(5)

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Exhibit
No.			Description
	4	.1	Rights Agreement, dated as of October 7, 1998, by and between Bio-Technology General Corp. and American Stock Transfer & Trust Company, as Rights Agent, which includes the form of Certificate of Designations setting forth the terms of the Series A Junior Participating Cumulative Preferred Stock, par value $0.01 per share, as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C.*(5)
	4	.2	Certificate of Designations of the Series A Junior Participating Cumulative Preferred Stock.*(5)
	10	.1	Letter from the Chief Scientist to Bio-Technology General (Israel) Ltd.*(6)
	10	.2	Agreement, dated January 20, 1984, between Bio-Technology General (Israel) Ltd., and the Chief Scientist with regard to certain projects.*(7)
	10	.3	Form of Indemnity Agreement between the Company and its directors and officers.*(8)
	10	.4	Bio-Technology General Corp. Stock Compensation Plan for Outside Directors, as amended.*(9)
	10	.5	Bio-Technology General Corp. Stock Option Plan for New Directors, as amended.*(9)†
	10	.6	Bio-Technology General Corp. 1992 Stock Option Plan, as amended.*(10)
	10	.7	Bio-Technology General Corp. 1997 Stock Option Plan for Non-Employee Directors.*(10)†
	10	.8	Savient Pharmaceuticals, Inc. 1998 Employee Stock Purchase Plan Amended and Restated as of May 23, 2006.
	10	.9	Bio-Technology General Corp. 2001 Stock Option Plan.*(11)
	10	.10	Employment Agreement, dated as of May 14, 2002, by and between Bio-Technology General Corp. and Christopher Clement.*(12)
	10	.11	Employment Agreement, dated March 23, 2003, by and between Bio-Technology General Corp. and Zebulun D. Horowitz, M.D.*(13)
	10	.12	Lease and Lease Agreement, dated as of June 11, 2002, between SCV Partners and Bio-Technology General Corp., as amended.*(14)
	10	.13	Severance Agreement, dated as of May 21, 2004, between Savient Pharmaceuticals, Inc. and Sim Fass.*(15)
	10	.14	Employment Agreement, dated as of May 28, 2004, between Savient Pharmaceuticals, Inc. and Philip K. Yachmetz.*(16)
	10	.15	Employment Agreement, dated as of February 15, 2006, by and between the Company and Robert Lamm.*(17)
	10	.16	Amendment, dated February 15, 2006, to Employment Agreement, dated May 28, 2004, by and between the Company and Philip K. Yachmetz.*(17)
	10	.17	Amendment, dated July 12, 2004, to Employment Agreement dated May 14, 2002, by and between the Company and Christopher Clement.*(17)
	10	.18	Amendment dated December 7, 2006, to Employment Agreement dated March 23, 2003, by and between the Company and Zebulun D. Horowitz, M.D.
	10	.19	Form of Savient Pharmaceuticals, Inc. Senior Management Incentive Stock Option Agreement.
	10	.20	Form of Savient Pharmaceuticals, Inc. Senior Management Non-Qualified Stock Agreement.
	10	.21	Form of Savient Pharmaceuticals, Inc. Senior Management Restricted Stock Agreement.
	10	.22	Form of Savient Pharmaceuticals, Inc. Senior Management Performance Share Agreement.
	10	.23	Form of Savient Pharmaceuticals, Inc. Board of Directors Non-Qualified Stock Agreement.
	10	.24++	License Agreement, dated August 12, 1998, by and among Mountain View Pharmaceuticals, Inc., Duke University, and Bio-Technology General Corporation, as amended on November 12, 2001.
	10	.25++	Supply Agreement, dated as of June 12, 2006, by and between Watson Pharma Inc. and Savient Pharmacueticals, Inc.
	21	.1	Subsidiaries of Savient Pharmaceuticals, Inc.
	23	.1	Consent of Grant Thornton LLP.
	23	.2	Consent of McGladrey & Pullen LLP.

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Exhibit
No.			Description
	31	.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification of the Interim Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32	.2	Certification of the Interim Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Stockholders of the Company will be provided with copies of these exhibits upon written request to the Company.

Confidential treatment has been granted for portions of such document.

++	Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Commission.
*	Previously filed with the Commission as Exhibits to, and incorporated herein by reference from, the following documents:
(1)	Company’s Current Report on Form 8-K, dated March 19, 2001.
(2)	Company’s Annual Report on Form 10-K for the year ended December 31, 2002.
(3)	Company’s Current Report on Form 8-K, dated March 23, 2005.
(4)	Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.
(5)	Company’s Current Report on Form 8-K, dated October 9, 1998.
(6)	Registration Statement on Form S-1 (File No. 2-84690).
(7)	Registration Statement on Form S-1 (File No. 033-02597).
(8)	Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1987.
(9)	Company’s Annual Report on Form 10-K for the year ended December 31, 1991.
(10)	Company’s Annual Report on Form 10-K for the year ended December 31, 1997.
(11)	Company’s Annual Report on Form 10-K for the year ended December 31, 2001.
(12)	Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.
(13)	Company’s Annual Report on Form 10-K for the year ended December 31, 2003.
(14)	Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002.
(15)	Company’s Current Report on Form 8-K, dated May 25, 2004.
(16)	Company’s Current Report on Form 10-Q, dated August 9, 2004.

(c) Financial Statement Schedule

(d) Schedule II — Valuation and Qualifying Accounts

See “Index to Consolidated Financial Statements” at Item 8 of this Annual Report on Form 10-K.

(17) Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SAVIENT PHARMACEUTICALS, INC.
(Registrant)

By:  /s/  Christopher G. Clement

Christopher G. Clement

President and Chief Executive Officer

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

March 16, 2007

Signature	Title	Date
/s/  Christopher G. Clement Christopher G. Clement	President, Chief Executive Officer and Director	March 16, 2007
/s/  Herbert Conrad Herbert Conrad	Director	March 16, 2007
/s/  Alan L. Heller Alan L. Heller	Director	March 16, 2007
/s/  Stephen Jaeger Stephen Jaeger	Director	March 16, 2007
/s/  Joseph Klein III Joseph Klein III	Director	March 16, 2007
/s/  Lee S. Simon, M.D. Lee S. Simon, M.D.	Director	March 16, 2007
/s/  David Tendler David Tendler	Director	March 16, 2007
/s/  Virgil Thompson Virgil Thompson	Director	March 16, 2007
/s/  Faye Wattleton Faye Wattleton	Director	March 16, 2007
/s/  Brian J. Hayden Brian J. Hayden	Senior Vice President, Chief Financial Officer and Treasurer	March 16, 2007

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EX-10.8

Exhibit 10.8

SAVIENT PHARMACEUTICALS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
Amended and Restated as of May 23, 2006

WHEREAS, the Company’s stockholders at the Annual Meeting held on June 1, 2005 approved the increase of the number of shares of Savient Pharmaceuticals, Inc.’s (the “Company”) common stock that may be issued under the 1998 Employee Stock Purchase Plan (as amended and restated, the “Plan”) from 3,000,000 to 4,000,000 and at the Annual Meeting held on May 23, 2006 approved the elimination of the termination date of the Plan.

NOW, THERFORE, this Plan is amended and restated as follows:

1. Purpose

     The purpose of this Plan is to provide employees of the Company and its subsidiaries who wish to become stockholders of the Company an opportunity to purchase shares of Common Stock of the Company (the “Shares”). The Plan is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”).

2. Eligible Employees

     Subject to the provisions of Sections 7, 8 and 9 below, any individual who is in the full-time employment of the Company or any subsidiary (as defined in Section 424(f) of the Code) of the Company on the day on which a Grant Date (as defined in Section 3 below) occurs is eligible to participate in an offering of Shares made by the Company hereunder. Full-time employment shall mean customary employment by the Company or any subsidiary for:

     (a) 20 hours or more per week; and

     (b) more than five months in the calendar year.

3. Grant Dates

     From time to time, the Board of Directors may fix a date (a “Grant Date”) or a series of dates (each of which is a “Grant Date”) on which the Company will grant rights to purchase Shares (“Rights”) to employees eligible to participate.

4. Prices

     The purchase price per Share for Shares covered by a grant of Rights hereunder shall be determined by the Board of Directors on or prior to the Grant Date, but in no event

shall be less than the lesser of:

     (a) eighty-five percent (85%) of the fair market value of a Share on the Grant Date; or

     (b) eighty-five percent (85%) of the fair market value of a Share on the date such Right is exercised as to that Share.

     For purposes of the Plan, the term “fair market value” on any date means:

     (a) the closing price (on that date) of the Common Stock on the principal national securities exchange on which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange;

     (b) the last reported sale price (on that date) of the Common Stock on the Nasdaq National Market or SmallCap Market, if the Common Stock is then traded on one of such markets; or

     (c) the average of the closing bid and asked prices last quoted (on that date) by an established quotation service for over-the-counter securities, if the Common Stock is not reported on a national securities exchange, the Nasdaq National Market or the Nasdaq SmallCap market.

5. Exercise of Rights and Method of Payment

     (a) Rights granted under the Plan will be exercisable on specific dates as determined by the Board of Directors.

     (b) The method of payment for Shares purchased upon exercise of Rights granted hereunder shall be through regular payroll deductions or by lump sum cash payment, or both, as determined by the Board of Directors. No interest shall be paid upon payroll deductions or other payments in exercise of Rights unless specifically provided for by the Board of Directors.

6. Terms of Rights

     Rights granted hereunder shall be exercisable during a twenty-seven (27) month period beginning on the Grant Date or such shorter period as determined by the Board of Directors. All Rights granted to an employee shall terminate upon termination of employment of the employee. Any amounts received or withheld by the Company from or on behalf of a participating employee with respect to a Right granted hereunder and not utilized for the purchase of Shares upon exercise of such Right shall be promptly returned

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to such employee by the Company after termination of such Right, except that amounts that were not so utilized because such amounts were insufficient to purchase a whole Share may be applied toward the purchase of Shares pursuant to a Right subsequently granted hereunder, if any.

7. Shares Subject to the Plan

     No more than four million (4,000,000) Shares may be sold pursuant to Rights granted under the Plan. Appropriate adjustments in the above figure, in the number of Shares covered by outstanding Rights granted hereunder, in the exercise price of the Rights and in the maximum number of Shares which an employee may purchase (pursuant to Section 9 below) shall be made to give effect to any mergers, consolidations, reorganizations, recapitalizations, stock splits, stock dividends or other relevant changes in the capitalization of the Company occurring after the effective date of the Plan, provided that no fractional Shares shall be subject to a Right and each Right shall be adjusted downward to the nearest full Share. Any agreement of merger or consolidation will include provisions for protection of the then existing Rights of participating employees under the Plan. Either authorized and unissued Shares or issued Shares heretofore or hereafter reacquired by the Company may be made subject to Rights under the Plan. If for any reason any Right under the Plan terminates in whole or in part, Shares subject to such terminated Right may again be subject to a Right under the Plan.

8. Limitations on Grants

     Anything to the contrary notwithstanding, pursuant to Section 423 of the Code:

     (a) No employee shall be granted a Right hereunder if such employee, immediately after the Right is granted, owns stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any subsidiary, in each case computed in accordance with Section 423(b)(3) and 424(d) of the Code.

     (b) No employee shall be granted a Right which permits his Rights to purchase Shares under all employee stock purchase plans of the Company and its subsidiaries to accrue at a rate which exceeds twenty-five thousand dollars ($25,000) (or such other maximum as may be prescribed from time to time by the Code) of fair market value of such Shares (determined at the time such Right is granted) for each calendar year in which such Right is outstanding at any time, all in accordance with the provisions of Section 423(b)(8) of the Code.

9. Limits on Participation

-3-

     (a) Participation shall be limited to eligible employees who enroll under the Plan. All participating employees will have the same rights and privileges under the Plan to the extent required by Section 423(b)(5) of the Code.

     (b) No Right granted to any participating employee shall cover more than twelve thousand (12,000) Shares.

10. Cancellation of Election to Participate

     An employee who has elected to participate in the Plan may, unless the employee has waived this cancellation right at the time of such election in a manner established by the Administrator (as defined in Section 18), cancel such election as to all (but not less than all) of the Rights granted by giving written notice of such cancellation to the Company before the next exercise date specified by the Board of Directors. Any amounts paid by the employee or withheld for the purchase of Shares from the employee’s compensation through payroll deductions shall be paid to the employee or to the employee’s estate, without interest.

11. Termination of Employment

     Upon termination of employment for any reason, including the death of the employee, before the date on which an outstanding Right granted under the Plan is exercisable, such Right shall immediately terminate and amounts paid by the employee or withheld for the purchase of Shares from the employee’s compensation through payroll deductions shall be paid to the employee or to the employee’s estate, without interest.

12. Limits on Sale of Stock Purchased Under the Plan

     The Plan is intended to provide Shares for investment and not for resale. The Company does not, however, intend to restrict or influence any employee in the conduct of his or her own affairs. An employee may, therefore, sell Shares purchased under the Plan at any time the employee chooses, subject to compliance with any applicable federal or state securities laws; provided, however, that because of certain federal tax requirements, each employee agrees, by entering the Plan, promptly to give the Company notice of any such Shares disposed of within two years after the date of grant of the applicable Right, showing the number of such Shares disposed of.

13. Employee’s Rights as Stockholder

     No participating employee shall have any rights as a stockholder in the Shares covered by a Right granted hereunder until such Right has been exercised, full payment has been made for the corresponding Shares and the purchase has been entered in the

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records of the Transfer Agent for the Shares.

14. Rights Not Transferable

     Rights under the Plan are not assignable or transferable by a participating employee.

15. Amendments or Discontinuance of the Plan

     The Board of Directors of the Company shall have the right to amend, modify or terminate the Plan at any time without notice; provided, however, that the then existing Rights of all participating employees shall not be adversely affected thereby, except that in the case of a participating employee of a foreign subsidiary of the Company the Plan may be varied to conform with local laws, and provided further that, subject to the provisions of Section 7 above, no such amendment to the Plan shall, without the approval of the stockholders of the Company:

     (a) Increase the total number of Shares which may be offered under the Plan; or

     (b) Amend the Plan in any manner which would render Rights granted hereunder unqualified for special tax treatment under Section 421 of the Code.

16. Effective Date and Approvals

     The Plan shall become effective as of August 1, 1998. The Company’s obligation to offer, sell or deliver its Shares under the Plan is subject to the approval of the Company’s stockholders and any governmental approval required in connection with the authorized issuance or sale of such Shares and is further subject to the determination by the Company that all applicable securities laws have been complied with.

17. Term of the Plan

     Rights may be granted under the Plan until such time as the maximum number of Shares permitted to be sold pursuant to Rights granted under the Plan are sold or the Plan is otherwise terminated.

18. Administration of the Plan

     The Board of Directors or any committee or person(s) to whom it delegates its authority (the “Administrator”) shall administer, interpret and apply all provisions of the Plan. The Administrator may waive such provisions of the Plan as it deems necessary to

-5-

meet special circumstances not anticipated or covered expressly by the Plan. Nothing contained in this Section shall be deemed to authorize the Administrator to alter or administer the provisions of the Plan in a manner inconsistent with the provisions of Section 423 of the Code.

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EX-10.18

Exhibit 10.18

Amendment to Employment Agreement

This Amendment is made, entered into, and is effective as of the Amendment Date, by and between the Company and Executive.

Article 1. Definitions

1.0	Unless otherwise defined herein, the terms used herein shall have the meanings ascribed to them in Article 2 of the Employment Agreement.
1.1	“Amendment” shall mean this Amendment to the Employment Agreement.
1.2	“Amendment Date” shall mean December 7, 2006.
1.3	“Employment Agreement” shall mean that certain agreement entered into by and between the Company and the Executive as of March 24, 2003 and which subsequently thereto was filed by the Company with the Securities and Exchange Commission.

Article 2. Amendments

2.0	The Employment Agreement is hereby amended, as of the Amendment Date, as set forth in Section 2.1.
2.1	Section 3.1 of the Employment Agreement is rewritten to read in its entirety as follows:

3.1 During the term of this Agreement, the Executive agrees to serve as Senior Vice President, Chief Medical Officer of the Company or in such other position which executive shall agree to accept or to which Executive shall be promoted during the Term and Executive shall report directly to the President and Chief Executive Officer, and shall maintain the level of duties and responsibilities as in effect as of the Effective Date, or such higher level of duties and responsibilities as Executive may be assigned during the Term (the “Position”).

Article 3. Miscellaneous

3.0 Except for those provisions of the Employment Agreement specifically amended as set forth in Article 2 of this Amendment, the remaining terms of the Employment Agreement shall remain in full force and effect as set forth therein.

IN WITNESS WHEREOF, the Company, through its duly authorized representative, and the Executive have executed this Amendment as of the Amendment Date.

Executive	Savient Pharmaceuticals, Inc.
/s/  Zebulun David Horowitz, M.D.	/s/  Christopher G. Clement
Zebulun David Horowitz, M.D.	Christopher G. Clement
	President & Chief Executive Officer

EX-10.19

Exhibit 10.19

INCENTIVE STOCK OPTION AGREEMENT
(Incentive Stock Option to Employee)

PURSUANT TO

SAVIENT PHARMACEUTICALS, INC.

2004 INCENTIVE PLAN
* * *

     INCENTIVE STOCK OPTION AGREEMENT made as of date, between SAVIENT PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and NAME, an employee of the Company or of a subsidiary of the Company (the “Optionee”).

W I T N E S S E T H:

     WHEREAS, the Company desires, by affording the Optionee an opportunity to purchase shares of its Common Stock, $.01 par value per share (the “Common Stock”), as hereinafter provided, to carry out the purpose of the Company’s 2004 Incentive Plan (the “Plan”):

     NOW THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter contained, the parties hereto mutually covenant and agree as follows:

     1. Grant of Option. The Company hereby grants to the Optionee an incentive stock option to purchase all or any part of an aggregate of number shares of Common Stock (such number being subject to adjustment as provided in Paragraph 6) on the terms and conditions hereinafter set forth (the “Option”).

     2. Purchase Price. The purchase price of the shares of Common Stock issuable upon exercise of the Option (the “Option Price”) shall be $price per share, which is not less than one hundred percent (100%) of the fair market value per share of Common Stock on the date hereof. Payment shall be made in cash, by certified check or in shares of Common Stock in the manner prescribed in Paragraph 7 hereof.

     3. Term of Option. The term of the Option shall be for a period of ten (10) years from the date hereof, subject to earlier termination as provided in Paragraph 5. The Option is exercisable during its term only in accordance with the provisions of Exhibit A attached hereto.

     Except as provided in Paragraph 5, the Option may not be exercised unless, at the time the Option is exercised and at all times from the date it was granted, the Optionee shall then be and shall have been, an employee of the Company or any subsidiary.

     4. Nontransferability. The Option shall not be transferable otherwise than by will or the laws of descent and distribution to the extent provided in Paragraph 5, and the Option may be exercised, during the lifetime of the Optionee, only by him. More particularly (but without limiting the generality of the foregoing), the Option may not be assigned, transferred (except as provided above), pledged or hypothecated in any way, shall not be assignable by operation of law, and shall

1

not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof and of the Plan, and the levy of any execution, attachment, or similar process upon the Option, shall be null and void and without effect; provided, however, that if the Optionee shall die while in the employ of the Company or any subsidiary, his estate, personal representative, or beneficiary shall have the right to exercise the Option to the extent provided in Paragraph 5.

     5. Termination of Option. If the Optionee shall cease to be employed by the Company or any subsidiary as the result of his dismissal without cause, then the Option, to the extent that it is exercisable by him at the time he ceases to be employed by the Company or any subsidiary, and only to the extent that the Option is exercisable as of such time, may be exercised by him within three (3) months after such time; provided, however, that the Compensation Committee may, in its sole discretion, determine that he has more than three (3) months from the date he ceases to be employed by the Company or any subsidiary to exercise the Option.

     If the Optionee shall cease to be employed by the Company or any subsidiary as the result of his dismissal for cause (as determined by the Board of Directors in its sole discretion), then the Compensation Committee may, in its sole discretion, determine that the Option, to the extent that it is exercisable by the Optionee at the time he ceases to be employed by the Company or any subsidiary, and only to the extent that the Option is exercisable as of such time, may be exercised by him within thirty (30) days after such time.

     If the Optionee shall cease to be employed by the Company or any subsidiary as the result of his disability, then the Option, to the extent that it is exercisable by him at the time he ceases to be employed by the Company or any subsidiary, and only to the extent that the Option is exercisable as of such time, may be exercised by him within twelve (12) months after such time.

     If the Optionee shall voluntarily terminate his employment with the Company or any subsidiary, then the Option, to the extent that it is exercisable by the Optionee at the time he ceases to be employed by the Company or any subsidiary, and only to the extent that the Option is exercisable as of such time, may be exercised by him within three (3) months after such time; provided, however, that the Compensation Committee may, in its sole discretion, determine that he has more than three (3) months from the date he ceases to be employed by the Company or any subsidiary to exercise the Option.

     If the Optionee shall die while in the employ of the Company or any subsidiary, his estate, personal representative, or beneficiary shall have the right, subject to the provisions of Paragraph 3, to exercise the Option (to the extent that the Optionee would have been entitled to do so at the time of his death) at any time within twelve (12) months from the date of his death.

     6. Changes in Capital Stock. Upon any readjustment or recapitalization of the Company’s capital stock whereby the character of the Common Stock shall be changed, appropriate adjustments shall be made so that the capital stock issuable upon exercise of the Option after such readjustment or recapitalization shall be the substantial equivalent of the Common Stock issuable upon exercise of the Option. In the case of a merger, sale of assets or similar transaction which results in a replacement of the Common Stock with stock of another corporation, the Company will make a reasonable effort, but shall not be required, to replace any outstanding Options granted under the Plan with comparable options to purchase the stock of such other corporation, or will provide for immediate maturity of all outstanding Options, with all Options not being exercised

2

within the time period specified by the Board of Directors being terminated.

     7. Method of Exercising Option. Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Company at its offices at One Tower Center, 14^th floor, East Brunswick, New Jersey 08816 (Attention: President), or as otherwise directed by the Company. Such notice shall state that the Option is being exercised thereby and the number of shares of Common Stock in respect of which it is being exercised. It shall be signed by the person or persons so exercising the Option and shall be accompanied by payment in full of the Option Price for such shares of Common Stock in cash, by certified check or in shares of Common Stock, provided that such shares of Common Stock are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

     If shares of Common Stock are tendered as payment of the Option Price, the value of such shares shall be their fair market value as of the date of exercise. If such tender would result in the issuance of fractional shares of Common Stock, the Company shall instead return the balance in cash or by check to the Optionee. The Company shall issue, in the name of the person or persons exercising the Option, and deliver a certificate or certificates representing such shares as soon as practicable after notice and payment shall be received.

     In the event the Option shall be exercised by any person or persons other than the Optionee, pursuant to Paragraph 5, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option.

     The Optionee shall have no rights of a stockholder with respect to shares of Common Stock to be acquired by the exercise of the Option until a certificate or certificates representing such shares are issued to him. All shares of Common Stock purchased upon the exercise of the Option as provided herein shall be fully paid and non-assessable.

     8. General. The Company shall at all times during the term of the Option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Agreement, shall pay all original issue taxes, if any, with respect to the issuance of shares of Common Stock pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith, and shall, from time to time, use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto.

     9. Representations of Optionee. The Optionee hereby represents that he and any related persons or entities, within the meaning of Section 425(d) of the Internal Revenue Code of 1986, do not own as much as ten percent (10%) of the total combined voting power of all classes of capital stock of the Company, and in accepting the Option herein granted to him, agrees to the terms of such Option as of the date hereof.

     10. Notices. Each notice relating to this Agreement shall be in writing and delivered in person or by first class mail, postage prepaid, to the address as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its offices at One Tower Center, 14^th floor, East Brunswick, New Jersey 08816 (Attention: President). Each notice to the Optionee or other person or persons then entitled to exercise the Option shall be addressed to the Optionee or such other person or persons at the Optionee’s last known address.

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     11. Reimbursement of Expenses. If the Optionee is not a citizen or resident of the United States, the Optionee, as a condition hereof, agrees to reimburse the Company at its request for any foreign exchange premiums or license, transfer taxes or similar sums of money payable outside the United States by the Company in connection with the exercise of the Option under this Agreement.

     12. Incorporation of Plan. Notwithstanding the terms and conditions herein, this Agreement shall be subject to and governed by all the terms and conditions of the Plan. A copy of the Plan has been delivered to the Optionee and is hereby incorporated by reference. In the event of any discrepancy or inconsistency between the terms and conditions of this Agreement and of the Plan, the terms and conditions of the Plan shall control.

     13. Continuance of Employment. The granting of the Option is in consideration of the Optionee’s continuing employment by the Company or any subsidiary; provided, however, nothing in this Agreement shall confer upon the Optionee the right to continue in the employ of the Company or any subsidiary or affect the right of the Company or any subsidiary to terminate the Optionee’s employment at any time in the sole discretion of the Company or any subsidiary, with or without cause.

     14. Interpretation. The interpretation and construction of any terms or conditions of the Plan, or of this Agreement or other matters related to the Plan by the Compensation and Stock Option Plan Committee shall be final and conclusive.

     15. Enforceability. This Agreement shall be binding upon the Optionee, his estate, his personal representatives and beneficiaries.

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     IN WITNESS WHEREOF, the Company has caused this Agreement to be duly exercised by its officer thereunto duly authorized, and the Optionee has hereunto set his hand all as of the day and year first above written.

SAVIENT PHARMACEUTICALS, INC.

By:

Authorized Officer

OPTIONEE

Name

Address:

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EXHIBIT A

TO

INCENTIVE STOCK OPTION AGREEMENT

     The Option is exercisable during its term only in accordance with the following:

Number of Years From Date of	Percentage Exercisable
Option Agreement	Per Time Period		Cumulative
One		25% = #		25% = #
Two		25% = #		50% = #
Three		25% = #		75% = #
Four		25% = #		100% = #

          Notwithstanding the foregoing, if there occurs a Change in Control of the Company, the Option shall become immediately exercisable in full whether or not the dates above have passed. For purposes hereof, a Change in Control of the Company is deemed to occur if (1) there occurs (A) any consolidation or merger in which the Company is not the continuing or surviving entity or pursuant to which shares of the Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the Company’s assets; (2) the Company’s stockholders approve any plan or proposal for the liquidation or dissolution of the Company; (3) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) shall become the beneficial owner (within the meaning of Rule 13d-3 under said Act) of 40% or more of the Common Stock other than pursuant to a plan or arrangement entered into by such person and the Company; or (4) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors shall cease for any reason to constitute a majority of the Board unless the election or nomination for election by the Company’s stockholders of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.

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EX-10.20

Exhibit 10.20

STOCK OPTION AGREEMENT
(Non-Qualified Stock Option to Employee)

PURSUANT TO

SAVIENT PHARMACEUTICALS, INC.

2004 INCENTIVE PLAN
* * *

     NON-QUALIFIED STOCK OPTION AGREEMENT made as of date, between SAVIENT PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and NAME, an employee of the Company or of a subsidiary of the Company (the “Optionee”).

W I T N E S S E T H:

     WHEREAS, the Company desires, by affording the Optionee an opportunity to purchase shares of its Common Stock, $.01 par value per share (the “Common Stock”), as hereinafter provided, to carry out the purpose of the Company’s 2004 Incentive Plan (the “Plan”):

     NOW THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter contained, the parties hereto mutually covenant and agree as follows:

     1. Grant of Option. The Company hereby grants to the Optionee a non-qualified stock option to purchase all or any part of an aggregate of number shares of Common Stock (such number being subject to adjustment as provided in Paragraph 6) on the terms and conditions hereinafter set forth (the “Option”).

     2. Purchase Price. The purchase price of the shares of Common Stock issuable upon exercise of the Option (the “Option Price”) shall be $price per share, which is not less than one hundred percent (100%) of the fair market value per share of Common Stock on the date hereof. Payment shall be made in cash, by certified check or in shares of Common Stock in the manner prescribed in Paragraph 7 hereof.

     3. Term of Option. The term of the Option shall be for a period of ten (10) years from the date hereof, subject to earlier termination as provided in Paragraph 5. The Option is exercisable during its term only in accordance with the provisions of Exhibit A attached hereto.

     Except as provided in Paragraph 5, the Option may not be exercised unless, at the time the Option is exercised and at all times from the date it was granted, the Optionee shall then be and shall have been, an employee of the Company or any subsidiary.

     4. Nontransferability. The Option shall not be transferable otherwise than by will or the laws of descent and distribution to the extent provided in Paragraph 5, and the Option may be exercised, during the lifetime of the Optionee, only by him. More particularly (but without limiting the generality of the foregoing), the Option may not be assigned, transferred (except as provided above), pledged or hypothecated in any way, shall not be assignable by operation of law, and shall

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not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof and of the Plan, and the levy of any execution, attachment, or similar process upon the Option, shall be null and void and without effect; provided, however, that if the Optionee shall die while in the employ of the Company or any subsidiary, his estate, personal representative, or beneficiary shall have the right to exercise the Option to the extent provided in Paragraph 5.

     5. Termination of Option. If the Optionee shall cease to be employed by the Company or any subsidiary as the result of his dismissal without cause, then the Option, to the extent that it is exercisable by him at the time he ceases to be employed by the Company or any subsidiary, and only to the extent that the Option is exercisable as of such time, may be exercised by him within three (3) months after such time; provided, however, that the Compensation Committee may, in its sole discretion, determine that he has more than three (3) months from the date he ceases to be employed by the Company or any subsidiary to exercise the Option.

     If the Optionee shall cease to be employed by the Company or any subsidiary as the result of his dismissal for cause (as determined by the Board of Directors in its sole discretion), then the Compensation Committee may, in its sole discretion, determine that the Option, to the extent that it is exercisable by the Optionee at the time he ceases to be employed by the Company or any subsidiary, and only to the extent that the Option is exercisable as of such time, may be exercised by him within thirty (30) days after such time.

     If the Optionee shall cease to be employed by the Company or any subsidiary as the result of his disability, then the Option, to the extent that it is exercisable by him at the time he ceases to be employed by the Company or any subsidiary, and only to the extent that the Option is exercisable as of such time, may be exercised by him within twelve (12) months after such time.

     If the Optionee shall voluntarily terminate his employment with the Company or any subsidiary, then the Option, to the extent that it is exercisable by the Optionee at the time he ceases to be employed by the Company or any subsidiary, and only to the extent that the Option is exercisable as of such time, may be exercised by him within three (3) months after such time; provided, however, that the Compensation Committee may, in its sole discretion, determine that he has more than three (3) months from the date he ceases to be employed by the Company or any subsidiary to exercise the Option.

     If the Optionee shall die while in the employ of the Company or any subsidiary, his estate, personal representative, or beneficiary shall have the right, subject to the provisions of Paragraph 3, to exercise the Option (to the extent that the Optionee would have been entitled to do so at the time of his death) at any time within twelve (12) months from the date of his death.

     6. Changes in Capital Stock. Upon any readjustment or recapitalization of the Company’s capital stock whereby the character of the Common Stock shall be changed, appropriate adjustments shall be made so that the capital stock issuable upon exercise of the Option after such readjustment or recapitalization shall be the substantial equivalent of the Common Stock issuable upon exercise of the Option. In the case of a merger, sale of assets or similar transaction which results in a replacement of the Common Stock with stock of another corporation, the Company will make a reasonable effort, but shall not be required, to replace any outstanding Options granted under the Plan with comparable options to purchase the stock of such other corporation, or will provide for immediate maturity of all outstanding Options, with all Options not being exercised

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within the time period specified by the Board of Directors being terminated.

     7. Method of Exercising Option. Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Company at its offices at One Tower Center, 14^th floor, East Brunswick, New Jersey 08816 (Attention: President), or as otherwise directed by the Company. Such notice shall state that the Option is being exercised thereby and the number of shares of Common Stock in respect of which it is being exercised. It shall be signed by the person or persons so exercising the Option and shall be accompanied by payment in full of the Option Price for such shares of Common Stock in cash, by certified check or in shares of Common Stock, provided that such shares of Common Stock are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

     If shares of Common Stock are tendered as payment of the Option Price, the value of such shares shall be their fair market value as of the date of exercise. If such tender would result in the issuance of fractional shares of Common Stock, the Company shall instead return the balance in cash or by check to the Optionee. The Company shall issue, in the name of the person or persons exercising the Option, and deliver a certificate or certificates representing such shares as soon as practicable after notice and payment shall be received.

     In the event the Option shall be exercised by any person or persons other than the Optionee, pursuant to Paragraph 5, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option.

     The Optionee shall have no rights of a stockholder with respect to shares of Common Stock to be acquired by the exercise of the Option until a certificate or certificates representing such shares are issued to him. All shares of Common Stock purchased upon the exercise of the Option as provided herein shall be fully paid and non-assessable.

     8. Treatment of Options. It is intended that this Option shall not be an “incentive stock option” as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”).

     9. General. The Company shall at all times during the term of the Option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Agreement, shall pay all original issue taxes, if any, with respect to the issuance of shares of Common Stock pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith, and shall, from time to time, use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto.

     10. Representations of Optionee. The Optionee hereby represents that he and any related persons or entities, within the meaning of Section 425(d) of the Code, do not own as much as ten percent (10%) of the total combined voting power of all classes of capital stock of the Company, and in accepting the Option herein granted to him, agrees to the terms of such Option as of the date hereof.

     11. Notices. Each notice relating to this Agreement shall be in writing and delivered in person or by first class mail, postage prepaid, to the address as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be

3

addressed to it at its offices at One Tower Center, 14^th floor, East Brunswick, New Jersey 08816 (Attention: President). Each notice to the Optionee or other person or persons then entitled to exercise the Option shall be addressed to the Optionee or such other person or persons at the Optionee’s last known address.

     12. Reimbursement of Expenses. If the Optionee is not a citizen or resident of the United States, the Optionee, as a condition hereof, agrees to reimburse the Company at its request for any foreign exchange premiums or license, transfer taxes or similar sums of money payable outside the United States by the Company in connection with the exercise of the Option under this Agreement.

     13. Incorporation of Plan. Notwithstanding the terms and conditions herein, this Agreement shall be subject to and governed by all the terms and conditions of the Plan. A copy of the Plan has been delivered to the Optionee and is hereby incorporated by reference. In the event of any discrepancy or inconsistency between the terms and conditions of this Agreement and of the Plan, the terms and conditions of the Plan shall control.

     14. Continuance of Employment. The granting of the Option is in consideration of the Optionee’s continuing employment by the Company or any subsidiary; provided, however, nothing in this Agreement shall confer upon the Optionee the right to continue in the employ of the Company or any subsidiary or affect the right of the Company or any subsidiary to terminate the Optionee’s employment at any time in the sole discretion of the Company or any subsidiary, with or without cause.

     15. Interpretation. The interpretation and construction of any terms or conditions of the Plan, or of this Agreement or other matters related to the Plan by the Compensation and Stock Option Plan Committee shall be final and conclusive.

     16. Enforceability. This Agreement shall be binding upon the Optionee, his estate, his personal representatives and beneficiaries.

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     IN WITNESS WHEREOF, the Company has caused this Agreement to be duly exercised by its officer thereunto duly authorized, and the Optionee has hereunto set his hand all as of the day and year first above written.

SAVIENT PHARMACEUTICALS, INC.

By:

Authorized Officer

OPTIONEE

Name

Address:

5

EXHIBIT A

TO

STOCK OPTION AGREEMENT

          The Option is exercisable during its term only in accordance with the following:

Number of Years From Date of	Percentage Exercisable
Option Agreement	Per Time Period		Cumulative
One		25% = #		25% = #
Two		25% = #		50% = #
Three		25% = #		75% = #
Four		25% = #		100% = #

          Notwithstanding the foregoing, if there occurs a Change in Control of the Company, the Option shall become immediately exercisable in full whether or not the dates above have passed. For purposes hereof, a Change in Control of the Company is deemed to occur if (1) there occurs (A) any consolidation or merger in which the Company is not the continuing or surviving entity or pursuant to which shares of the Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the Company’s assets; (2) the Company’s stockholders approve any plan or proposal for the liquidation or dissolution of the Company; (3) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) shall become the beneficial owner (within the meaning of Rule 13d-3 under said Act) of 40% or more of the Common Stock other than pursuant to a plan or arrangement entered into by such person and the Company; or (4) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors shall cease for any reason to constitute a majority of the Board unless the election or nomination for election by the Company’s stockholders of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.

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EX-10.21

Exhibit 10.21

Savient Pharmaceuticals, Inc.

Restricted Stock Agreement
Granted Under 2004 Incentive Plan

     AGREEMENT made [DATE], between Savient Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and [NAME] (the “Participant”).

     For valuable consideration, including employment services rendered and to be rendered by the Participant to the Company, the parties hereto agree as follows:

     1. Purchase of Shares.

     The Company shall issue to the Participant, subject to the terms and conditions set forth in this Agreement and in the Company’s 2004 Incentive Plan (the “Plan”), [#] shares (the “Shares”) of common stock, $0.01 par value, of the Company (“Common Stock”). The Shares will be held in book entry by the Company’s transfer agent in the name of the Participant for that number of Shares issued to the Participant. The Participant agrees that the Shares shall be subject to the forfeiture provisions set forth in Section 2 of this Agreement and the restrictions on transfer set forth in Section 4 of this Agreement.

     2. Vesting.

          (a) In the event that the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to three years from the date hereof, any Unvested Shares shall be forfeited immediately and automatically to the Company in exchange for $.01 per Share. Notwithstanding anything herein to the contrary, if the Shares do not vest on or before the occurrence of one or more of the events set forth in this Section 2, the Shares shall automatically be forfeited to the Company in exchange for $0.01 per Share. The aggregate amount to be paid for by the Company to the Participant upon forfeiture of the Shares shall be referred to herein as the “Forfeiture Amount”.

          (b) “Unvested Shares” means the total number of Shares multiplied by the Applicable Percentage at the time the Shares are forfeited. Except as provided in paragraphs (c) through (e) of this Section 2 and in Section 7(b) below, the “Applicable Percentage” shall be (i) 100% during the one-year period ending on the day before the first anniversary of the date hereof, (ii) 66.7% during the one-year period beginning on the second anniversary of the date hereof and ending on the day before the third anniversary of the date hereof and (iii) 0% beginning on the third anniversary of the date hereof.

          (c) Notwithstanding the foregoing, in the event that the Participant’s employment with the Company is terminated by reason of the Participant’s death or disability, the “Applicable Percentage” shall immediately and thereafter be 0%. For this purpose, “disability” shall mean the inability of the Participant, due to a medical reason, to carry out his duties as an employee of the Company for a period of six consecutive months.

          (d) Notwithstanding the foregoing, if the Participant’s employment with the Company is terminated by the Company without Cause, then effective immediately prior to such termination of employment, the “Applicable Percentage” shall immediately and thereafter be 100% less the product of 0.0685% times the number of days that have elapsed after the date hereof and through and including the effective date of the termination of the Participant’s employment with the Company without Cause. As used herein, “Cause” means any (i) willful failure by the Participant, which failure is not cured within 30 days of written notice to the Participant from the Company, to perform his or her material responsibilities to the Company or (ii) willful misconduct by the Participant which affects the business reputation of the Company.

          (e) Notwithstanding the foregoing, if a Change in Control (as defined in the Plan) of the Company occurs, the “Applicable Percentage” shall immediately and thereafter be 0%.

          (f) The Forfeiture Amount may be payable, at the option of the Company, in cancellation of all or a portion of any outstanding indebtedness of the Participant to the Company or in cash (by check) or both.

          (g) For purposes of this Agreement, employment with the Company shall include employment with a parent or subsidiary of the Company.

     3. Automatic Sale Upon Vesting.

          (a) Upon any reduction in the Applicable Percentage, the Company shall sell, or arrange for the sale of, such number of the Shares no longer subject to forfeiture under Section 2 as a result of such reduction in the Applicable Percentage as is sufficient to generate net proceeds sufficient to satisfy the Company’s minimum statutory withholding obligations with respect to the income recognized by the Participant upon the lapse of the forfeiture provisions (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such income), and the Company shall retain such net proceeds in satisfaction of such tax withholding obligations.

          (b) The Participant hereby appoints the President and the Secretary of the Company, and each of them acting singly, his or her attorney in fact, to sell the Participant’s Shares in accordance with this Section 3. The Participant agrees to execute and deliver such documents, instruments and certificates as may reasonably be required in connection with the sale of the Shares pursuant to this Section 3.

          (c) The Participant represents to the Company that, as of the date hereof, he or she is not aware of any material nonpublic information about the Company or the Common Stock. The Participant and the Company have structured this Agreement to constitute a “binding contract” relating to the sale of Common Stock pursuant to this Section 3, consistent with the affirmative defense to liability under Section 10(b) of the Securities Exchange Act of 1934 under Rule 10b5-1(c) promulgated under such Act.

     4. Restrictions on Transfer.

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          (a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any Shares, or any interest therein, until such Shares have vested, except that the Participant may transfer such Shares (i) to or for the benefit of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (collectively, “Approved Relatives”) or to a trust established solely for the benefit of the Participant and/or Approved Relatives, provided that such Shares shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Section 4 and the forfeiture provisions contained in Section 2) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement or (ii) as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation), provided that, in accordance with the Plan and except as otherwise provided herein, the securities or other property received by the Participant in connection with such transaction shall remain subject to this Agreement.

          (b) The Company shall not be required (i) to transfer on its books any of the Shares which have been transferred in violation of any of the provisions set forth in this Agreement or (ii) to treat as owner of such Shares or to pay dividends to any transferee to whom such Shares have been transferred in violation of any of the provisions of this Agreement.

     5. Restrictive Legends.

     All Shares subject to this Agreement shall be subject to the following restriction, in addition to any other legends that may be required under federal or state securities laws:

“The shares of stock represented by this certificate are subject to forfeiture provisions and restrictions on transfer set forth in a certain Restricted Stock Agreement between the corporation and the registered owner of these shares (or his predecessor in interest), and such Agreement is available for inspection without charge at the office of the Secretary of the corporation.”

     6. Provisions of the Plan.

     This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement.

     7. Reorganizations.

          (a) As used in this Agreement, a “Reorganization Event” means: (i) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property, or is cancelled; (ii) any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction; or (iii) any liquidation or dissolution of the Company.

-3-

          (b) Upon the occurrence of a Reorganization Event other than a liquidation or dissolution of the Company, the forfeiture provisions contained in Section 2 and the other rights of the Company hereunder shall inure to the benefit of the Company’s successor and shall apply to the cash, securities or other property into which the Shares were converted, or for which the Shares were exchanged pursuant to such Reorganization Event, in the same manner and to the same extent as they applied to the Shares. Upon the occurrence of a Reorganization Event involving the liquidation or dissolution of the Company, all restrictions and conditions on all Restricted Stock Awards then outstanding shall automatically be deemed terminated or satisfied.

          (c) If, in connection with a Reorganization Event, a portion of the cash, securities and/or other property received upon the conversion or exchange of the Shares is to be placed into escrow to secure indemnification or similar obligations, the mix between the vested and unvested portion of such cash, securities and/or other property that is placed into escrow shall be the same as the mix between the vested and unvested portion of such cash, securities and/or other property that is not subject to escrow.

     8. Withholding Taxes; Section 83(b) Election.

          (a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state or local taxes of any kind required by law to be withheld with respect to the issuance of the Shares to the Participant or the lapse of the forfeiture provisions.

          (b) The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

          THE PARTICIPANT AGREES NOT TO FILE AN ELECTION UNDER SECTION 83(B) OF THE CODE WITH RESPECT TO THE PURCHASE OF THE SHARES.

     9. Miscellaneous.

          (a) No Rights to Employment. The Participant acknowledges and agrees that the vesting of the Shares pursuant to Section 2 hereof is earned only by continuing service as an employee at the will of the Company (not through the act of being hired or being granted the Shares hereunder). The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee or consultant for the vesting period, for any period, or at all.

          (b) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this

-4-

Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

          (c) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company.

          (d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 4 of this Agreement.

          (e) Notice. Each notice relating to this Agreement shall be in writing and delivered in person or by first class mail, postage prepaid, to the address as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its offices at One Tower Center, 14th floor, East Brunswick, New Jersey 08816 (Attention: President). Each notice to the Participant shall be addressed to the Participant at the Participant’s last known address.

          (f) Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.

          (g) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersede all prior agreements and understandings, relating to the subject matter of this Agreement.

          (h) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.

          (i) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws.

          (j) Continuance of Employment. The issuance of the Shares hereunder is in consideration of the Participant’s continuing employment by the Company or any subsidiary; provided, however, nothing in this Agreement shall confer upon the Participant the right to continue in the employ of the Company or any subsidiary or affect the right of the Company or any subsidiary to terminate the Participant’s employment at any time in the sole discretion of the Company or any subsidiary, with or without cause.

          (k) Interpretation. The interpretation and construction of any terms or conditions of the Plan, or of this Agreement or other matters related to the Plan by the Compensation Committee of the Board of Directors of the Company shall be final and conclusive.

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           (l) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; and (iv) is fully aware of the legal and binding effect of this Agreement.

          (m) Delivery of Certificates. Subject to Section 3, the Participant may request that the Company deliver the Shares in certificated form with respect to any Shares that have ceased to be subject to forfeiture pursuant to Section 2.

-6-

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

SAVIENT PHARMACEUTICALS, INC.
By:
	Name:
	Title:
[Name of Participant] Address:   [                    ]                  [                    ]

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EX-10.22

Exhibit 10.22

Savient Pharmaceuticals, Inc.

Performance Share Agreement
Granted Under 2004 Incentive Plan

     AGREEMENT made [DATE], between Savient Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and [NAME] (the “Participant”).

     For valuable consideration, including employment services rendered and to be rendered by the Participant to the Company, the parties hereto agree as follows:

     1. Purchase of Shares.

     The Company shall issue to the Participant, subject to the terms and conditions set forth in this Agreement and in the Company’s 2004 Incentive Plan (the “Plan”), a maximum of [#] shares (the “Shares”) of common stock, $0.01 par value, of the Company (“Common Stock”). The Participant agrees that the Shares shall be subject to the forfeiture provisions set forth in Section 2 of this Agreement and the restrictions on transfer set forth in Section 4 of this Agreement.

     2. Vesting.

          (a) The Shares shall vest on two separate occasions as set forth in Exhibit A in accordance with the achievement of the performance objectives (the “Performance Objectives”) set forth in Exhibit B and Exhibit C hereto (each, a “Vesting Event”).

          (b) In the event that the Participant ceases to be employed by the Company for any reason or no reason, with or without cause, prior to a Vesting Event, such maximum number of Shares as would have vested upon such Vesting Event shall be forfeited immediately and automatically to the Company in exchange for $.01 per Share. Notwithstanding anything herein to the contrary, if the Shares do not vest on or before the occurrence of one or more of the events set forth in this Section 2, the Shares shall automatically be forfeited to the Company in exchange for $0.01 per Share. The aggregate amount to be paid for by the Company to the Participant upon forfeiture of the Shares shall be referred to herein as the “Forfeiture Amount”.

          (c) Notwithstanding the foregoing, if a Change in Control (as defined in the Plan) of the Company occurs prior to a Vesting Event, such number of shares as indicated in Paragraph 1 hereto shall immediately vest and become exercisable, to the extent not already vested.

          (d) The Forfeiture Amount may be payable, at the option of the Company, in cancellation of all or a portion of any outstanding indebtedness of the Participant to the Company or in cash (by check) or both.

          (e) For purposes of this Agreement, employment with the Company shall include employment with a parent or subsidiary of the Company.

     3. Automatic Sale Upon Vesting.

          (a) Upon a Vesting Event, the Company shall sell, or arrange for the sale of, such number of the Shares as have vested as is sufficient to generate net proceeds sufficient to satisfy no less than the Company’s minimum statutory withholding obligations with respect to the income recognized by the Participant upon the vesting of the Shares (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such income), and the Company shall retain such net proceeds in satisfaction of such tax withholding obligations.

          (b) The Participant hereby appoints the President and the Secretary of the Company, and each of them acting singly, his or her attorney in fact, to sell the Participant’s Shares in accordance with this Section 3. The Participant agrees to execute and deliver such documents, instruments and certificates as may reasonably be required in connection with the sale of the Shares pursuant to this Section 3.

          (c) The Participant represents to the Company that, as of the date hereof, he or she is not aware of any material nonpublic information about the Company or the Common Stock. The Participant and the Company have structured this Agreement to constitute a “binding contract” relating to the sale of Common Stock pursuant to this Section 3, consistent with the affirmative defense to liability under Section 10(b) of the Securities Exchange Act of 1934 under Rule 10b5-1(c) promulgated under such Act.

     4. Restrictions on Transfer.

          (a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any Shares, or any interest therein, until such Shares have vested, except that the Participant may transfer such Shares (i) to or for the benefit of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (collectively, “Approved Relatives”) or to a trust established solely for the benefit of the Participant and/or Approved Relatives, provided that such Shares shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Section 4 and the forfeiture provisions contained in Section 2) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement or (ii) as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation), provided that, in accordance with the Plan and except as otherwise provided herein, the securities or other property received by the Participant in connection with such transaction shall remain subject to this Agreement.

          (b) The Company shall not be required (i) to transfer on its books any of the Shares which have been transferred in violation of any of the provisions set forth in this Agreement or (ii) to treat as owner of such Shares or to pay dividends to any transferee to whom such Shares have been transferred in violation of any of the provisions of this Agreement.

     5. Restrictive Legends.

     All Shares subject to this Agreement shall be subject to the following restriction, in addition to any other legends that may be required under federal or state securities laws, until vested:

“The shares of stock represented by this certificate are subject to forfeiture provisions and restrictions on transfer set forth in a certain Performance Share Agreement between the corporation and the registered owner of these shares (or his predecessor in interest), and such Agreement is available for inspection without charge at the office of the Secretary of the corporation.”

     6. Provisions of the Plan.

     This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Agreement.

     7. Reorganizations.

          (a) As used in this Agreement, a “Reorganization Event” means: (i) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property, or is cancelled; (ii) any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction; or (iii) any liquidation or dissolution of the Company.

          (b) Upon the occurrence of a Reorganization Event other than a liquidation or dissolution of the Company, the forfeiture provisions contained in Section 2 and the other rights of the Company hereunder shall inure to the benefit of the Company’s successor and shall apply to the cash, securities or other property into which the Shares were converted, or for which the Shares were exchanged pursuant to such Reorganization Event, in the same manner and to the same extent as they applied to the Shares. Upon the occurrence of a Reorganization Event involving the liquidation or dissolution of the Company, all restrictions and conditions on all Performance Share Awards then outstanding shall automatically be deemed terminated or satisfied.

          (c) If, in connection with a Reorganization Event, a portion of the cash, securities and/or other property received upon the conversion or exchange of the Shares is to be placed into escrow to secure indemnification or similar obligations, the mix between the vested and unvested portion of such cash, securities and/or other property that is placed into escrow shall be the same as the mix between the vested and unvested portion of such cash, securities and/or other property that is not subject to escrow.

     8. Withholding Taxes; Section 83(b) Election.

          (a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state or local

taxes of any kind required by law to be withheld with respect to the issuance of the Shares to the Participant or the lapse of the forfeiture provisions.

          (b) The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

          THE PARTICIPANT AGREES NOT TO FILE AN ELECTION UNDER SECTION 83(B) OF THE CODE WITH RESPECT TO THE PURCHASE OF THE SHARES.

     9. Miscellaneous.

          (a) No Rights to Employment. The Participant acknowledges and agrees that the vesting of the Shares pursuant to Section 2 hereof is earned only by continuing service as an employee at the will of the Company (not through the act of being hired or being granted the Shares hereunder). The Participant further acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee or consultant for the vesting period, for any period, or at all.

          (b) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

          (c) Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company.

          (d) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in Section 4 of this Agreement.

          (e) Notice. Each notice relating to this Agreement shall be in writing and delivered in person or by first class mail, postage prepaid, to the address as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its offices at One Tower Center, 14th floor, East Brunswick, New Jersey 08816 (Attention: President). Each notice to the Participant shall be addressed to the Participant at the Participant’s last known address.

          (f) Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.

          (g) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, and supersede all prior agreements and understandings, relating to the subject matter of this Agreement.

          (h) Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Participant.

          (i) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws.

          (j) Continuance of Employment. The issuance of the Shares hereunder is in consideration of the Participant’s continuing employment by the Company or any subsidiary; provided, however, nothing in this Agreement shall confer upon the Participant the right to continue in the employ of the Company or any subsidiary or affect the right of the Company or any subsidiary to terminate the Participant’s employment at any time in the sole discretion of the Company or any subsidiary, with or without cause.

          (k) Interpretation. The interpretation and construction of any terms or conditions of the Plan, or of this Agreement or other matters related to the Plan by the Compensation Committee of the Board of Directors of the Company shall be final and conclusive.

          (l) Participant’s Acknowledgments. The Participant acknowledges that he or she: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; and (iv) is fully aware of the legal and binding effect of this Agreement.

          (m) Delivery of Certificates. Subject to Section 3, the Participant may request that the Company deliver the Shares in certificated form with respect to any Shares that have ceased to be subject to forfeiture pursuant to Section 2.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

SAVIENT PHARMACEUTICALS, INC.
By:
	Name:
	Title:

[Name of Participant]
Address:	[                                        ]
	[                                        ]

EXHIBIT A

VESTING

Number of Shares

[# Shares] shall vest on the second business day immediately following the satisfaction of the Performance Objectives set forth in Exhibit B.

[# Shares] shall vest on the second business day immediately following the satisfaction of the Performance Objectives set forth in Exhibit C.

Performance Objectives

The Performance Objectives set forth in Exhibits B and C have been determined by the Compensation Committee on [DATE].

EXHIBIT B

PERFORMANCE OBJECTIVES

     Performance objectives may include, among other things: advancement of development programs for new products; regulatory filings and approvals for new products; launch and commercialization of new products; improvements to the Company’s controls and procedures; operation at and achievement of specified financial targets; manufacturing development and supply chain advancements; and business and strategic developments and advancements.

EXHIBIT C

PERFORMANCE OBJECTIVES

     Performance objectives may include, among other things: advancement of development programs for new products; regulatory filings and approvals for new products; launch and commercialization of new products; improvements to the Company’s controls and procedures; operation at and achievement of specified financial targets; manufacturing development and supply chain advancements; and business and strategic developments and advancements.

EX-10.23

Exhibit 10.23

STOCK OPTION AGREEMENT
(Non-Qualified Stock Option to Director)

PURSUANT TO

SAVIENT PHARMACEUTICALS, INC.

2004 INCENTIVE PLAN
* * *

     NON-QUALIFIED STOCK OPTION AGREEMENT made as of date, between SAVIENT PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and NAME, a member of the Board of Directors of the Company (the “Optionee”).

W I T N E S S E T H:

     WHEREAS, the Company desires, by affording the Optionee an opportunity to purchase shares of its Common Stock, $.01 par value per share (the “Common Stock”), as hereinafter provided, to carry out the purpose of the Company’s 2004 Incentive Plan (the “Plan”):

     NOW THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter contained, the parties hereto mutually covenant and agree as follows:

     1. Grant of Option. The Company hereby grants to the Optionee a non-qualified stock option to purchase all or any part of an aggregate of number shares of Common Stock (such number being subject to adjustment as provided in Paragraph 6) on the terms and conditions hereinafter set forth (the “Option”).

     2. Purchase Price. The purchase price of the shares of Common Stock issuable upon exercise of the Option (the “Option Price”) shall be $price per share, which is not less than one hundred percent (100%) of the fair market value per share of Common Stock on the date hereof. Payment shall be made in cash, by certified check or in shares of Common Stock in the manner prescribed in Paragraph 7 hereof.

     3. Term of Option. The term of the Option shall be for a period of ten (10) years from the date hereof, subject to earlier termination as provided in Paragraph 5. The Option is exercisable during its term only in accordance with the provisions of Exhibit A attached hereto.

     Except as provided in Paragraph 5, the Option may not be exercised unless, at the time the Option is exercised and at all times from the date it was granted, the Optionee shall then be and shall have been, a member of the Board of Directors of the Company.

     4. Nontransferability. The Option shall not be transferable otherwise than by will or the laws of descent and distribution to the extent provided in Paragraph 5, and the Option may be exercised, during the lifetime of the Optionee, only by him. More particularly (but without limiting the generality of the foregoing), the Option may not be assigned, transferred (except as provided above), pledged or hypothecated in any way, shall not be assignable by operation of law, and shall

1

not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof and of the Plan, and the levy of any execution, attachment, or similar process upon the Option, shall be null and void and without effect; provided, however, that if the Optionee shall die while in the employ of the Company or any subsidiary, his estate, personal representative, or beneficiary shall have the right to exercise the Option to the extent provided in Paragraph 5.

     5. Termination of Option. If the Optionee shall cease to serve as a member of the Board of Directors of the Company for any reason other than his death, then the Option, to the extent that it is exercisable by him at the time he ceases to be a director of the Company, and only to the extent that the Option is exercisable as of such time, may be exercised by him within six (6) months after such time; provided, however, that the Compensation Committee may, in its sole discretion, determine that he has more than six (6) months from the date he ceases to be employed by the Company or any subsidiary to exercise the Option.

     If the Optionee shall die while serving as a member of the Board of Directors of the Company, his estate, personal representative, or beneficiary shall have the right, subject to the provisions of Paragraph 3, to exercise the Option (to the extent that the Optionee would have been entitled to do so at the time of his death) at any time within twelve (12) months from the date of his death.

     6. Changes in Capital Stock. Upon any readjustment or recapitalization of the Company’s capital stock whereby the character of the Common Stock shall be changed, appropriate adjustments shall be made so that the capital stock issuable upon exercise of the Option after such readjustment or recapitalization shall be the substantial equivalent of the Common Stock issuable upon exercise of the Option. In the case of a merger, sale of assets or similar transaction which results in a replacement of the Common Stock with stock of another corporation, the Company will make a reasonable effort, but shall not be required, to replace any outstanding Options granted under the Plan with comparable options to purchase the stock of such other corporation, or will provide for immediate maturity of all outstanding Options, with all Options not being exercised within the time period specified by the Board of Directors being terminated.

     7. Method of Exercising Option. Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Company at its offices at One Tower Center, 14^th floor, East Brunswick, New Jersey 08816 (Attention: President), or as otherwise directed by the Company. Such notice shall state that the Option is being exercised thereby and the number of shares of Common Stock in respect of which it is being exercised. It shall be signed by the person or persons so exercising the Option and shall be accompanied by payment in full of the Option Price for such shares of Common Stock in cash, by certified check or in shares of Common Stock, provided that such shares of Common Stock are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

     If shares of Common Stock are tendered as payment of the Option Price, the value of such shares shall be their fair market value as of the date of exercise. If such tender would result in the issuance of fractional shares of Common Stock, the Company shall instead return the balance in cash or by check to the Optionee. The Company shall issue, in the name of the person or persons exercising the Option, and deliver a certificate or certificates representing such shares as soon as practicable after notice and payment shall be received.

2

     In the event the Option shall be exercised by any person or persons other than the Optionee, pursuant to Paragraph 5, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option.

     The Optionee shall have no rights of a stockholder with respect to shares of Common Stock to be acquired by the exercise of the Option until a certificate or certificates representing such shares are issued to him. All shares of Common Stock purchased upon the exercise of the Option as provided herein shall be fully paid and non-assessable.

     8. Treatment of Options. It is intended that this Option shall not be an “incentive stock option” as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”).

     9. General. The Company shall at all times during the term of the Option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Agreement, shall pay all original issue taxes, if any, with respect to the issuance of shares of Common Stock pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith, and shall, from time to time, use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto.

     10. Representations of Optionee. The Optionee hereby represents that he and any related persons or entities, within the meaning of Section 425(d) of the Code, do not own as much as ten percent (10%) of the total combined voting power of all classes of capital stock of the Company, and in accepting the Option herein granted to him, agrees to the terms of such Option as of the date hereof.

     11. Notices. Each notice relating to this Agreement shall be in writing and delivered in person or by first class mail, postage prepaid, to the address as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its offices at One Tower Center, 14^th floor, East Brunswick, New Jersey 08816 (Attention: President). Each notice to the Optionee or other person or persons then entitled to exercise the Option shall be addressed to the Optionee or such other person or persons at the Optionee’s last known address.

     12. Reimbursement of Expenses. If the Optionee is not a citizen or resident of the United States, the Optionee, as a condition hereof, agrees to reimburse the Company at its request for any foreign exchange premiums or license, transfer taxes or similar sums of money payable outside the United States by the Company in connection with the exercise of the Option under this Agreement.

     13. Incorporation of Plan. Notwithstanding the terms and conditions herein, this Agreement shall be subject to and governed by all the terms and conditions of the Plan. A copy of the Plan has been delivered to the Optionee and is hereby incorporated by reference. In the event of any discrepancy or inconsistency between the terms and conditions of this Agreement and of the Plan, the terms and conditions of the Plan shall control.

     14. Continuance of Service. The granting of the Option is in consideration of the Optionee’s continuing service to the Company; provided, however, nothing in this Agreement shall

3

confer upon the Optionee the right to continue in the service of the Company or any subsidiary.

     15. Interpretation. The interpretation and construction of any terms or conditions of the Plan, or of this Agreement or other matters related to the Plan by the Compensation and Stock Option Plan Committee shall be final and conclusive.

     16. Enforceability. This Agreement shall be binding upon the Optionee, his estate, his personal representatives and beneficiaries.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be duly exercised by its officer thereunto duly authorized, and the Optionee has hereunto set his hand all as of the day and year first above written.

SAVIENT PHARMACEUTICALS, INC.

By:

Authorized Officer

OPTIONEE

Name

Address:

4

EXHIBIT A

TO

STOCK OPTION AGREEMENT

          The Option is exercisable during its term only in accordance with the following:

Number of Years From Date of
Option Agreement	Percentage Exercisable
One		100	%

          Notwithstanding the foregoing, if there occurs a Change in Control of the Company, the Option shall become immediately exercisable in full whether or not the dates above have passed. For purposes hereof, a Change in Control of the Company is deemed to occur if (1) there occurs (A) any consolidation or merger in which the Company is not the continuing or surviving entity or pursuant to which shares of the Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the Company’s assets; (2) the Company’s stockholders approve any plan or proposal for the liquidation or dissolution of the Company; (3) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) shall become the beneficial owner (within the meaning of Rule 13d-3 under said Act) of 40% or more of the Common Stock other than pursuant to a plan or arrangement entered into by such person and the Company; or (4) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors shall cease for any reason to constitute a majority of the Board unless the election or nomination for election by the Company’s stockholders of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.

5

EX-10.24

Exhibit 10.24

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.

Amendment

BTG, Duke and MVP agree as follows:

Article 1 — Definitions

1.0 Unless specifically defined in this Amendment, the capitalized terms shall have the meanings ascribed to them in the Agreement.

1.1 “Agreement” shall mean the License Agreement entered into by and among BTG, Duke and MVP on August 12, 1998.

1.2 “Amendment” shall mean this amendment to the Agreement entered into by and among BTG, Duke and MVP as of the Amendment Date.

1.3 “Amendment Date” shall mean November 12, 2001.

Article 2 — Amendments

3.0 Effective as of the Amendment Date, the Agreement is amended to delete Section 9.1(b) in its entirety.

3.1 This amendment is conditioned upon the payment to MVP by BTG (by wire transfer) of $[**], (consisting of $[**] allocated to Milestone No. 4 and $[**] allocated to Milestone No. 5), as an advance payment in partial satisfaction of the payments due under Milestone Nos. 4 and 5.

3.2 BTG shall provide to MVP complete copies of all written and electronic communications related to PEG-uricase, such as regulatory filings and other correspondence, to and from government regulatory agencies (including, without limitation, the U.S. Food and Drug Administration), within five (5) business days of BTG’s filing or receipt, respectively, of such communications.

Article 3 — Miscellaneous

3.1 This Amendment shall be effective as of the Amendment Date.

3.2 Except as expressly modified in this Amendment, the Agreement shall remain in full force and effect according to its terms.

IN WITNESS WHEREOF, BTG, Duke and MVP have caused this Amendment to be executed as of the Amendment Date by their duly authorized officers.

BlO-TECHNOLOGY GENERAL CORP.
By:	/s/ Norman Barton
	Name:	Norman Barton
	Title:	Chief Medical Officer

DUKE UNIVERSITY
By:	/s/ Robert L. Taber
	Name:	Robert L. Taber, Ph.D.
	Title:	Vice Chancellor. Science & Tech. Dev.

MOUNTAIN VIEW PHARMACEUTICALS, INC.
By:	/s/ Mark Saifer
	Name:	Mark Saifer
	Title:  Vice President

LICENSE AGREEMENT

     THIS LICENSE AGREEMENT is made and entered into as of the 12^th day of August 1998, by and among Mountain View Pharmaceuticals, Inc., Duke University, and Bio-Technology General Corporation.

     WHEREAS, DUKE has developed certain recombinant mammalian uricases prior to the start of the GRANT, including PBC URICASE;

     WHEREAS, DUKE and/or MVP have developed, pursuant to the GRANT, additional recombinant mammalian uricases;

     WHEREAS, DUKE and MVP have developed, pursuant to the GRANT, PEG conjugates of PBC URICASE and other mammalian uricases;

     WHEREAS, MVP has developed PEG conjugates of non-mammalian uricases;

     WHEREAS, DUKE and MVP, in order to have the benefits of these developments made available to the public, desire to license their rights therein exclusively, on a worldwide basis, to BTG in the FIELD; and

     WHEREAS, BTG desires to obtain such a license.

     NOW THEREFORE, in consideration of the premises and the faithful performance of the covenants herein contained, the PARTIES agree as follows:

ARTICLE 1 — INDEPENDENT CONTRACTORS

1.0 MVP’s and DUKE’s relationships to one another and to BTG under this AGREEMENT are those of independent contractors and not as agents, joint venturers or partners.

ARTICLE 2 — DEFINITIONS

2.0 As used throughout this AGREEMENT, the terms and phrases set forth herein in capital letters shall be defined as set forth in this Article 2.

2.1 “AFFILIATES” of a person or an entity shall mean any individual, sole proprietorship, firm, partnership, corporation, trust, joint venture or other entity, whether de jure or de facto, which, directly or indirectly, controls, is controlled by or is under common control with such person or entity. As used in this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the policies and management of a person or entity, whether by the ownership of stock, by contract or otherwise.

2.2 “AGREEMENT” shall mean this License Agreement as amended from time to time.

2.3 “BIRD” shall mean the U.S.-Israel Binational Industrial Research and Development Foundation.

2.4 “BTG” shall mean Bio-Technology General Corporation, a corporation organized under the laws of Delaware, and having its principal offices at Iselin, New Jersey 08830, and its AFFILIATES.

2.5 “DUKE” shall mean Duke University, a North Carolina not-for-profit corporation, having its principal office at Durham, North Carolina 27710, and its AFFILIATES.

2.6 “DUKE TECHNOLOGY” shall mean technologies conceived, reduced to practice, developed, or acquired, by or for DUKE, or licensed to DUKE, or developed jointly with MVP, relating to mammalian urate oxidase (mammalian uricase), including the know-how and other information described in detail in Exhibit A attached hereto and made a part hereof, as of the EFFECT1VE DATE, and including any improvement made by DUKE thereon during the TERM of this AGREEMENT, for use in the FIELD; provided, however, that with respect to such improvements DUKE shall promptly disclose each such improvement to BTG and it shall be included in the license only if, within six (6) months after disclosure, BTG elects to incorporate the improvement into LICENSED PRODUCTS or the manufacturing process thereof.

2.7 “EFFECTIVE DATE” shall mean the date first written above.

2.8 “FIELD” shall mean the treatment of humans.

2.9 “GRANT” shall mean the STTR grant from NIH (Grant No. DK48529) for a research project titled, “Mammalian PEG-Uricase for Therapy of Intractable Gout” under which LICENSORS received funding from September 30, 1996, through August 31, 1998.

2.10 “IMPUTED NET SALES” shall have the meaning ascribed to it in Section 2.17(a).

2.11 “INFORMATION” shall have the meaning ascribed to it in Section 11.1.

2.12 “LICENSED PRODUCTS” shall mean any products (including all dosage forms, strengths, and package sizes) that utilize TECHNOLOGY in whole or in part.

2.13 “LICENSEE” shall mean BTG.

2.14 “LICENSOR” shall mean MVP, DUKE or both of them, depending on the context.

2.15 “MVP” shall mean Mountain View Pharmaceuticals, Inc., a corporation organized under the laws of California, and having its principal place of business at Menlo Park, California 94025, and its AFFILIATES.

2.16 “MVP TECHNOLOGY” shall mean technologies conceived, reduced to practice, developed, or acquired, by or for MVP, or licensed to MVP, or developed jointly with DUKE, relating to mammalian urate oxidase (mammalian uricase) and non- mammalian urate oxidase (non-mammalian uricase) and PEG conjugates of both mammalian uricase and non-mammalian uricase, including the know-how and other information described in detail in Exhibit B attached hereto and made a part hereof, as of the EFFECTIVE DATE, including any improvements made by MVP thereon during the TERM of this AGREEMENT, for use in the FIELD; provided, however, that with respect to such improvements, MVP shall promptly disclose each such improvement to BTG and it shall be included in the license only if, within six (6) months after disclosure, BTG elects to incorporate the improvement into LICENSED PRODUCTS or the manufacturing process thereof.

2.17 “NET SALES” shall mean LICENSEE’s aggregate arm’s length gross charges to the trade, physicians or patients charged for sales by LICENSEE of the LICENSED PRODUCTS, less all normal and customary trade and quantity discounts and less any sales and excise taxes and duties paid by LICENSEE.

(a) In the event that the LICENSED PRODUCTS are distributed by LICENSEE at no cost to the recipient for revenue-producing activities, these shall be deemed to be NET SALES (“IMPUTED NET SALES”) for purposes of computing royalty

	obligations, except for LICENSED PRODUCTS distributed that are not reimbursable or which are used for non-revenue- producing activities such as promotional samples and supplies for clinical studies or field trials.
(b)	IMPUTED NET SALES shall be valued at the mean price for such respective LICENSED PRODUCTS sold by LICENSEE during the calendar quarter preceding the calendar quarter during which such IMPUTED NET SALES occur.
(c)	Transfer prices for LICENSED PRODUCTS between AFFILIATES shall not be considered for the purpose of computing NET SALES or IMPUTED NET SALES.

2.18	“NIH” shall mean the US. National Institutes of Health.
2.19	“PATENT RIGHTS” shall mean rights to any claims directed to any aspect of the TECHNOLOGY in all United States and foreign patent applications filed and any patents now issued or hereinafter issuing from such patent applications, substitutes, continuations, continuations-in-part, divisional applications, reexaminations or reissues thereof, which contain at least one claim directed to any aspect of the TECHNOLOGY, a current listing of which appears in Exhibit C attached hereto and made a part hereof, as amended from time to time during the TERM of this AGREEMENT.
2.20	“PARTY” or “PARTIES” shall mean LICENSEE on the one hand and DUKE and/or MVP on the other hand, or all three, depending on the context.
2.21	“PBC URICASE” shall mean [**].
2.22	“PEG” shall mean poly(ethylene glycol) or poly(ethylene oxide).
2.23	“SALES AND REVENUE REPORTS” shall have the meaning ascribed to it in Section 6.9.
2.24	“STTR” shall mean the Small Business Technology Transfer Research program.
2.25	“SUBLICENSE REVENUES” shall mean all revenues or other consideration received by LICENSEE from sublicensees, including, without limitation, sublicense issue fees, other sublicense fees, royalties, and milestone payments.
2.26	“TECHNOLOGY” shall mean the DUKE TECHNOLOGY and the MVP TECHNOLOGY.
2.27	“TERM” shall have the meaning ascribed to it in Section 10.1.
2.28	“TERRITORY” shall mean each and every country of the world, including, with respect to each country, its territories and possessions.
2.29	“TOP [**] MARKETS” shall mean the [**] countries with the greatest dollar volume of sales of allopurinol during the twelve (12) months preceding any particular date, based on monthly data compiled by IMS America.
2.30	“TOTAL REVENUES” shall mean the sum of NET SALES plus SUBLICENSE REVENUES.
2.31	“TOTAL SALES” shall mean the cumulative sum of NET SALES of LICENSED PRODUCTS by LICENSEE plus net sales of LICENSED PRODUCTS by its sublicensees from the EFFECTIVE DATE.
2.32	“USPTO” shall mean the United States Patent and Trademark Office.

ARTICLE 3 — SPONSORED RESEARCH

3.1 LICENSEE shall sponsor research relevant to the TECHNOLOGY at the facilities of each of the LICENSORS.

3.2 LICENSEE agrees to provide not less than $[**] to DUKE and $[**] to MVP (less any amounts received by MVP from BIRD) for sponsored research during the first twenty-four (24) months following the EFFECTIVE DATE.

3.3 Payments for such sponsored research shall be made at least semiannually to each of the LICENSORS at the annual rate of at least $[**] per year; provided, however, that with respect to MVP, these payments shall be reduced by the amounts received by MVP from BIRD.

3.4 The funding for sponsored research at DUKE is to support research at DUKE by Dr. [**], and it is understood that if for any reason, Dr. [**] should no longer be affiliated with DUKE during the period for which the funding is provided, then DUKE will transfer the funding to another institution with which Dr. [**] may affiliate, upon his departure from DUKE.

ARTICLE 4 — LICENSE AND TRANSFER OF TECHNOLOGY

4.1 LICENSORS hereby grant to LICENSEE and LICENSEE hereby accepts from LICENSORS, upon the terms and conditions herein specified, an exclusive, royalty-bearing license in the TERRITORY, with the right to grant sublicenses, under the TECHNOLOGY and PATENT RIGHTS, subject to U.S. Government rights in the TECHNOLOGY, to make and have made, use and have used, and sell and have sold, LICENSED PRODUCTS for use in the FIELD. In recognition of the general applicability to other drugs of MVP’s technology for the production of PEG conjugates of uricases, BTG expressly agrees that it shall not utilize such technology in any manner except for the production of PEG conjugates of uricases and only as provided in this AGREEMENT; provided, however, that MVP expressly agrees that nothing contained in this AGREEMENT shall be read to preclude LICENSEE from using technology for the production of PEG conjugates which is in the public domain, or which is developed by LICENSEE independent of MVP’s technology for the production of PEG conjugates, or which LICENSEE acquires or licenses from a third party.

4.2 Within sixty (60) days after the execution of this AGREEMENT:

(a)	DUKE agrees to provide LICENSEE with the materials and copies of the protocols and representative results for the methods listed in Exhibit A.
(b)	MVP agrees to provide LICENSEE with the materials and copies of the protocols and representative results for the methods listed in Exhibit B.
(c)	LICENSORS agree to provide LICENSEE with copies of any and all patents and patent applications identified in Exhibit C.

4.3 MVP hereby grants to LICENSEE the exclusive, royalty-free, right and license in the TERRITORY and in the FIELD to use such rights as MVP may possess in the trademark, PURICASE^TM, the registration of which has been published in the Official Gazette of the USPTO (Volume 1211, Number 2, page TM 100) and is pending in the European Community (Application No. 716019).

(a)	LICENSEE may use whichever trademark or trademarks it may elect, in its sole discretion, in connection with the marketing of LICENSED PRODUCTS, and shall be under no obligation to use the trademark, PURICASETM.
(b)	If LICENSEE elects not to use the trademark PURICASETM or otherwise fails to use such trademark by one (1) year after the first sale of any LICENSED PRODUCT, MVP shall retain all rights to its use.

4.4 LICENSEE shall comply with all obligations imposed by the U.S. Government on exclusive licenses of inventions made under a U.S. Government funding agreement including, but not limited to, the requirement that any products which are sold in the United States be substantially manufactured in the United States, if such products are based on inventions conceived or first actually reduced to practice under such funding agreements.

(a)

LICENSORS recognize that the currently projected market for LICENSED PRODUCTS does not justify a second manufacturing facility, and that LICENSEE currently has a manufacturing facility in Israel, and, therefore, LICENSORS and LICENSEE agree to cooperate and use their best efforts to promptly obtain a waiver of the U.S. manufacturing requirement.

(b)

DUKE represents that PBC URICASE was constructed at DUKE prior to its receipt of the GRANT and that U.S. Government funds did not support its development; and represents further that subject to review and determination by DUKE, other uricases may also have been constructed at DUKE prior to its receipt of the GRANT, developed without the support of U.S. Government funds, and that DUKE shall promptly identify any such uricases for LICENSEE.

4.5 Any sublicenses granted by LICENSEE shall be on such financial terms as LICENSEE may negotiate in its sole discretion but otherwise shall be subject to, and shall incorporate therein, conditions at least as stringent as those imposed on LICENSEE by the terms of this AGREEMENT.

(a)	LICENSEE agrees to be responsible for any obligations assumed hereunder by its sublicensees.
(b)	LICENSEE further agrees that all sublicense agreements will provide that if LICENSORS terminate this AGREEMENT pursuant to Section 10.3 or 10.6 prior to the end of the TERM in one or more countries, or if LICENSEE terminates this AGREEMENT pursuant to Section 10.2, all such sublicenses in those countries shall be assigned directly to LICENSORS; provided, however, that LICENSORS first agree, in writing, to assume all of LICENSEE’s obligations under such sublicenses and to hold LICENSEE harmless with respect to any claims made by such sublicensees as a result of such termination; provided, however, that LICENSORS shall not be liable for any claims against LICENSEE arising out of LICENSEE’s negligence or willful wrongdoing, or claims arising from LICENSEE’s breach, prior to termination, of its obligations under a sublicense.
(c)	LICENSORS shall promptly be provided a copy of each sublicense agreement, provided, however, that during the TERM of this AGREEMENT, LICENSORS shall maintain such agreements in confidence and shall not contact any such sublicensee without LICENSEE’s prior written consent.

4.6 Upon expiration of the TERM of this AGREEMENT with respect to each country as set forth in Article 10, the licenses granted in this Article 4 shall become fully paid-up, irrevocable and non-exclusive in each such country.

ARTICLE 5 — LICENSE FEES AND MILESTONE PAYMENTS

5.1. The LICENSEE shall make separate payments to MVP and to DUKE according to the following schedule:

	[**] of U.S. Dollars
Event Triggering Payments	To MVP	To DUKE	Total
1) Execution of this AGREEMENT	[**]	[**]	[**]
2) Successful transfer of the technology for the production of PEG conjugates of uricase	[**]	[**]	[**]
3) First anniversary of execution of this AGREEMENT	[**]	[**]	[**]
4) Filing for an investigational new drug exemption	[**]	[**]	[**]
5) Commencement of a Phase 2 clinical study	[**]	[**]	[**]
6) Filing of an application to permit marketing in any one of the [**]	[**]	[**]	[**]
7) Marketing approval in any one of the [**]		[**]	[**]
8) Cumulative TOTAL REVENUES of $[**]	[**]	[**]	[**]
9) Cumulative TOTAL REVENUES of $[**]	[**]	[**]	[**]
Totals:	[**]	[**]	[**]

5.2 LICENSEE shall make the payments identified in Section 5.1 as follows:

(a)	Payments 1) upon execution of this AGREEMENT.
(b)	Payments 2) not later than thirty (30) days after successful transfer of the technology for the production of PEG conjugates of uricase, as set forth in Section 5.10.
(c)	Payment 3) on the first anniversary of the EFFECTIVE DATE.
(d)	Payments 4) not later than thirty (30) days after the first filing of an application for an investigational new drug exemption for LICENSED PRODUCTS.
(e)	Payments 5) not later than thirty (30) days after enrolling the first patient in a Phase 2 clinical study of LICENSED PRODUCTS.
(f)	Payments 6) not later than thirty (30) days after filing an application to permit marketing of LICENSED PRODUCTS in any one of the [**].
(g)	Payments 7) not later than thirty (30) days after obtaining approval to market LICENSED PRODUCTS in any one of the [**].
(h)	Payments 8) not later than sixty (60) days after the end of the calendar quarter in which cumulative TOTAL REVENUES from LICENSED PRODUCTS exceed the equivalent of $[**].
(i)	Payments 9) not later than sixty (60) days after the end of the calendar quarter in which cumulative TOTAL REVENUES from LICENSED PRODUCTS exceed the equivalent of $[**].

5.3 All of the payments in this Article 5 are in addition to the royalties specified in Article 6.

5.4 All payments required by this AGREEMENT, if not paid when due, shall bear interest at the rate of one and one-half percent (1 ¹/2 %) per month or fraction thereof, or the maximum interest rate allowed by applicable law, whichever is less.

5.5 If this AGREEMENT is executed before LICENSEE has had the opportunity to review and approve the version of the patent application (titled “PEG-URATE OXIDASE CONJUGATES AND USE THEREOF”) that has been filed with the United States Patent and Trademark Office, then:

(a)	If upon such review subsequent to execution of this AGREEMENT, which LICENSEE shall complete within sixty (60) days after receipt of such application, LICENSEE determines in good faith that such application is inadequate (e.g., for lack of support in the specification or in view of the prior art), LICENSEE may elect, in its sole discretion, to terminate this AGREEMENT.
(b)	If LICENSEE does so elect to terminate, MVP and DUKE shall each refund to LICENSEE all payments made to them by LICENSEE as of the date of termination, and MVP shall be solely responsible for the repayment to BIRD, should such repayment be required, of any funds received by MVP from BIRD.

5.6 MVP shall commence the transfer to BTG of its proprietary technology for the production of PEG conjugates of uricases once the following conditions have been met:

(a)	MVP and DUKE have been notified, in writing, by BTG following the review of their patent application as set forth in Section 5.5, either that such patent application is acceptable or, if unacceptable, that BTG nonetheless elects not to terminate the AGREEMENT, and that, therefore, the payments made by BTG to MVP and DUKE as of the date of such written notice are irrevocable;
(b)	BTG and MVP have selected a specific uricase and BTG has provided at least [**] from a single batch to MVP for each [**] of PEG conjugate to be prepared by MVP as part of the technology transfer; and
(c)	BTG has installed at its facility in Israel all of the necessary instruments, accessories, columns and other materials for assessing the activity of uricase, the purity of the PEG-uricase conjugates and the number of strands of PEG attached per uricase subunit according to MVP’s protocols. [**]

5.7	Such transfer shall commence as soon as practical after BTG has met all of the conditions in Section 5.6.
5.8	The technology transfer shall include the following steps: [**]
5.9	BTG and MVP shall use their best efforts to complete successful transfer of such technology as promptly as possible and each company shall therefore assign appropriately skilled personnel to this task.
5.10	The technology transfer shall be complete once Sections 5.8(c) and 5.8(d) have been completed and BTG shall notify LICENSORS in writing within thirty (30) days of such completion.
5.11	Failure to successfully transfer the technology within one (1) year after the transfer is initiated by MVP, unless such failure is caused by BTG’s failing to comply with Section 5.9, shall have the following consequences:

(a)	MVP and DUKE shall forfeit payments 2) in Section 5.1 and they shall not be made pursuant to Section 5.2 or otherwise; and
(b)	MVP and DUKE shall forfeit the royalties attributable to know-how pursuant to Section 6.4 as further defined in Section 6.5.

5.12 If the U.S. Government declines to waive the U.S. manufacturing requirement, MVP shall cooperate with LICENSEE to transfer such technology to a U.S. manufacturer selected by LICENSEE; provided, however:

(a)	that payments 2) in Section 5.1 shall have been made;
(b)	that such manufacturer shall first agree to maintain such technology in confidence on terms no less restrictive than those applicable to LICENSEE under this AGREEMENT, and to use such technology only for the production of PEG-uricase conjugates for LICENSEE;
(c)	that such manufacturer does not manufacture PEG-unease conjugates for itself or any third party;
(d)	that such manufacturer is not [xx], or [xx]; and
(e)	that such manufacturer is a company for which, as of the effective date of the agreement between LICENSEE and such company, none of the following three (3) individuals: [xx], is an employee, director, consultant, or shareholder possessing at least ten percent of the outstanding shares of common stock, unless MVP’s prior written consent has been obtained, which consent shall not be unreasonably withheld.

ARTICLE 6 — ROYALTIES, RECORDS AND REPORTS

6.1 Within sixty (60) days after the end of each calendar quarter, LICENSEE shall pay to LICENSORS, in equal shares, any running royalties due pursuant to this Article 6 on NET SALES of LICENSED PRODUCTS made by LICENSEE during the preceding calendar quarter.

6.2 The total rates of such running royalties, subject to adjustment pursuant to Section 6.5, shall be:

(a)	[**] percent ([**] %) of the NET SALES of LICENSED PRODUCTS made by LICENSEE until the TOTAL SALES equal $[**];
(b)	[**] percent ([**] %) of NET SALES of LICENSED PRODUCTS made by LICENSEE once the TOTAL SALES exceed $[**] and until such TOTAL SALES equal $[**]; and
(c)	[**] percent ([**] %) of NET SALES of LICENSED PRODUCTS made by LICENSEE once the TOTAL SALES exceed $[**].

6.3 Concurrent with the payments provided for in Sections 6.1 and 6.2 and subject to Sections 6.5 and 6.6, LICENSEE shall pay to LICENSORS, in United States Dollars,

	royalty payments in the amount of [**] percent ([**]%) of SUBLICENSE REVENUES accrued by LICENSEE during the preceding calendar quarter.
6.4	Of the percentages specified in Sections 6.2 and 6.3, one half (1/2) shall be considered a patent royalty, and one half (1/2) shall be considered a royalty for use of know-how.
6.5	Subject to Article 8, the actual royalty rates payable in any country pursuant to Sections 6.1, 6.2 and 6.3 shall be determined as follows:

(a)

If there is no patent protection under PATENT RIGHTS in a country in the TERRITORY and no protection under the U.S. Orphan Drug Act or any foreign equivalent in such country, then the applicable royalty rates for such country shall be [**] percent ([**]%) of the royalty rates specified in Sections 6.2 and 6.3 if there has been a successful transfer of technology pursuant to Section 5.10, and [**] percent ([**]%) if there has not been a successful transfer.

(b)

If there is patent protection under PATENT RIGHTS in a country in the TERRITORY or protection under the U.S. Orphan Drug Act or any foreign equivalent in such country, then the applicable royalty rates for such country shall be the royalty rates specified in Section 6.2 and 6.3 if there has been a successful transfer of technology pursuant to Section 5.10, and [**] percent ([**]%) of the royalty rates specified in Sections 6.2 and 6.3 if there has not been a successful transfer.

6.6	For the purpose of calculating royalties due to LICENSORS, revenues in currencies other than United States Dollars shall be converted to United States Dollars using the exchange rates that were published in the Wall Street Journal on the last business day of the calendar quarter during which LICENSEE accrued such revenues.
6.7	LICENSEE shall keep full, true and accurate books of accounts and other records containing all particulars that may be necessary to properly ascertain and verify the royalties payable by LICENSEE hereunder.
6.8	Upon the request of LICENSORS, LICENSEE shall permit an independent Certified Public Accountant selected by LICENSORS (except one to whom the LICENSEE has some reasonable objection, such as that the accountant represents either of LICENSORS with respect to its own matters) to have access, not more than once in any calendar year, and during ordinary business hours, to such of LICENSEE’ s records as may be necessary to determine, in respect of any quarter ending not more than three (3) years prior to the date of such request, the correctness of any report and/or payment made under this AGREEMENT.

(a)	If such examination results in a determination that LICENSEE has underpaid its obligations to LICENSORS by more than three percent (3%), the cost of such examination shall be borne by LICENSEE.
(b)	If such examination results in a determination that LICENSEE has correctly paid or overpaid its obligations to LICENSORS, the cost of such examination shall be borne by LICENSORS.
(c)	All adjustments resulting from such examinations shall be made by appropriate payments within thirty (30) days after the results of the examination become known to the PARTIES.
(d)	Such accountant shall maintain all information learned during such inspection in confidence and shall report to LICENSORS whether there has been an

overpayment, correct payment or underpayment of royalties and, if applicable, the amount of such overpayment or underpayment.

6.9 For each quarterly payment, LICENSEE shall render to each of the LICENSORS written accounts (“SALES AND REVENUE REPORTS”) of the NET SALES of LICENSED PRODUCTS by LICENSEE and AFFILIATES, net sales by SUBLICENSEES, and the SUBLICENSE REVENUES accrued by LICENSEE during the preceding quarter.

(a)	LICENSEE warrants that such SALES AND REVENUE REPORTS will be prepared in accordance with Generally Accepted Accounting Principles.
(b)	SALES AND REVENUE REPORTS will be supplied to each of the LICENSORS not later than sixty (60) days after the end of each calendar quarter in which the LICENSEE accrues revenue from sales of LICENSED PRODUCTS or from sublicenses of the LICENSED PRODUCTS.
(c)	LICENSORS agree to hold such SALES AND REVENUE REPORTS in confidence.

ARTICLE 7 — PERFORMANCE OBLIGATIONS

7.1 The LICENSEE shall use its best efforts to bring LICENSED PRODUCTS to market and to diligently market LICENSED PRODUCTS during the TERM of this AGREEMENT.

7.2 LICENSEE and MVP shall commit such funds as each may receive from BIRD solely to the development of LICENSED PRODUCTS.

7.3 LICENSEE shall repay all finds provided by BIRD to LICENSEE and MVP, up to [**] percent ([**]%) of the grant, as required by BIRD.

7.4 Beginning in 1999 (for calendar year 1998), and continuing until the year following the year of the first commercial sale of LICENSED PRODUCTS, the LICENSEE shall submit annual progress reports to LICENSORS by February 28th of each year, which reports shall discuss the progress and results, as well as ongoing plans, with respect to the development of LICENSED PRODUCTS.

ARTICLE 8 — PATENTS AND INFRINGEMENT

8.1 Subsequent to the EFFECTIVE DATE, LICENSORS shall continue to have responsibility, at their shared expense, for filing, prosecuting and maintaining their jointly owned patent applications in the USPTO on TECHNOLOGY; DUKE shall continue to have responsibility, at its own expense, for filing, prosecuting and maintaining its solely owned patent applications in the USPTO on DUKE TECHNOLOGY; and MVP shall continue to have responsibility, at its own expense, for filing, prosecuting and maintaining its solely owned patent applications in the USPTO on MVP TECHNOLOGY. LICENSORS shall keep LICENSEE advised as to the prosecution of such applications by forwarding to LICENSEE copies of all official correspondence relating thereto, and shall give LICENSEE an opportunity to comment on all applications, responses to Office Actions, Declarations and other papers before they are filed with the USPTO, and shall consult with LICENSEE concerning the scope of allowed claims before paying any issue fee.

8.2 LICENSEE agrees to cooperate with the LICENSORS in the prosecution of the U.S. patent applications to ensure that the applications reflect, to the best of LICENSEE’s knowledge, all items of commercial and technical interest and importance.

8.3 LICENSORS shall seek patent protection in Europe (including the United Kingdom), Japan and such other countries as LICENSEE may designate, and LICENSEE shall reimburse LICENSORS within thirty (30) days for their reasonable, out-of-pocket costs associated with obtaining such protection; provided, however, that the prosecution of such applications shall be at the direction of LICENSEE and LICENSEE may elect to prosecute such applications itself or have them prosecuted through LICENSEE’s agents.

(a)	Regardless of whether LICENSORS or LICENSEE prosecute(s) such application, the resultant patents shall be owned by LICENSORS.
(b)	LICENSORS may elect to seek patent protection in countries not designated by LICENSEE, in which case LICENSORS shall be responsible for all expenses attendant thereto.
(c)	In the event that LICENSEE elects to prosecute foreign patent applications itself, LICENSORS will be kept informed, will have an opportunity to comment, and shall have the right to approve such applications, which approval will not be unreasonably withheld.
(d)	If LICENSEE decides to abandon or not pursue any application, LICENSEE shall notify LICENSORS in a timely manner so that LICENSORS can decide whether or not to assume the prosecution.

8.4 Any inventions made, during the TERM of this AGREEMENT, with respect to the manufacture, use or sale of LICENSED PRODUCTS shall be:

(a)	the sole property of LICENSEE if made solely by LICENSEE;
(b)	the joint property of LICENSEE and LICENSORS if made jointly by LICENSEE and LICENSORS; and
(c)	the sole property of LICENSORS if made solely by LICENSORS;

provided, however, that any such invention made solely by LICENSORS shall be included within PATENT RIGHTS.

8.5 Upon learning of the infringement by a third party of PATENT RIGHTS, the PARTY learning of such infringement shall promptly inform the other PARTIES, in writing, of that fact and shall provide any evidence available pertaining to such infringement.

(a) LICENSEE may elect, within sixty (60) days after notice and at its own expense, to take whatever steps are necessary to stop the infringement and recover damages.

     (i) If LICENSEE elects to take such action, it will:

(A)	keep LICENSORS informed of the steps taken and the progress of any legal actions taken;
(B)	during the pendency of such actions, offset against royalties owed to LICENSORS on NET SALES in the country or countries affected by the infringement, the costs of any actions taken to stop such infringement up to a maximum of fifty percent (50%) of the royalties owed or owing to LICENSORS;
(C)	be entitled to enter into a settlement on such terms as it may elect;

(D)

retain for its own account, after first deducting the costs of any actions taken to stop such infringement, seventy-five percent (75%) of any amounts received in settlement or awarded as damages with the remaining twenty-five percent (25%) being paid in equal shares to LICENSORS; and

(E)

if unsuccessful in halting such infringement, be entitled to reduce its royalties owed to LICENSORS, with respect to the country or countries affected by such infringement, by fifty percent (50%) during the remaining TERM of the Agreement in each of those countries; provided that the infringer has achieved ten percent (10%) or more of the market defined by LICENSED PRODUCTS and the infringing product in those countries in which the infringement exists.

(ii) If LICENSEE does not elect to take such action within such period, it will promptly inform LICENSORS, in which event LICENSORS may elect within thirty (30) days:

(A)

to take such action as is required to stop such infringement, and will then be entitled to settle such actions on such terms as they may elect (provided, however, that if they grant a license to the infringer, LICENSEE shall be entitled to reduce its royalties owed to LICENSORS for the country or countries affected by fifty percent (50%) and shall be entitled to the benefit of any terms which are more favorable than those granted to LICENSEE under this AGREEMENT), will keep LICENSEE informed of the steps taken and the progress of any legal actions taken, and will be entitled to retain any amounts received in settlement or awarded in damages; provided, however, that during the period and for the country or countries in which LICENSEE does not enjoy exclusivity, or with respect to which LICENSORS are not able to stop such infringement, LICENSEE shall be entitled to reduce the applicable royalty rate by fifty percent (50%); provided that the infringer has achieved ten percent (10%) or more of the market defined by LICENSED PRODUCTS and the infringing product; or

(B)

not to take any action against such infringers, in which event LICENSEE shall be entitled to elect either:

(1)	to terminate this AGREEMENT pursuant to Section 8.8; or
(2)	to reduce the applicable royalty rate by fifty percent (50%) for each country affected by such infringement; provided that the infringer has achieved ten percent (10%) or more of the market defined by LICENSED PRODUCTS and the infringing product in the countries where such infringement exists.

8.6 LICENSORS shall give prompt notice to LICENSEE of any inquiry received with respect to the availability of a license under PATENT RIGHTS or TECHNOLOGY and also of any third party patent of which LICENSORS become aware that may present an issue of infringement with respect to LICENSEE’s activities under this AGREEMENT.

8.7 LICENSEE shall give LICENSORS prompt notice of each claim or allegation received by it that the manufacture, use or sale of LICENSED PRODUCTS constitutes an infringement of a third party patent or other intellectual property rights. If such alleged infringement is due to the incorporation of DUKE TECHNOLOGY or MVP TECHNOLOGY in the LICENSED PRODUCTS, then:

(a)	LICENSEE shall have the primary right and responsibility, but not the obligation, at its own expense to defend and control the defense of any such claims against LICENSEE, using counsel of its choosing.
(b)	During the pendency of any such action, no royalties shall be payable to LICENSORS on account of NET SALES of LICENSED PRODUCTS in any countries affected by such action.
(c)	LICENSEE’s attorneys’ fees and any amounts agreed to be paid in settlement of any such action or awarded against LICENSEE as damages, shall be deducted by LICENSEE from any future royalties due to LICENSORS.
(d)	If LICENSEE is required to pay a royalty to any third party as a result of settlement of any such claim or allegation of infringement, it shall be entitled to deduct such royalty from the royalties due to LICENSORS under this AGREEMENT.
(e)	The settlement of any such action must be approved by LICENSORS, which approval shall not be unreasonably withheld.

8.8 Independent of any action which LICENSEE or LICENSORS may elect to take pursuant to Section 8.5 or 8.7 with respect to the prosecution, defense or compromise of any such allegation or claim, LICENSEE may elect to terminate this AGREEMENT solely with respect to the country or countries to which such claim or allegation pertains. In such event, all rights to the use and sale of LICENSED PRODUCTS and regulatory filings in that country or those countries shall revert to LICENSORS.

8.9 In any action brought under this Article 8, the PARTIES not bringing or defending the action shall, in their sole discretion, be entitled to participate through counsel of their own choosing in any such action; provided, however, that such participation shall be limited to an advisory role and counsel for the PARTY bringing or defending the action shall be lead counsel and the action shall be directed by such PARTY.

8.10 Each PARTY agrees to cooperate with the other PARTIES in any reasonable manner deemed by the PARTY defending or prosecuting an action under this Article 8, to be necessary in defending or prosecuting such action.

ARTICLE 9 — REGULATORY, PUBLICATION, OTHER USE, AND EXPORT

9.1 LICENSEE agrees to use its best efforts to have the LICENSED PRODUCTS cleared by the responsible government agencies requiring such clearance for marketing in those countries in which LICENSEE intends to sell LICENSED PRODUCTS or award sublicenses.

(a)	To accomplish such clearances at the earliest possible dates, LICENSEE agrees to file, according to the standard practice in the industry, any and all necessary data with the appropriate government agencies.
(b)	Where permitted by law, LICENSEE shall include the names of both LICENSORS as co-registrants on all regulatory filings.

9.2 LICENSEE further agrees that the right of publication of the TECHNOLOGY shall reside in the inventor(s) and other personnel of LICENSORS and the LICENSORS shall use their best efforts to provide a copy of such publication forty-five (45) days in advance of publication for review by LICENSEE. If LICENSEE determines that the publication by LICENSORS will disclose any trade secrets, LICENSORS shall delay publication for an additional sixty (60) days after the forty-five (45) day period to allow patent applications to be filed.

9.3 It is agreed that, notwithstanding any provisions herein, LICENSORS are free to use the TECHNOLOGY and PATENT RIGHTS for their own non-commercial purposes, whether educational, teaching, research or clinical purposes, without payment of royalties or other fees.

9.4 LICENSEE and LICENSORS agree to comply with all United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes and other commodities and technology.

ARTICLE 10 — DURATION AND TERMINATION

10.1 This AGREEMENT shall become effective upon the EFFECTIVE DATE and shall remain in full force and effect, on a country-by-country basis, for the longer of: ten (10) years from the date of first sale of LICENSED PRODUCTS in each country, or the date of expiration of the last-to-expire patent, of those patents included in the PATENT RIGHTS, in each country; such period of time with respect to each country being known as the TERM of this AGREEMENT; provided, however, that this AGREEMENT may be terminated in one or more countries prior to the TERM in accordance with Sections 8.8, 10.2, 10.3 or 10.6.

10.2 LICENSEE may, prior to expiration of the TERM, elect to terminate this AGREEMENT with respect to any one or more countries in the TERRITORY, at any time, effective after the first anniversary of the EFFECTIVE DATE, by giving LICENSORS written notice at least six (6) months prior to each such termination. On the effective date of each such termination, LICENSEE shall cease the manufacture, use and sale of LICENSED PRODUCTS in the country or countries in which LICENSEE has elected to terminate prior to expiration of the TERM.

10.3 As used in this Section 10.3, PARTY shall mean either (1) BTG or (2) MVP and DUKE, jointly. Any PARTY may immediately terminate this AGREEMENT for fraud, willful misconduct, or illegal conduct of the other PARTY upon written notice of same to such PARTY. Except as provided above, if a PARTY fails to fulfill any of its material obligations under this AGREEMENT, the non-breaching PARTY may terminate this AGREEMENT, with respect to the country or countries affected, upon written notice to the other PARTY, as provided below. Such notice must contain a full description of the event or occurrence constituting a breach of this AGREEMENT. A PARTY receiving notice that it has breached the AGREEMENT will have the opportunity to cure that breach within thirty (30) days of the receipt of notice. A PARTY’s ability to cure a breach will apply only to the first two (2) material breaches properly noticed to that PARTY under the terms of this AGREEMENT. Any subsequent material breach by that PARTY will entitle the other PARTY to terminate this AGREEMENT immediately upon proper notice to such PARTY without a cure period. In the event that a PARTY commits such a subsequent breach, the non-breaching PARTY may, at its option and in addition to any other remedies it may have in law or in equity, terminate this AGREEMENT for

	default by sending to the breaching PARTY written notice of termination, effective immediately upon receipt.
10.4	Upon the termination of this AGREEMENT in one or more countries prior to the end of the TERM, LICENSEE shall notify LICENSORS of the quantity of LICENSED PRODUCTS that LICENSEE then has in inventory with respect to the country or countries for which the termination is effective and LICENSEE shall then have a license in each such country to sell that amount of LICENSED PRODUCTS, but no more, provided that the LICENSEE shall pay the royalty thereon at the rate and at the time provided for herein.
10.5	If this AGREEMENT is terminated pursuant to Section 8.8 or pursuant to this Article 10 by either LICENSEE or LICENSORS prior to the end of the TERM in one or more countries, then all intellectual property rights conveyed by LICENSORS to LICENSEE under this AGREEMENT (including, without limitation: rights in the mark, PURICASETM, approved and pending regulatory applications, Orphan Drug Designations, Drug Master Files, sublicenses, preclinical data and clinical data) shall revert to LICENSORS with respect to those countries.
10.6	If, during the TERM of this AGREEMENT, a PARTY shall become bankrupt or insolvent, or if the business of a PARTY shall be placed in the hands of a receiver or trustee, whether by the voluntary act of such PARTY or otherwise, or if a PARTY shall cease to exist as an active concern, then if the PARTY experiencing such event is:

(a)	LICENSEE, then this AGREEMENT shall terminate immediately, and all rights to LICENSED PRODUCTS and the TECHNOLOGY shall revert to the LICENSORS or their respective successors or assignees;
(b)	MVP or DUKE, then the rights granted to LICENSEE under this AGREEMENT by such LICENSOR shall become paid-up, exclusive, and irrevocable, this AGREEMENT shall terminate with respect to such LICENSOR, and LICENSEE shall make such payments to the remaining LICENSOR that it would have received absent termination of the AGREEMENT with respect to the other LICENSOR.

10.7 Expiration or termination of this AGREEMENT shall be without prejudice to or limitation on any other remedies or any accrued obligations of any of the PARTIES.

ARTICLE 11 — CONFIDENTIAL INFORMATION

11.1 Confidential information (“INFORMATION”) shall mean all information provided by LICENSORS to LICENSEE or by LICENSEE to LICENSORS and identified as confidential at the time of disclosure. Specifically excepted from this definition is all information that is:

(a)	already known by the receiving PARTY at the time of disclosure, as demonstrated by clear and convincing evidence contemporaneous with or preceding the disclosure;
(b)	publicly disclosed through no improper act or omission of the receiving PARTY;
(c)	rightfully received by the receiving PARTY from a third party without any obligation of confidentiality; or
(d)	disclosed pursuant to any judicial or government requirement or order, provided that the receiving PARTY takes reasonable steps to provide the disclosing

	PARTY with sufficient prior notice in order to allow the disclosing PARTY to contest such requirement or order; or
(e)	independently developed by DUKE alone, without reference or access to the disclosing PARTY’s INFORMATION.

11.2 In the event the receiving PARTY is required by law, regulation or court order to disclose any of the disclosing PARTY’s INFORMATION, the receiving PARTY will promptly notify the disclosing PARTY in writing prior to making any such disclosure in order to facilitate the disclosing PARTY seeking a protective order or other appropriate remedy from the proper authority. The receiving PARTY agrees to cooperate with the disclosing PARTY in seeking such order or other remedy. The receiving PARTY further agrees that if the disclosing PARTY is not successful in precluding the requesting legal body from requiring the disclosure of the INFORMATION, it will furnish only that portion of the INFORMATION that is legally required and will exercise all reasonable efforts to obtain reliable assurances that confidential treatment will be accorded the INFORMATION.

11.3 The receiving PARTY agrees to hold INFORMATION in trust and confidence for the disclosing PARTY, using the same care and discretion that the receiving PARTY uses with respect to its own proprietary information that it considers confidential and, in any event, at least the care that is standard in the industry for confidential, proprietary information of another. The receiving PARTY will not use such information for any purpose except those expressly set forth in this AGREEMENT and will not disclose such information to any third party without the prior written authorization from the disclosing PARTY.

(a)	Any INFORMATION that MVP discloses to BTG related to PEGylation of proteins or to purification or analysis of PEG-protein conjugates may not be disclosed to DUKE. Except as provided in the foregoing sentence, any other INFORMATION that MVP discloses to BTG may be disclosed by BTG to DUKE.
(b)	Obligations of this Section 11.3 shall remain in effect during the TERM of this AGREEMENT and for a period of five (5) years after the expiration or termination of the AGREEMENT in the last-to-expire or last-to-terminate country, whichever occurs later.
(c)	No provision contained in this AGREEMENT shall be read to preclude BTG from providing PEGylated uricase to DUKE for research or clinical purposes, or from informing DUKE of the number of strands and molecular weight of the PEG and other descriptive characteristics of the PEGylated uricase provided to DUKE.
(d)	Notwithstanding the foregoing, DUKE shall not be obligated to hold in confidence another PARTY’s INFORMATION for longer than five (5) years after such INFORMATION is disclosed to it.

ARTICLE 12 — LAW TO GOVERN

12.1 The laws of the State of California will govern the construction, interpretation and performance of this AGREEMENT, without giving effect to conflicts of law rules thereof.

ARTICLE 13 — ASSIGNMENT

13.1 No PARTY may assign any of its rights or delegate any of its duties under this AGREEMENT without the prior written consent of the other PARTIES except:

(a)	In connection with the sale of a PARTY’s entire business operation; or
(b)	In connection with the assignment of the rights or delegation of the duties of any PARTY to any of its AFFILIATES.

13.2 Any unauthorized attempted assignment or delegation shall be null and void and of no force or effect.

ARTICLE 14 — NOTICES

14.1 Any notice or other communication required or permitted under this AGREEMENT will be in writing and will be deemed given as of the date it is: (a) delivered by hand, or (b) mailed, postage prepaid, first class, certified mail, return receipt requested, to the PARTY/PARTIES at the address listed below or subsequently specified in writing, or (c) sent, postage prepaid, return receipt requested, by courier service, to the PARTY/PARTIES at the address listed below or subsequently specified in writing:

If to the LICENSORS:

Mountain View Pharmaceuticals, Inc.
3475-S Edison Way
Menlo Park, California 94025
Attn.: Merry R. Sherman, Ph.D.

AND:

Office of Science and Technology
North Building, Room 230
Research Drive
Duke University, Box 90083
Durham, North Carolina 27708
Attn.: License Administrator

With a copy to:

     Office of the University Counsel
     Allen Building, Room 011
     Duke University
     Durham, North Carolina 27708

If to the LICENSEE:

Bio-Technology General Corporation
70 Wood Avenue South
Iselin, New Jersey 08830
Attn.: Sim Fass, Ph.D.

ARTICLE 15 — INDEMNITY, INSURANCE AND REPRESENTATIONS

15.1 LICENSEE agrees to indemnify, hold harmless and defend LICENSORS, their officers, employees, and agents, against any and all claims, suits, losses, damages, costs, fees, and expenses, including reasonable attorneys’ fees, asserted by third parties, both government

	and non-government, resulting from or arising out of LICENSEE’s exercise of the rights granted under this AGREEMENT. LICENSEE shall not be responsible for the intentional wrongdoing of LICENSORS.
15.2	LICENSORS agree to indemnify, hold harmless and defend LICENSEE, its officers, employees, and agents, against any and all claims, suits, losses, damages, costs, fees, and expenses, including reasonable attorneys’ fees, asserted by third parties, both government and non-government, resulting from or arising out of LICENSORS’s exercise of their rights and obligations under this AGREEMENT. LICENSORS shall not be responsible for the intentional wrongdoing of LICENSEE.
15.3	The PARTIES shall maintain in force at their sole cost and expense general liability insurance coverage in an amount reasonably sufficient to protect against liability under this Article 15. LICENSEE also shall maintain in force at its sole cost and expense product liability insurance coverage in an amount reasonably sufficient to protect against liability under this Article 15. Each PARTY shall have the right to request and to receive copies of the appropriate certificates of insurance from the other PARTIES for the purpose of ascertaining the sufficiency and currency of such coverage.
15.4	Except as provided in Section 15.8, nothing in this AGREEMENT shall be deemed to be a representation or warranty by LICENSORS of the validity of any of the patents or the accuracy, safety, efficacy, or usefulness, for any purpose, of any TECHNOLOGY.
15.5	LICENSORS shall have no obligation, expressed or implied, to supervise, monitor, review or otherwise assume responsibility for the production, manufacture, testing, clinical trials, marketing or sale of any LICENSED PRODUCTS, and LICENSORS shall have no liability whatsoever to LICENSEE, its officers, employees or agents for or on account of any injury, loss, or damage, of any kind or nature, sustained by, or any damage assessed or asserted against, or any other liability incurred by or imposed upon LICENSEE, its officers, employees or agents or any other person or entity, arising out of or in connection with or resulting from LICENSEE’s:

(a)	production, use, or sale of any LICENSED PRODUCTS;
(b)	use of any TECHNOLOGY; or
(c)	advertising or other promotional activities with respect to any of the foregoing.

15.6	MVP hereby represents and warrants to BTG and DUKE that MVP has the right to grant the licenses set forth herein under PATENT RIGHTS and MVP TECHNOLOGY, including the license to the technical know-how summarized in Exhibit B, and to the use of the trademark, PURICASETM.
15.7	DUKE hereby represents and warrants to BTG and MVP that DUKE has the right to grant the licenses set forth herein under PATENT RIGHTS and DUKE TECHNOLOGY, including the license to the technical know-how and materials summarized in Exhibit A.
15.8	Each of the LICENSORS hereby separately represents and warrants to BTG that:

(a) it has no actual knowledge, as of the EFFECTIVE DATE, that the use of TECHNOLOGY for the manufacture, use or sale of LICENSED PRODUCTS will infringe any patent or other intellectual property right of any third party in any country in the world, and that, if at any time during the TERM of this AGREEMENT, it becomes aware of any such information, it will promptly disclose such to BTG;

(b)	it has no actual knowledge, as of the EFFECTIVE DATE, of any prior art that would raise any issue concerning the validity of any patents issued or to issue on any applications which are included in PATENT RIGHTS, and that if at any time during the TERM of this AGREEMENT, it becomes aware of any such information, it will promptly disclose such to BTG;
(c)	it is not aware of any other agreements, amendments or licenses that affect its authority or ability to enter into this AGREEMENT;
(d)	prior to the execution of this AGREEMENT, it has not assigned, encumbered, pledged, mortgaged, used as collateral, granted a security interest or lien in or otherwise engaged in any action that affects its ability to grant LICENSEE the rights granted pursuant to the terms of this AGREEMENT; and
(e)	during the TERM of this AGREEMENT, it will not engage in any action that could reasonably be anticipated to adversely affect its ability to grant LICENSEE the rights to manufacture, use and sell LICENSED PRODUCTS anywhere in the world pursuant to the terms of this AGREEMENT.

ARTICLE 16 — USE OF A PARTY’S NAME

16.1 Except for the rights granted to LICENSEE herein with respect to the mark PURICASE^TM, no PARTY to this AGREEMENT will, without the prior written consent of another party:

(a)	use in advertising, publicity or otherwise, the name of any employee or agent, any trade-name, trademark, trade dress, service mark, symbol, or any abbreviation, contraction or simulation thereof owned by another PARTY; or
(b)	represent, either directly or indirectly, that any product or service of another PARTY is a product or service of the representing PARTY or that it is made in accordance with or utilizes the information or documents of another PARTY.

16.2 No PARTY will originate any publicity, news release or other public announcement or comment, written or oral, related to this AGREEMENT without the prior written consent of the other PARTIES, except as may be required by law. The PARTY making any announcement, which it reasonably believes to be required by law, will first give the other PARTIES an opportunity to review the form and content of any such announcement and comment upon it before it is made.

Notwithstanding the foregoing, LICENSORS acknowledge that BTG is a publicly traded company, and hereby consent to BTG’s disclosure of this AGREEMENT and its relationship with LICENSORS in its filings with the Securities and Exchange Commission and its disclosures to its stockholders.

ARTICLE 17 — SEVERABILITY

17.1 Each clause of this AGREEMENT is distinct and severable. If any clause is deemed illegal, void or unenforceable, it is the PARTIES’ intent that all other clauses or portions of this AGREEMENT shall remain in effect to the maximum extent possible.

ARTICLE 18 — WAIVER

18.1 The failure of any PARTY in any instance to insist upon the strict performance of the terms of this AGREEMENT will not be construed to be a waiver or relinquishment of any of the terms of this AGREEMENT, either at the time of the PARTY’s failure to insist upon strict performance or at any subsequent time, and such terms will continue in full force and effect.

ARTICLE 19 — TITLES

19.1 All titles and article headings contained in this AGREEMENT are inserted only as a matter of convenience and reference. They do not define, limit, extend or describe the scope of this AGREEMENT or the intent of any of its provisions.

ARTICLE 20 — ENTIRE UNDERSTANDING

20.1 This AGREEMENT represents the entire understanding between the LICENSEE and the LICENSORS, and supersedes all other agreements, expressed or implied, between the LICENSEE and the LICENSORS, with the sole exception of the agreement dated July 30, 1998 among BIRD, BTG and MVP.

     IN WITNESS WHEREOF, the PARTIES have caused this AGREEMENT to be executed by their duly authorized representatives as of the EFFECTIVE DATE.

MOUNTAIN VIEW PHARMACEUTICALS, INC.
By:	/s/ Merry R. Sherman, Ph.D.
	Merry R. Sherman, Ph.D
	President

DUKE UNIVERSITY
By:	/s/ Robert L. Taber Ph.D.
	Robert L. Taber, Ph.D.
	Associate Vice-Chancellor and Director, Office of Science and Technology

BIO-TECHNOLOGY GENERAL CORP.
By:	/s/ Robert M. Shaw
	Robert M. Shaw
	Vice President, General Counsel

Exhibit A

Summary of Know-how, Information and Materials to be Provided by DUKE to BTG as
Part of DUKE TECHNOLOGY

[**]

Exhibit B

Summary of Know-how, Information and Materials to be Provided by MVP
to BTG as Part of MVP TECHNOLOGY

[**]

Exhibit C

Patents and Patent Applications included within PATENT RIGHTS
(To Be Amended from Time to Time during the TERM)

[**] EX-10.25 10 y29840exv10w25.htm EX-10.25: SUPPLY AGREEMENT

Exhibit 10.25

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.

SUPPLY AGREEMENT

BETWEEN

WATSON PHARMA, INC.

AND

SAVIENT PHARMACEUTICALS, INC.

Table of Contents

SECTION 1 DEFINITIONS		i
SECTION 2 SUPPLY AND PURCHASE OF PRODUCTS	iii
SECTION 3 PRICING	vi
SECTION 4 FORECASTS, ORDERS	viii
SECTION 5 SPECIFICATIONS	ix
SECTION 6 TERM	xii
SECTION 7 TERMINATION	xii
SECTION 8 DELIVERY; INVENTORY	xv
SECTION 9 DEFECTIVE PRODUCTS	xv
SECTION 10 REGULATORY MATTERS	xvi
SECTION 11 FORCE MAJEURE	xix
SECTION 12 INSURANCE	xix
SECTION 13 CONFIDENTIALITY	xx
SECTION 14 PUBLIC ANNOUNCEMENTS	xx
SECTION 15 REPRESENTATIONS AND WARRANTIES	xxi
SECTION 16 INDEMNIFICATION	xxii
SECTION 17 DISPUTE RESOLUTION	xxiii
SECTION 18 MISCELLANEOUS	xxiii

LIST OF EXHIBITS

A. Product, Specifications and Packaging

B. Initial Finished Product Prices

C. Adverse Event Reporting Procedures

D. Initial Purchase Order Forecast

E. Quality Requirements

F. Form of Press Release

SUPPLY AGREEMENT

     SUPPLY AGREEMENT, dated as of June 12, 2006, by and between Savient Pharmaceuticals, Inc., a Delaware corporation (“Seller”), and Watson Pharma, Inc., a Delaware corporation (“Purchaser”).

     WHEREAS, Seller would like to make and sell the Products (as defined below) to Purchaser, and Purchaser would like to purchase the Products from Seller pursuant to the terms of this Agreement;

     NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth, the parties hereto agree as follows:

SECTION 1

DEFINITIONS

     As used throughout this Agreement and any exhibits, schedules or attachments hereto, each of the following terms shall have the respective meaning set forth below:

     1.1 “Additional Amount” shall have the meaning given in Section 2.2.3.

     1.2 “Affiliate” of a Party shall mean any entity that, directly or indirectly, controls, is controlled by, or is under common control with such entity. For the purposes of this definition, the term “controls” (including, with correlative meanings, the terms “controlled by” and “under common control with”) as used with respect to any Party, shall mean the possession (directly or indirectly) of more than 50% of the outstanding voting securities or other equity or voting interest of an entity.

     1.3 “ANDA” shall mean an Abbreviated New Drug Application filed with the FDA.

     1.4 “Bankruptcy Code” shall have the meaning given in Section 7.3.

     1.5 “Bankruptcy Law” shall have the meaning given in Section 7.3.

     1.6 “Commercially Reasonable Efforts” shall mean, with respect to a Party, those commercially reasonable efforts that such Party is making in similar circumstances relative to other products in its portfolio with respect to production and/or marketing, distribution and sales of its own products that are in production or that are being marketed, distributed and sold at that time, as applicable. Commercially Reasonable Efforts shall be in accordance with the efforts and resources that the Party would use for a product owned by it or to which it has rights, which is of similar market potential at a similar stage in its product life, taking into account the competitiveness of the marketplace, the proprietary position of the applicable active ingredient, the regulatory structure involved, and the profitability of the product.

     1.7 “Damages” shall have the meaning given in Section 16.1.

     1.8 “Delivery Price” shall have the meaning given in Section 3.1.

     1.9 “Effective Date” shall mean the date of this Agreement.

i

     1.10 “Equivalent Product” shall mean any product, other than a Product that Seller is obligated to supply to Purchaser hereunder, which (i) is manufactured by a Party pursuant to an ANDA which was approved by the FDA, which ANDA was filed on the basis of the original NDA for the brand equivalent of such Product or (ii) is otherwise a generic version of the brand equivalent of such Product.

     1.11 “Existing Inventory” shall mean all Product manufactured by Seller into final tableted form prior to [**] with the following lot numbers: A18061; C400715; C400721; C500173; C500174; C500175, and; 4A3069.

     1.12 “FDA” shall mean the U.S. Food and Drug Administration, and any successor or replacement agency.

     1.13 “Finished Product Price” shall mean the aggregate cost to manufacture and/or Label Product, on a batch by batch basis,

     (i) if Product is manufactured and/or Labeled by Seller or an Affiliate of Seller the sum of Seller’s (a) [**], (b) [**] and (c) [**]; or

     (ii) if such Product is manufactured and/or Labeled by a Third Party manufacturer, the sum of (a) [**] and (b) [**].

All costs included in Manufacturing Costs shall be calculated in accordance with U.S. generally accepted accounting principles, consistently applied to the manufacture of all products produced in the facility or facilities in which such Product is manufactured and/or Labeled. [**]

     1.14 “Force Majeure Event” shall have the meaning given in Section 11.

     1.15 “Gross Margin” shall have the meaning given in Section 3.1.

     1.16 “Indemnity Claim” shall have the meaning given in Section 16.3.

     1.17 “Initial Purchase Order” shall have the meaning given in Section 2.2.1.

     1.18 “Label”, “Labeled” or “Labeling” shall mean all labels and other written, printed or graphic matter upon (i) any packaging, container or wrapper utilized with the Products, or (ii) any written material accompanying the Products, including package inserts; or as the context requires, the act of applying and/or using the same.

     1.19 “Latent Defect” shall mean any instance where a lot of a Product fails to conform to the applicable Specifications or is otherwise defective or fails to conform to the warranties given by Seller herein, and such failure would not be discoverable upon reasonable physical inspection or standard testing of such Product upon receipt by Purchaser in accordance with Purchaser’s standard operating procedures.

     1.20 “Launch Quantity” shall have the meaning given in Section 2.2.1.

     1.21 “Material Change” shall have the meaning given in Section 5.2.1

     1.22 “NDA” shall mean a New Drug Application filed with the FDA.

     1.23 “Net Sales” shall mean, with respect to any Product, the revenues derived from the sale by Purchaser, its Affiliates, licensees and assignees from the sale of a Product to independent third parties, less: (i) all normal and customary discounts (such as cash discounts, volume discounts, chargebacks, allowances (including shelf stock adjustments and promotional allowances that are not selling or marketing-related operational expenses), government mandated rebates and other rebates, credits, and Product returns), (ii) freight, shipping, insurance costs relating to the shipment of the Product, duties and taxes; and (iii) bad debt related to the Product (as such bad debts are actually

incurred). Net Sales shall be determined on an accrual basis (except for clause (iii) above) in accordance with generally accepted accounting principles in the Territory, applied on a basis consistent with Purchaser’s annual audited financial statements. Subject to the foregoing, Purchaser will not deduct any marketing, selling, advertising or distribution expenses of any kind to determine Net Sales.

     1.24 “Packaging” shall mean all primary containers, Labels, cartons, shipping cases or any other like matter used in packaging or accompanying the Products; or as the context requires, the act of applying and/or using the same.

     1.25 “Party” shall mean Seller or Purchaser and, when used in the plural, shall mean Seller and Purchaser.

     1.26 “Patent Defect” shall mean any instance where a lot of a Product fails to conform to the applicable Specifications or is otherwise defective or fails to conform to the warranties given by Seller herein, and such failure is discoverable upon reasonable physical inspection or standard testing of such Product upon receipt by Purchaser in accordance with Purchaser’s standard operating procedures.

     1.27 “Product” or “Products”, as applicable, shall mean each of oxandrolone 2.5mg tablets (the “2.5mg Product”) and oxandrolone 10mg tablets (the “10mg Product”), collectively the Products and, any other products the parties agree to include herein; Product shall not include any branded version of oxandrolone either currently offered for sale or offered for sale in the future by Seller, whether or not of the same dosage strength or form.

     1.28 “Purchase Price” shall have the meaning give in Section 3.1.

     1.29 “Purchaser Trademarks” shall have the meaning given in Section 5.4.

     1.30 “Quality Requirements” shall have the meaning give in Section 5.3.

     1.31 “Remainder Payment” shall have the meaning given in Section 3.1.

     1.32 “Specifications” shall mean the specifications for the design, composition, manufacture, packaging, and/or quality control of each of the Products, as set forth on Exhibit A attached hereto and made a part hereof, as the same may hereafter be modified by mutual agreement of the parties in writing.

     1.33 “Start Date” shall have the meaning given in Section 2.2.3.

     1.34 “Territory” shall mean the United States of America, including its territories and possessions and military bases and possessions (including, but not limited to, the Commonwealth of Puerto Rico).

SECTION 2

SUPPLY AND PURCHASE OF PRODUCTS

     2.1 Supply and Purchase Obligations.

          2.1.1 During the Distribution Term, Seller shall manufacture, or have manufactured by a third party, and exclusively supply Purchaser with Products for sale and distribution in the

Territory. Seller shall supply Purchaser with those quantities of Products as are ordered by Purchaser pursuant to this Agreement. In the event Seller has any Product manufactured by an unaffiliated third party, Seller shall (i) notify the Purchaser as to the identity of the third party manufacturer prior to the commencement of supply, and (ii) use its best efforts to obtain from such third party manufacturer rights for the benefit of Purchaser as set forth in Section 5.3, 5.5, 10.3, 10.4, 10.9 and 10.10 hereto. During the Distribution Term (subject to the provisions of Section 4.5) Purchaser shall purchase from Seller 100% of Purchaser’s requirements for the Products in the Territory.

          2.1.2 During the Distribution Term (and subject to the provisions of Section 4.5), Purchaser shall purchase from Seller the Products solely for distribution and sale in the Territory. During the Term, Seller and its Affiliates shall not, and shall not directly or indirectly grant to any other person or entity the right to, sell or distribute the Products and/or Equivalent Product in the Territory, and Seller shall not directly or indirectly cooperate with any other person or entity with respect to, or supply products or services for, the sale or distribution of the Products and/or Equivalent Product in the Territory. Nothing in this Agreement shall prevent the Seller from marketing or selling, or granting third parties the right to market or sell (i) any formulation, dosage or strength of oxandrolone, utilizing any method of delivery, under the brand name Oxandrin® or (ii) any other branded formulations, dosages or strengths of oxandrolone, in each case, other than those Products identified in Exhibit A.

          2.1.3 During the Term, Purchaser shall not, directly or knowingly and indirectly, (i) solicit customers for the Product, or make sales of the Product, or establish or maintain any branch or distribution depot for the Product, outside of the Territory, or assist any party in doing so or (ii) solicit customers for an Equivalent Product, or make sales of an Equivalent Product, or establish or maintain any branch or distribution depot for an Equivalent Product, within the Territory, or assist any party in doing so. If at any time Purchaser, directly or knowingly and indirectly, markets, sells, or distributes the Product outside the Territory, Seller may suspend all sales of the Product to Purchaser until Purchaser takes appropriate actions to cease such sales. At such time as Purchaser learns that a customer is directly or indirectly using, marketing, selling or distributing Products outside of the Territory, or that such customer is assisting any other party to do so, then Purchaser shall cease making sales of Products to such customer until such a time as customer ceases making sales outside of the Territory and Purchaser shall immediately notify Seller in writing of such occurrence and take reasonable actions within its legal rights and powers to cause such third parties to cease making such sales of the Product outside the Territory.

          2.1.4 [ ** ], nothing in this Agreement shall prohibit Purchaser from undertaking its own development of any Equivalent Product, seeking regulatory approval of any such Equivalent Product, or undertaking manufacturing development and qualification, and limited manufacture (including third party manufacturing) of stability batches and validation batches of Equivalent Product, in each case solely for purposes of seeking regulatory approval for such Equivalent Product; provided, however, that Purchaser shall not be permitted to sell any Equivalent Product which it so manufactures during the Term of this Agreement. [ ** ]

     2.2 Commencement of Supply.

          2.2.1 Seller shall be obligated to commence supply of the Products to Purchaser within ninety (90) days of receipt of a binding purchase order of Products from Purchaser in accordance with the terms and conditions of this Agreement (“Initial Purchase Order”). The quantities in such Initial Purchase Order shall be discussed in good faith and mutually agreed

between the parties (“Launch Quantity”). Subject to the immediately preceding sentence, the nonbinding forecast for the Initial Purchase Order is attached as Exhibit D to this Agreement. It is further agreed that Seller shall use best commercial efforts to supply a total amount of [**] bottles of the 2.5mg Product, [**], as soon as commercially practicable but in no event later than ninety (90) days from the date of receipt by Purchaser of the Launch Quantities. All orders of Product by Purchaser shall be made in units which comprise whole batch amounts; the delivery of such Product shall be in amounts that reflect the actual batch yield where such yield does not deviate from the defined range ([**] bottles per batch for 2.5mg Product and [**] bottles per batch for 10mg Product).

          2.2.2 Upon receipt of the Initial Purchase Order, Seller shall, as promptly as commercially feasible and using diligent efforts (but in any event no later than ninety (90) days after receipt of such Initial Purchase Order or later date as requested in writing by Purchaser) supply to Purchaser the quantities of the applicable Product which are indicated on the Initial Purchase Order for such Product. In addition to any other right or remedy available to Purchaser, upon any failure by Seller to provide all of the Products in the Initial Purchase Order within the specified and mutually agreed upon time schedule, then Purchaser shall have the right, but not the obligation, to terminate this Agreement, without penalty to either Party, with respect to any or all of such Products (at Purchaser’s discretion) on thirty (30) days prior written notice to Seller.

          2.2.3 The parties agree that they shall cooperate to determine when an Equivalent Product may become available to the marketplace. However, Seller shall, at its sole discretion, designate on which date the Products will be distributed in the Territory by Purchaser (“Start Date”) and provide Purchaser with reasonable written notice thereof. It is specifically contemplated and agreed that the 2.5mg Product and the 10mg Product may each have a separate and distinct Start Date based upon the availability of an Equivalent Product in the respective dosage forms, and that Purchaser shall only sell that Product for which Seller has provided explicit approval and for which a designated Start Date has been specified in writing by Seller.

          2.2.4 Prior to the Start Date, Purchaser shall have in place with all significant wholesalers, chain and other drug supply and pharmacy outlets, a communication advising such entities of the Product’s pending availability. Consequently, if any Product supplied to Purchaser under this Agreement is delivered by Purchaser to any third party earlier than two (2) business days prior to the applicable Start Date, then Purchaser shall pay to Seller, as liquidated damages (the “Additional Amount”) an amount equal to (X) the number of units of such Product shipped or distributed by Purchaser to any third party prior to the applicable Start Date times (Y) Seller’s average net selling price for Seller’s branded version of such Product, less (Z) the amounts paid or payable by Purchaser to Seller for such Product under Section 3 below.

          Notwithstanding the foregoing, with Seller’s prior written approval, Purchaser may ship Product to third party purchasers earlier than two (2) business days prior to the Start Date without penalty if such Product is held by third party purchasers thereof in isolation and not available for sale, resale or dispensing until the applicable Start Date; provided, however, that Purchaser shall obtain from any third party purchasers of Product contemplated hereunder binding assurances of non-release prior to the Start Date. To the extent any third party purchaser releases Product for sale, resale or dispensing prior to the Start Date, then Purchaser shall be liable to Seller for the Additional Amount with respect to such Product as calculated above. The Additional Amount shall be Seller’s sole and exclusive remedy (whether arising in contract, tort or otherwise) for the sale prior to the applicable Start Date of any Product by Purchaser and in no event shall such sale be considered or deemed as a breach hereunder. Purchaser shall deliver to Seller written notice of its initial shipment of Product to the retail trade within twenty-four (24) hours of such shipment.

          2.2.5 Seller shall supply to Purchaser, and Purchaser shall accept from Seller subject to all applicable terms and conditions herein, Launch Quantities of Product from Seller’s Existing Inventory provided that such Existing Inventory complies with the terms and conditions of this Agreement. Anything to the contrary notwithstanding, to the extent that any Existing Inventory is sold to Purchaser by Seller and subsequent thereto Purchaser is unable to sell such Existing

Inventory because its remaining expiry dating is equal to or less than twelve (12) months, Purchaser may return such quantities of Existing Inventory to Seller and Seller shall thereafter, in accordance with the applicable terms and conditions herein, refund to Purchaser one hundred percent (100%) of the Delivery Price actually paid for such quantities as are actually returned to Seller.

SECTION 3

PRICING

     3.1 Purchase Prices. The purchase price (“Purchase Price”) paid by Purchaser for each Product delivered by Seller shall be paid in two installments. The first installment (the “Delivery Price”) shall be a payment equal to the number of units of such Product delivered by Seller to Purchaser pursuant to [**] of such Product. The second installment (the “Remainder Payment”) shall be a quarterly payment equivalent to [**] percent ([**]%) of Purchaser's Gross Margin (as defined below) on the sale of such Product for each calendar quarter during the Term hereof. For purposes of this Agreement “Gross Margin” for a particular calendar quarter shall be equivalent to [**] of Product sold during the quarter in question. Purchaser shall provide to Seller within thirty (30) days of the end of each quarter a reasonably detailed report which sets forth the Gross Margin for the quarter just completed.

     3.2 Delivery Price Adjustment. The Delivery Price for Product in effect during any calendar year may be adjusted by Seller upon notice to Purchaser during such calendar year to reflect any actual increase in Seller’s Manufacturing Cost for Product.

     3.3 Shipping Terms. The prices charged by Seller to Purchaser shall be FCA (Incoterms 2000), Seller’s facility in the Territory at which finished goods are packaged for shipment to Purchaser. All deliveries must be accompanied by a packing slip that describes the Products and identifies the purchase order number and the shipment’s destination.

     3.4 Payment Terms. The Delivery Price for each Product shall be paid by Purchaser within sixty (60) days from the date of delivery of such Product. The Remainder Payment shall be paid to Seller within sixty (60) days after the end of each calendar quarter. All payments shall be made in United States dollars.

     3.5 Negative Gross Margin.

          3.5.1 To the extent the Gross Margin is negative in any particular quarter or quarters hereunder Seller shall reimburse Purchaser for [**] percent ([**]%) of the amount of any such negative Gross Margin within sixty (60) days after the end of (i) such calendar quarter or (ii) the expiration or termination of this Agreement, as the case may be.

          3.5.2 For any quarter in which Purchaser claims a negative Gross Margin, Seller shall have the right to have Seller’s independent public accountants (reasonably acceptable to Purchaser) conduct an audit of Purchaser’s financial records, as such information relates to Net Sales and the calculation of Gross Margin with respect to each Product during the quarter in question, for a period of twelve (12) months following receipt of Purchaser’s notice to Seller of such negative Gross Margin; provided, however, that this right may not be exercised more than once in any calendar year. Any audit conducted pursuant to this Section 3.5.2 shall not count against the maximum number of audits to which Seller is entitled pursuant to Section 3.6 herein, and may be conducted by the

independent public accountants upon the provision of not less than thirty (30) days prior written notice to Purchaser.

     3.6 Annual Audit Rights.

          3.6.1 Purchaser shall keep accurate books and records for purposes of documenting the amount of the Net Sales and the calculation of Gross Margin with respect to each Product. Said books of account shall be kept at Purchaser’s principal place of business. Upon at least thirty (30) days prior written notice given on or before June 30th of each calendar year, Seller, at its expense, shall have the right to have Seller’s independent public accountants (reasonably acceptable to Purchaser) obtain access to Purchaser’s financial records for the previous calendar year, during reasonable business hours solely for the purpose of verifying the amount of Net Sales and the calculation of Gross Margin with respect to each Product for such previous calendar year; provided, however, that this right may not be exercised more than once in any calendar year. Purchaser agrees to reasonably cooperate with Seller’s independent public accountants in the conduct of any such audit. Prior to disclosing the results of any such audit, the auditor shall present Purchaser with a preliminary report of its findings and provide Purchaser with an opportunity to respond to any questions raised or issues identified; provided, however, that Seller shall receive the audit report as originally submitted by independent public accountants along with Purchasers responses thereto to the extent such responses are given pursuant to questions raised in an audit and to the extent that the responses are material to resolving the audit. Seller shall solicit or receive only information relating to the accuracy of such calculations and shall deliver to Purchaser a detailed written accountants’ report (setting forth, among other things, the miscalculations, if any, identified by the audit) within thirty (30) days of completion of the audit. If Seller does not submit a dispute in regards to the amount of Net Sales or Gross Margin so audited within forty-five (45) days of Seller’s receipt of the audit report, then the amount of Net Sales and Gross Margin as originally reported by Purchaser shall be deemed to have been accepted and agreed to by Seller and shall be binding. Seller shall ensure that Seller’s independent public accountants maintain the confidentiality of Purchaser’s Confidential Information on terms no less restrictive than those set forth in Section 13. Such accountants shall report to Seller only the results of the verification. Except in the event of a bona fide dispute, any underpayment or overpayment of the Purchase Price due to a miscalculation of such amount shall be paid within sixty (60) days after the delivery of the detailed written accountants’ report to Purchaser. To the extent that the results of any audit conducted by Seller discloses an underpayment of the Purchase Price by Purchaser to Seller by an amount equal to or exceeding ten percent (10%) for the period in question, then the costs of the audit shall be borne by Purchaser and Purchaser shall remit such costs within thirty (30) days of the presentment of an invoice.

          3.6.2 Seller shall keep accurate books and records for purposes of documenting the Delivery Price. Said books of account shall be kept at Seller’s principal place of business. Upon at least thirty (30) days prior written notice given on or before June 30th of each calendar year, Purchaser, at its expense, shall have the right to have Purchaser’s independent public accountants (reasonably acceptable to Seller) obtain access to Seller’s financial records for the previous calendar year, during reasonable business hours solely for the purpose of verifying the Delivery Price for such previous calendar year; provided, however, that this right may not be exercised more than once in any calendar year. Seller agrees to reasonably cooperate with Purchaser’s independent public accountants in the conduct of any such audit. Prior to disclosing the results of any such audit, the auditor shall present Seller with a preliminary report of its findings and provide Seller with an opportunity to respond to any questions raised or issues identified; provided, however, that Purchaser shall receive the audit report as originally submitted by independent public accountants along with Seller responses thereto to the extent such responses are given pursuant to questions raised in an audit and to the extent that the responses are material to resolving the audit. Purchase shall solicit or

receive only information relating to the accuracy of such calculations and shall deliver to Seller a detailed written accountants’ report (setting forth, among other things, the miscalculations, if any, identified by the audit) within thirty (30) days of completion of the audit. If Purchaser does not submit a dispute in regards to Delivery Price so audited within forty-five (45) days of Purchaser’s receipt of the audit report, then the Delivery Price as originally reported by Seller shall be deemed to have been accepted and agreed to by Purchaser and shall be binding. Purchaser shall ensure that Purchaser’s independent public accountants maintain the confidentiality of Seller’s Confidential Information on terms no less restrictive than those set forth in Section 13. Such accountants shall report to Purchaser only the results of the verification. Except in the event of a bona fide dispute, any underpayment or overpayment of the Purchase Price due to a miscalculation of such amount shall be paid within sixty (60) days after the delivery of the detailed written accountants’ report to Seller. To the extent that the results of any audit conducted by Purchaser discloses an overpayment of the Delivery Price by Purchaser to Seller by an amount equal to or exceeding ten percent (10%) for the period in question, then the costs of the audit shall be borne by Seller and Seller shall remit such costs within thirty (30) days of the presentment of an invoice.

SECTION 4

FORECASTS, ORDERS

     4.1 Forecasts and Orders. The initial forecast for the Products will be a 24-month non-binding forecast of demand for each Product after the Effective Date for capacity planning purposes, and is attached as Exhibit D. Purchaser shall submit to Seller a purchase order for the initial six (6) months of the initial forecast within five (5) days of the Start Date of this Agreement. Within five (5) days after the beginning of each calendar quarter during the Term of this Agreement, Purchaser shall provide Seller with a written rolling forecast of Purchaser’s expected requirements for the Products during the following twelve (12) months. The first six (6) months of each such forecast shall be binding; and the amounts set forth for each of the following two (2) calendar quarters shall constitute a non-binding, good faith estimate of the Product requirements of Purchaser for such period for planning purposes only. Seller shall be required to manufacture and deliver to Purchaser such quantities of Products as Purchaser orders in any calendar quarter up to 125% of the quantity forecast for such calendar quarter in the immediately preceding binding forecast. Seller shall use reasonable commercial efforts to manufacture, or have manufactured, and deliver to Purchaser any quantities of Product Purchaser orders in excess of 125% of the quantity forecasted for such calendar quarter, but shall be under no obligation to provide to Purchaser any quantities of Product which exceed 125% of the quantity forecasted for such calendar quarter. If Seller becomes aware of any circumstances that may cause Seller to default on its obligation to deliver such quantities of Product as Purchaser orders or to fail to supply quantities of Product in accordance with Purchaser’s forecasts for any calendar quarter, Seller shall give Purchaser prompt written notice describing such circumstances, together with a proposed course of action to remedy such failure. In the event of a significant change in market conditions, significant new competitive factors and/or new key customer demands, the parties agree to negotiate in good faith on appropriate changes to such forecasts.

     4.2 Orders. Purchaser shall submit binding written or electronic purchase orders for Product (or by any other means agreed to in writing by the parties) to Seller, which shall be placed at least one hundred eighty (180) days prior to the desired date of delivery, and which binding orders shall comply with the binding forecasts set out in Section 4.1. Purchaser shall have no minimum purchase requirements of Products during the Term of this Agreement. Purchase orders shall be submitted by Purchaser to Seller in accordance with previously agreed upon delivery mechanisms.

     4.3 Conflicts. To the extent of any conflict or inconsistency between this Agreement and any purchase order, purchase order release, confirmation, acceptance or any similar document, the terms of this Agreement shall govern.

     4.4 Capacity Allocation. In the event that Seller’s inability (including without limitation any inability as a result of a Force Majeure Event) to meet firm orders, in whole or in part, is due to a shortage of production capacity or common raw materials, Seller shall promptly notify Purchaser in writing of such shortage of production capacity or common raw materials, and, if possible, the date such shortage of production capacity or common raw materials is expected to end. In such event, Seller shall allocate its available production capacity or raw materials to the production of the Products in such proportion (expressed as a function of equipment utilized) as the production equipment capacity or common raw materials actually utilized to meet orders for the Products over the previous six (6) month period bears to total production equipment capacity which is set up to manufacture the Products in such facility(ies) over that same period.

     4.5 Short Orders; Alternative Sources of Equivalent Products. In the event that Seller fails (for any or no reason including without limitation any Force Majeure Event) to deliver all or any portion of an order of Product to Purchaser in accordance with the terms of this Agreement, Seller shall promptly notify in writing Purchaser of such fact. In addition to any other rights and remedies available to Purchaser, Purchaser shall have the right, but not the obligation, to modify any outstanding purchase order.

SECTION 5

SPECIFICATIONS

     5.1 Specifications.

          5.1.1 Attached as Exhibit A to this Agreement are the Specifications for each of the Products. The Specifications for each Product shall not be changed except as permitted under this Agreement.

          5.1.2 The attached Exhibit A also reflects the current Packaging for each Product. The parties agree to cooperate in good faith with respect to any changes to the Packaging of the Product with the Party requesting any changes to the Packaging bearing the development costs (e.g. artwork or package design) of such changes.

     5.2 Changes.

          5.2.1 From time to time during the Term of this Agreement, either Party may submit to the other written proposals for the adoption, implementation or development of any change, improvement or modification to the Product. If such change is proposed by Seller, such change may be implemented by Seller after consultation with Purchaser (but without requiring Purchaser’s consent) so long as such change does not negatively impact the safety or efficacy of the Products, or materially increase Purchaser’s liability with respect to the Products (any such change hereinafter referred to as a “Material Change”). If such change is a Material Change, Seller shall not be permitted to make such change without the prior written consent of Purchaser, such consent not to be unreasonably withheld or delayed, and subject to the provisions of Sections 5.2.2 and 5.2.3 below. The Specifications shall be modified to reflect any such changes. In the event of any change, Seller shall establish an appropriate qualification protocol, and Purchaser and Seller shall determine an appropriate inventory level for the pre-change Product in order to cover on-going requirements

during the qualification process. The foregoing shall not preclude Seller from implementing process changes or other manufacturing related changes so long as such changes do not materially alter the Specifications.

          5.2.2 In the event that Seller is required to change the Product Specifications pursuant to applicable law, rule, or regulation or in response to the order of a governmental authority or regulatory body, Seller shall promptly advise Purchaser in writing of any such change, as well as any scheduling adjustments which may result from such change.

          5.2.3 In addition to the changes under Section 5.2.2, Purchaser shall also have the right to request that a change be made to the Specifications at its expense and upon prior written notice to Seller. Seller shall not be required to make any such change but shall consider Purchaser’s request in good faith.

          5.2.4 In order for Purchaser to include in any Product Label or Labeling Purchaser Trademarks or similar changes indicating Purchaser as the distributor of such Product, upon Purchaser’s request, Seller shall provide Purchaser the Label artwork and text in electronic format. Purchaser shall update such artwork and text to include Purchaser Trademarks and such other similar changes as desired by Purchaser to indicate Purchaser as the distributor of such Product; provided that Seller shall not be required to accept such changes if such changes do not comply with the NDA under which the Product is to be sold and distributed and all applicable laws, rules and regulations. Purchaser shall make all necessary arrangements, at its expense, to have such changed Labels or Labeling printed and shall provide to Seller printer’s proofs for Seller’s review and approval. Except with respect to the use of Purchaser’s Trademarks and supplied artwork, Seller shall be responsible for ensuring the accuracy of all information contained on all Labels and Labeling for the Products and for the compliance of all such Labels and Labeling with the NDA under which such Products are to be sold and distributed and applicable law. In accordance with the foregoing, Seller shall, within ten (10) business days of receipt of said printer’s proofs, provide written notice to Purchaser of Seller’s approval of such proofs in the form submitted by Purchaser or with such corrections thereto as included in Seller’s notice.

     5.3 Quality Requirements. The Seller shall, and shall cause any third party manufacturer to, materially comply with the quality requirements set forth on Exhibit E attached hereto (the “Quality Requirements”), with respect to the manufacture of the Product. To the extent that any inconsistencies or conflicts exist between Exhibit E and this Agreement, the stipulations and provisions in this Agreement shall prevail.

     5.4 Trademarks.

          5.4.1 All trademarks, trade names (if needed) and packaging graphics (collectively, the “Purchaser Trademarks”) used by Purchaser in connection with the Products shall be chosen by Purchaser in its discretion. Purchaser shall be responsible for any and all liabilities which may arise from Purchaser’s use of the Purchaser Trademarks. Unless required by applicable law or regulation or unless otherwise agreed to by the parties, Purchaser shall not use a trademark, trade name, or copyright of Seller in connection with the distribution, marketing, promotion or sale of the Products; to the extent that Purchaser believes that it shall or must use a trademark, trade name or copyright of Seller, Seller shall be provided with advance notice of Purchaser’s intention to do so and Seller must consent prior to any such use by Purchaser, such consent not to be unreasonably withheld; provided, however, that Purchaser may use Seller’s trademarks, trade names and copyright as contemplated under Section 14.1 and in Purchaser’s advertising and promotional materials in order to, among other things, identify the Products as comparable to Seller’s brand version product and to identify Seller as

the owner of Seller’s trademark used with its brand version product (e.g., “Oxandrolone Tablets– Compare to Oxandrin^®. Oxandrin^® is a registered trademark of Savient Pharmaceuticals, Inc.”). For the purpose of clarity, any use of Seller’s trademarks, trade names and/or copyright pursuant hereto shall be made only with the prior written approval of Seller as to the specific use thereby contemplated.

          5.4.2 Use of Purchaser Trademarks by Seller shall be solely for the purpose of preparing and Packaging the Products for sale to Purchaser. Purchaser hereby grants a limited license on a non-exclusive basis to Seller hereunder to use the Purchaser Trademarks in accordance with the terms of this Agreement. Any and all Products supplied hereunder are for sale only to Purchaser for distribution by Purchaser. Seller will not, at any time in any manner, represent that it has ownership in any Purchaser Trademarks and acknowledges that it has no ownership interest in any Purchaser Trademarks nor will Seller grant a sublicense to any third party to use such Purchaser Trademarks. Upon expiration or earlier termination of this Agreement, Seller will cease and desist use of any Purchaser Trademark in any way.

     5.5 Certificate of Analysis; Certificate of Compliance. Each shipment of the Products to Purchaser shall be accompanied by a certificate of analysis prepared by an authorized representative of Seller, including where applicable a third party manufacturer, confirming that the Products in the shipment have been tested and shown to be in accordance with the Specifications for such Products. Such certificates of analysis and certificates of compliance shall be substantially in the form set forth in the Quality Requirements.

     5.6 Expiry Dating. Except for Products which comprise the Existing Inventory which are addressed in Section 2.2.4, all Products shipped to Purchaser, at the time of shipment by Seller, shall have no less than [ ** ] months expiry dating remaining for the 2.5mg Product and no less than [ ** ] months expiry dating remaining for the 10mg Product. Purchaser shall notify Seller in the event a Product has [ ** ] months or less dating remaining, and within thirty (30) days of receipt of such notice Purchaser shall deduct from the next quarterly payment owing to Seller [**] percent ([**]%) of the amount actually paid to Seller for such Product. For all deliveries consisting of Existing Inventory, at the time of shipment by Seller, such Products shall have no less than [ ** ] months expiry dating remaining. At Seller’s option and sole expense, Purchaser shall (a) destroy such Product, or (b) return such Product to Seller.

     5.7 Stability Testing. Seller shall maintain a stability testing program for the Products and provide Purchaser with an annual product report thereon. In the event that any results from such program could indicate that Product would not meet its expiry date, Seller shall promptly notify Purchaser. At least one (1) batch per year of each Product (or its branded equivalent), or as otherwise required by the NDA, shall be included in the stability program.

     5.8 Annual Report. Purchaser will supply distribution information and other required information to Seller for the purposes of inclusion into the Annual Report to FDA and shall provide such information in a timely manner so as to enable Seller to file the Annual Report in accordance with applicable regulations. To the extent that Seller requests additional information from Purchaser, Purchaser agrees to reasonably cooperate with Seller.

SECTION 6

TERM

     6.1 Term. The term of this Agreement shall commence on the Effective Date and remain in effect for each Product hereunder for a period of ten (10) years from the Start Date for such Product (the “Initial Term”), unless sooner terminated as expressly provided under the terms of this Agreement. This Agreement will automatically renew for successive two-year periods following the Initial Term (each, a “Renewal Term”), unless terminated prior to the expiry of the Initial Term or any Renewal Term by either Party confirmed in writing and delivered at least twelve (12) months prior to the expiration of the Initial Term or the Renewal Term to which it relates (the Initial Term, together with any Renewal Terms, the “Term”). The distribution term for Product shall become effective as of the date upon which Seller supplies and Purchaser actually receives the Launch Quantities of Product (the “Distribution Term”) and shall remain in effect until the end of the Term unless sooner terminated as expressly provided under the terms of this Agreement.

SECTION 7

TERMINATION

     7.1 Termination for Convenience. Each of Seller or Purchaser may terminate this Agreement in its sole discretion (and without any liability to the other for such termination), with respect to any Product, at any time on or after the fourth (4th) anniversary of the Start Date of such Product upon no less than one (1) year prior written notice to the other, which prior written notice, if any, shall be delivered on or after such fourth (4th) anniversary of such Start Date.

     7.2 Breach. This Agreement may be terminated, on a Product by Product basis, prior to the expiration of the Term, by either Party by giving written notice of its intent to terminate and stating the grounds therefor if the other Party shall materially breach or materially fail in the observance or performance of any representation, warranty, guarantee, covenant or obligation under this Agreement. The Party receiving the default notice shall have sixty (60) days from the date of receipt thereof to cure the breach or failure. If a breach is not curable within such sixty (60) day period (other than a failure to supply Product in accordance with the terms of this Agreement), then the non-performing Party shall have an additional sixty (60) days within which to cure such breach so long as the non-performing Party is diligently working towards a remedy for such breach. In the event such breach or failure is cured in accordance with the provisions of this Section 7.2, the default notice shall be of no effect. In the event such breach or failure is not cured in accordance with the provisions of this Section 7.2, then this Agreement shall terminate without the requirement of the non-defaulting Party providing any additional notice to the defaulting Party.

     7.3 Insolvency, Etc. This Agreement may be terminated, prior to the expiration of the Term, upon written notice by either Party: (i) in the event that the other Party hereto shall (1) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (2) make a general assignment for the benefit of its creditors, (3) commence a voluntary case under the United States Bankruptcy Code, as now or hereafter in effect (the “Bankruptcy Code”), (4) file a petition seeking to take advantage of any law (the “Bankruptcy Laws”) relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, (5) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in any involuntary case under the Bankruptcy Code, or (6) take any corporate action for the purpose of effecting any of the foregoing; or (ii) if a proceeding or case shall be commenced against the other Party hereto in any court of competent

jurisdiction, seeking (1) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (2) the appointment of a trustee, receiver, custodian, liquidator or the like of the Party or of all or any substantial part of its assets, or (3) similar relief under any Bankruptcy Laws, or an order, judgment or decree approving any of the foregoing shall be entered and continue unstayed for a period of 60 days; or an order for relief against the other Party hereto shall be entered in an involuntary case under the Bankruptcy Code.

     7.4 Failure to Supply. In the event that Seller supplies less than (i) [**] percent ([**]%) of the aggregate quantity of Purchaser’s for Product for any two (2) out of three (3) consecutive calendar months or (ii) [**] percent ([**]%) of the aggregate quantity of Purchaser’s for Product for any four (4) out of six (6) consecutive calendar months, then Purchaser shall have the right to terminate this Agreement immediately by providing written notice to Seller of such termination.

     7.5 Gross Margin Deficiency. If the aggregate Gross Margin in any period of three (3) consecutive months is less than [**] percent ([**]%) of the aggregate Finished Product Price during such three-month period (the amount by which the Gross Margin is less than [**] percent ([**]%) of the aggregate Purchase Price is referred to herein as the “Gross Margin Deficiency”), then either Party may thereafter terminate this Agreement with sixty (60) days prior written notice to the other Party; provided, however, that in the event such termination notice is delivered by Seller such notice shall be deemed rescinded and shall be of no force or effect if, within ten (10) business days after receipt thereof, Purchaser pays to Seller an amount in cash equal to the Gross Margin Deficiency. For avoidance of doubt, in the event that Purchaser provides notice of its intention to terminate this Agreement pursuant to this Section 7.5, Purchaser shall nonetheless remain obligated to purchase any outstanding binding order quantities.

     7.6 Other Termination. Purchaser shall have the right but not the obligation, to terminate this Agreement with respect to any Product if the Start Date for such Product does not occur on or before January 1, 2009. In the event Purchaser terminates the Agreement pursuant to this Section, Seller shall promptly refund to Purchaser the amount paid to Seller for any quantity of such Product on-hand at the time of such termination and Purchaser shall return all quantities of Product on-hand to Seller.

     7.7 Transaction Event. Notwithstanding any other term of this Agreement, if, during the Term, Purchaser enters into an agreement (an “Acquisition Agreement”) pursuant to which it becomes an affiliate of an entity that develops, manufactures, markets or sells an Equivalent Product, and provided that the primary purpose of the Acquisition Agreement was for something other than acquiring rights to an Equivalent Product, Purchaser shall have the right to terminate this Agreement with ninety (90) days’ prior written notice of such termination to the Seller. If Purchaser exercises its rights under this Section 7.7, then beginning on the effective date of such termination (the “Termination Date”), through the shorter of (a) the date that would have been the natural expiration date of the Initial Term or the then current Renewal Term but for such termination or (b) the date upon which the Agreement could have been terminated in accordance with Section 7.1 hereof (i.e. one (1) year subsequent to the provision of notice following the fourth (4^th) anniversary of the Effective Date), (in either case, such period, the “Remainder Period”), Purchaser shall:

          7.7.1 where there exists two complete calendar quarters of sales of Product in accordance with this Agreement, make quarterly payments to Seller equal to [**]% of the average quarterly Gross Margin of the two calendar quarters immediately preceding the quarter in which Purchaser provided such notice of termination.

          7.7.2 in the event the Termination Date occurs prior to the completion of two (2) quarters of sales of Product in accordance with this Agreement, amounts which are the product of the

following formula: (a) the average quarterly net sales of Seller’s branded version of the Product for the two (2) most recent quarters prior to the effective date of such termination, times (b) the assumption on unit substitution rate of [**] percent ([**]%), times (c) the assumption of captured market share at [**] percent ([**]%), times (d) the pricing assumption of [**] percent ([**]%) of net selling price, less (e) cost of goods sold for the average quarterly net sales of Seller’s branded version of the Product for the two (2) most recent quarters prior to the effective date of such termination, the product thereof times (f) [**] percent ([**]%);

          7.7.3 In both cases of 7.7.1 and 7.7.2 above, such amount shall be reduced by any amounts earned by or paid to Seller by a third party in connection with the sale of the Product during the Remainder Period.

The remedies set forth in this Section 7.7 set forth Seller’s sole and exclusive remedy in the event Purchaser enters into an Acquisition Agreement.

     7.8 Intervening Equivalent Product Launch. In the event that an Equivalent Product becomes commercially available, where such Equivalent Product is manufactured and sold by unaffiliated third party or parties, prior to the receipt by Purchaser of the Launch Quantity of Product, then Seller shall have the right to terminate this Agreement immediately upon the provision of written notice to Purchaser; provided, however, that Seller shall promptly reimburse Purchaser for any (i) payments made to Seller by Purchaser prior to such termination and (ii) reasonable out-of-pocket costs incurred by Purchaser as a result of such termination.

     7.9 Effect of Termination.

          7.9.1 Subject to Section 7.9.3, upon expiration or termination of this Agreement, Seller shall manufacture and ship, and Purchaser shall purchase from Seller in accordance with the terms and conditions of this Agreement, any and all amounts of Products ordered by Purchaser hereunder prior to the effective date of such expiration or termination.

          7.9.2 Termination of this Agreement for any reason shall be without prejudice to any rights that have accrued to the benefit of either Party prior to such termination and shall not release either Party hereto from any liability which at such time has already accrued or which thereafter accrues from a breach or default prior to such expiration or termination, nor affect in any way the survival of any other right, duty or obligation of either Party hereto which is expressly stated elsewhere in this Agreement to survive such termination. In the case of a termination under Section 7.2 above, the non-defaulting Party may pursue any remedy available in law or in equity with respect to such breach, subject to the terms of Sections 15, 16 and 17.

          7.9.3 In the event that Purchaser terminates this Agreement pursuant to Section 7.2 for Seller’s failure to cure a material breach of this Agreement, Purchaser shall not be obligated to accept shipments of Product regardless of whether such Products were manufactured pursuant to Firm Orders submitted by Purchaser. In the event that Seller terminates this Agreement pursuant to Section 7.2 for Purchaser’s failure to cure a material breach of this Agreement, Seller shall have the right to cease the manufacture Product and cancel all shipments of Product to Purchaser regardless of whether such Products were manufactured pursuant to Firm Orders submitted by Purchaser.

          7.9.4 For a period of five (5) years from the date of any termination or expiration of the Agreement Purchaser shall, initially no later than sixty (60) days after the six-month anniversary of the end of the calendar quarter within which the Agreement terminated or expired, and quarterly thereafter, prepare and deliver to Seller a reasonably detailed report (each, a “Gross Margin Report”), of the cumulative Gross Margin from the Effective Date through the end of the period covered by the Gross Margin Report which reconciles (i) previously estimated amounts of Gross Margin with (ii) actual

experience for the period covered by the Gross Margin Report (the difference, if any, the “Reconciled Amount”). If the Gross Margin Report shows a positive adjustment to Gross Margin Purchaser shall pay to Seller [**] percent ([**]%) of the Reconciled Amount within fifteen (15) days of Seller’s receipt of the Gross Margin Report. If the Gross Margin Report shows a negative adjustment to Gross Margin Seller shall pay to Purchaser [**] percent ([**]%) of the Reconciled Amount within fifteen (15) days of Seller’s receipt of the Gross Margin Report.

     7.10 Survival. Sections 1, 3.4, 3.5, 5.7, 7.9, 7.10, 13, 15, 16, 17 and 18 as well as any other provision which by its clear language is intended to survive, shall survive the expiration or earlier termination of this Agreement in accordance with the respective terms thereof.

SECTION 8

DELIVERY; INVENTORY

     8.1 Delivery. All charges for in-process storage, Packaging and bar coding are included in the Purchase Price unless otherwise agreed to by the parties. Seller shall not be responsible for warehousing finished goods for Purchaser and Seller shall ship all finished goods to Purchaser FCA (Incoterms 2000) Seller’s premises. All shipments must be accompanied by a packing slip that describes the articles, states the purchase order number and shows the shipment’s destination. Deliveries of Products shall be made in accordance with the delivery schedule set forth in the purchase orders provided in compliance with Section 4.2. For the avoidance of doubt, Seller shall not make deliveries of Products in advance of the delivery schedule set forth in such purchase orders without the prior written approval of Purchaser.

     8.2 Shipment. The risk of loss with respect to Products shall be with Purchaser in accordance with the relevant provisions associated with the FCA (Incoterms 2000) delivery terms. Seller will pack all Products ordered hereunder in a manner suitable for shipment and sufficient to enable the Products to withstand the effects of shipping, including handling during loading and unloading. Purchaser shall use its Commercially Reasonable Efforts to notify Seller within one (1) business day of Purchaser’s discovery of any lost or stolen goods to facilitate Seller’s notification of the FDA.

SECTION 9

DEFECTIVE PRODUCTS

     9.1 Rejection and Cure. If a shipment of Product or any portion thereof has a Patent Defect or Latent Defect, then Purchaser shall have the right to reject such nonconforming shipment of Product or the nonconforming portion thereof, as the case may be, in accordance with the following:

          9.1.1 Purchaser shall give written notice to Seller of its rejection hereunder, within thirty (30) days after Purchaser’s receipt of shipment of any Product containing a Patent Defect, specifying the grounds for such rejection. After receipt of such notice from Purchaser, Seller shall be permitted to analyze any Product rejected by Purchaser for nonconformity, and to present its findings with respect to such Product to Purchaser. If the parties cannot agree on whether the Product in question is nonconforming, an independent laboratory, reasonably acceptable to both parties and at a cost equally shared by both parties, shall analyze both Purchaser’s and Seller’s samples of Product in question, and the definitive results of such laboratory shall be binding. If the shipment of Product in

question is determined to be nonconforming, such nonconforming Product shall be held for Seller’s disposition, or shall be returned to Seller, in each case at Seller’s expense, as directed by Seller. Seller shall use its Commercially Reasonable Efforts to replace each nonconforming shipment of Product, or the nonconforming portion thereof, with conforming Product as soon as reasonably practicable after receipt of notice of rejection thereof, and in any event shall do so within thirty (30) days after receipt of notice of rejection thereof. If and to the extent that the nominated independent laboratory determines that the rejected Product is conforming, and to the extent that Seller has replaced such rejected Product with additional Product, then Purchaser shall be responsible for the Delivery Price for both the allegedly nonconforming Product and for the replacement Product.

          9.1.2 As soon as either Party becomes aware of a Latent Defect in any Product lot, it shall immediately notify the other Party and the batch involved, at Purchaser’s election, shall be deemed rejected as of the date of such notice. Seller shall refund all moneys paid for the shipment of Product involved and shall reimburse Purchaser for its costs of accepting returns from its customers and shall be responsible for all costs reasonably incurred by Purchaser in recalling Product that have Latent Defects.

SECTION 10

REGULATORY MATTERS

     10.1 Reporting; Etc. Purchaser shall have the responsibility in the Territory for complying with all regulatory filings, reporting requirements and other matters which relate solely to Purchaser’s acting as a distributor of the Product in the Territory. All other regulatory reporting matters (including adverse event and Product complaint reporting) shall be Seller’s responsibility. Each of Seller and Purchaser shall notify the other of receipt of any report(s) of adverse events or product complaints pursuant to Exhibit C. Exhibit C sets forth additional details with respect to the handling of adverse event reporting.

     10.2 FDA Communications. Purchaser and Seller agree to promptly notify the other Party in the event they receive any communication or notice from the FDA with respect to the Products, and each Party shall promptly provide a copy of such communications to the other. The parties shall cooperate in good faith in responding to any such FDA inquiry or in making any report to the FDA with respect to the Products, but in all cases Seller shall have final authority for regulatory decisions concerning the Products and responsibility for all communications with the FDA. Notwithstanding the foregoing, to the extent any such communication or decision relates solely to the Products (and not Seller’s branded version of the Products), then Seller shall not make such communication or decision without the prior written consent of Purchaser, such consent not to be unreasonably withheld or delayed.

     10.3 Audits. Purchaser shall have the right, at Purchaser’s sole expense, to audit Seller, during normal business hours, upon written notice to Seller in accordance with the terms of the Quality Requirements set forth in Exhibit E hereto, and Seller’s facilities and documents, which relate to the manufacture, processing, Packaging, testing or storage of a Product. Purchaser shall have the right to conduct such audit no more than one (1) time per calendar year; provided, however, that in the event Purchaser has identified any substantive, material quality issue, then Purchaser shall be entitled to such reasonable number of additional follow-up audits as may be needed to confirm the steps taken to rectify such issue. In no event shall an audit of a particular facility exceed two (2) days in duration or involve more than three (3) representatives of Purchaser unless mutually agreed in writing by the parties. Such inspections and audits hereunder shall be carried out in a manner that does not unreasonably interfere with the normal conduct of business. Any such representatives shall

be reasonably qualified in terms of auditing skill to conduct audits and shall comply with Seller’s normal company policies and with security and safety regulations. Any third party representatives conducting such audits shall execute a written agreement to maintain in confidence all information obtained during the course of any such audit except for disclosure to Purchaser. In addition, Seller shall audit any unaffiliated third party manufacturer for compliance on a periodic schedule and to the extent permitted pursuant to the terms of any agreement between Seller and such unaffiliated third party manufacturer, shall promptly provide Purchaser a copy of such audit report. Seller shall use best efforts to obtain the consent of any third party manufacturer for Purchaser to participate in, or to conduct on its own, audits as contemplated in this section. Notwithstanding the foregoing, any failure by Seller to obtain such third party consent shall not be considered a breach of this Agreement.

     10.4 Audit Feedback. Within thirty (30) days of completing any audit hereunder, Purchaser shall submit to Seller (and the third party manufacturer, if applicable) a written report outlining its findings and/or observations from any such audit. If deficiencies are discovered during an audit that could, in Purchaser’s opinion, prevent Seller or the third party manufacturer from satisfying the requirements of cGMP, and Seller or the third party manufacturer in good faith disputes the observations or conclusions of Purchaser, then the Parties shall promptly enter into good faith discussions to resolve their differences. If the Parties fail to resolve their differences within thirty (30) days after receipt of the audit report, then the parties shall resolve their differences in accordance with Section 17.1 hereto; provided, however, that Purchaser shall not be prohibited from taking any action applicable to Purchaser that it is required to take under applicable law. If Seller (or the third party manufacturer, as the case may be) does not dispute the observations made during any audit it shall use its Commercially Reasonable Efforts to correct those deficiencies at its own cost, and shall notify Purchaser in writing when those deficiencies are corrected.

     10.5 Recalls. Seller and Purchaser each shall notify the other promptly if any batch of Product purchased by Purchaser pursuant to this Agreement is the subject of a recall or market withdrawal, and the Parties shall cooperate in the handling and disposition of such recall or market withdrawal; provided, however, in the event of a disagreement as to any matters related to such recall or market withdrawal, other than the determination of who shall bear the costs as set forth below, Seller shall have the final authority with respect to any Product recall. Notwithstanding the foregoing, Purchaser shall not be restricted from taking any action which Purchaser believes in good faith after consultation with its legal counsel is required by law or regulation; provided, however, that nothing in this section shall relieve Purchaser from any liability associated with a Purchaser initiated voluntary recall of Product that is subsequently determined, in accordance with the provisions of Section 17.2, to have been in error. Purchaser shall bear the cost of all recall or market withdrawals of Product purchased by Purchaser pursuant to this Agreement unless such recall or market withdrawal shall have been the result of (i) Seller’s failure to manufacture, Package or Label the Product in accordance with the requirements of this Agreement, or the failure of the Product to meet the Specifications, or (ii) Seller’s breach of any of its obligations or warranties set forth in this Agreement, in which case Seller shall bear the cost of such recall or market withdrawal. Purchaser shall maintain records of all sales of Product and customers sufficient to adequately administer a recall or market withdrawal for the longer of three (3) years after the date of the last sale of the Product by Purchaser or the period required by applicable law. Purchaser shall, in all events and regardless of who bears the cost, be responsible for administrating the physical aspects of any recalls or market withdrawals with respect to the Products. For the avoidance of doubt, Product returns relating to a recall or market withdrawal will be deducted from Net Sales.

     10.6 Batch Records. Batch records, including information relating to the manufacturing, Packaging, and quality control testing and analysis for each lot of finished Product produced hereunder, will be prepared in accordance with Seller’s standard operating procedures. Batch records and all other records relating to production hereunder shall be retained by Seller for such period of time as is required under applicable rules and regulations of the FDA. In the event (i) Seller receives a regulatory letter or comments from any federal agency in connection with its manufacture of the Product or the facility where the Product is manufactured requiring a response or action by Seller, or the third party manufacturer, including, but not limited to, receipt of a Form 483 (Inspectional Observations) or a “Warning Letter,” or (ii) any batch of Product purchased by Purchaser pursuant to this Agreement is the subject of a recall or market withdrawal (each of (i) and (ii) a “For Cause Incident”), promptly following Purchaser’s prior written request therefore, Seller make available to Purchaser, at Seller’s premises during business hours, a complete copy of an executed batch record for each SKU of Product associated with such For Cause Incident. Additionally, Seller shall, upon Purchaser’s written request in connection with any Audit, and to the extent applicable, make available for review by Purchaser during the course of such Audit, updates to the process validation report and equipment cleaning validation for each Product. All records made available to Purchaser hereunder shall be considered highly confidential materials of Seller and may not be used by Purchaser for any purpose other than the furtherance of the purposes of this Agreement.

     10.7 Adverse Events. The parties respective obligations with respect to Product adverse event reporting are set forth in Exhibit C attached hereto.

     10.8 Medical Information Inquiries. All requests for medical information for Product will be directed back to the Seller for follow up. After the Effective Date, the Medical Affairs groups of Purchaser and Seller shall discuss and agree upon procedures for the handling and transfer of the inquiries.

     10.9 Labeling and Packaging. The parties’ respective responsibilities with respect to Labeling and Packaging are set forth on Exhibit F attached hereto.

     10.10 Inspections.

          10.10.1 In the event Seller’s, or a third party manufacturer’s, manufacturing, packaging, testing or storage facility producing the Products hereunder is inspected by representatives of any federal agency in connection with Seller’s, or a third party manufacturer’s, manufacture, packaging, testing or storage of a Product, Seller shall notify Purchaser promptly upon learning of such inspection, and shall promptly supply Purchaser with copies of any correspondence or portions of correspondence which relate to such Product or the facility where such Product is manufactured; provided, however, that Seller shall not be obligated to provide any documents which would violate any agreement existing between Seller and any third party manufacturer. In the event Seller, or a third party manufacturer, receives any regulatory letter or comments from any federal agency in connection with its manufacture of the Product or the facility where the Product is manufactured requiring a response or action by Seller, or the third party manufacturer, including, but not limited to, receipt of a Form 483 (Inspectional Observations) or a “Warning Letter,” (a) Seller shall promptly provide Purchaser with a copy of such regulatory letter or comments, and (b) Purchaser will provide Seller with any data or information reasonably required by Seller in preparing any response relating to Seller’s manufacture of the Product, and Purchaser will cooperate with Seller in preparing such response, and Seller will promptly provide Purchaser with a copy of any such response; provided, however, that Seller shall not be obligated to provide any documents which would violate any agreement existing between Seller and any third party manufacturer.

          10.10.2 In the event Purchaser is inspected or receives a regulatory letter or comments from any federal agency in connection to the distribution of the Products, Purchaser shall promptly notify Seller upon learning of such inspection or receiving such documentation. Seller may participate in that portion of such inspection relating to such Product (and shall be required to participate if reasonably requested by Purchaser). If either Seller or Purchaser requests Seller to participate as described above, Seller and Purchaser shall mutually agree on the response with respect to such Product and Purchaser shall be responsible for submitting any such responses to the regulatory authorities. Seller will promptly provide Purchaser with all data or information reasonably required by Purchaser in preparing for any such inspection or any response relating to the Products, and Purchaser will promptly provide Seller with a copy of any such response.

     10.11 Cooperation. Seller shall provide reasonable assistance to Purchaser in its preparation and filing with appropriate regulatory agencies (both federal and state agencies related to reimbursement and health care insurance) of filings required for the marketing, Labeling (if applicable), Packaging (if applicable) and distribution of the Products in the Territory by Purchaser. Seller and Purchaser shall work together in good faith to develop such necessary regulatory strategies which may be required for purposes of this Agreement, and to allow the Products to be listed on applicable formularies and other drug listings as reasonably requested by Purchaser, and making any applicable filings or registrations to allow the Products to be included on such formularies or listings, including, without limitation, Medicare and Medicaid. In addition, Seller shall promptly provide to Purchaser copies (in electronic format if available) of those materials which Seller currently uses to respond to inquiries regarding the Products from consumers and health care professionals.

SECTION 11

FORCE MAJEURE

     11.1 Force Majeure Events. If either Party is prevented from performing any of its obligations hereunder (except for any financial payments due hereunder) due to any cause which is beyond the non-performing Party’s reasonable control, including fire, explosion, flood, or other acts of God; acts, regulations, or laws of any government; court injunction or other court order; war or civil commotion; strike, lock-out or labor disturbances; or failure of public utilities or common carriers (a “Force Majeure Event”), such non-performing Party shall not be liable for breach of this Agreement with respect to such non-performance to the extent any such non-performance is due to a Force Majeure Event. Except as set forth below, such non-performance will be excused for as long as such Force Majeure event shall be continuing, provided that the non-performing Party gives immediate written notice to the other Party of the Force Majeure Event. Such non-performing Party shall exercise all reasonable efforts to eliminate the Force Majeure Event and to resume performance of its affected obligations as soon as practicable. In the event such Force Majeure Event continues unabated for a period of ninety (90) days or longer, then the Party which is not subject to such Force Majeure Event may terminate this Agreement in its entirety or with respect to the Products affected by the Force Majeure Event upon thirty (30) days prior written notice to the other Party.

SECTION 12

INSURANCE

     12.1 Insurance. Each Party agrees to procure and maintain in full force and effect during the Term and for a period of three (3) years thereafter, at its sole cost and expense Products Liability, General Liability and Property Damage insurance with a combined single limit of not less than $10,000,000 per occurrence and $20,000,000 in the aggregate annually, which insurance shall name the other Party as an

additional insured. Each Party shall, on request, provide to the other Party copies of a certificate of coverage or other written evidence reasonably satisfactory to such Party of such insurance coverage. Either Party may substitute a program of self-insurance for all or part of the third party insurance required hereunder.

SECTION 13

CONFIDENTIALITY

     13.1 Confidentiality. As used herein, “Confidential Information” shall include all confidential or proprietary information given to one Party by the other Party, or otherwise acquired by such Party in its performance of this Agreement, relating to such other Party or any of its Affiliates, including information regarding any of the products of such other Party or any of its Affiliates, information regarding its advertising, distribution, marketing or strategic plans or information regarding its costs, productivity or technological advances. Neither Party shall use or disclose to third parties any Confidential Information of the other (except to comply with its obligations under this Agreement) and each Party shall insure that its and its Affiliates’ employees, officers, representatives and agents shall not use or disclose to third parties any Confidential Information and upon the termination of this Agreement shall return to the other or destroy all Confidential Information in written form, provided, however, that such Party may retain one (1) copy of such Confidential Information to ensure compliance with the terms of this Agreement. Confidential Information shall not include information that (i) was already known to receiving Party at the time of its receipt thereof or is independently developed by receiving Party, as evidenced by its written records, (ii) is disclosed to receiving Party after its receipt thereof by a third party who has a right to make such disclosure without violating any obligation of confidentiality, (iii) is or becomes part of the public domain through no fault of receiving Party or (iv) is independently developed by a Party as evidenced by contemporaneous written documentation. The obligations of confidentiality set out above shall survive termination or expiration of this Agreement for a period of three (3) years.

SECTION 14

PUBLIC ANNOUNCEMENTS

     14.1 Public Announcements. Neither Party shall make any publicity releases concerning the terms of this Agreement without the prior written approval of the other Party, which approval shall not unreasonably be withheld or delayed. Notwithstanding the foregoing, (a) the parties agree that the form of the Press Release, attached hereto as Exhibit G, shall be published on the Start Date, (b) either Party may publish and republish, in whole or in part, any publicity release and/or make any statement to communication media, financial analysts or others that is the same or substantially similar to a publicity release or statement that has been previously approved by the other Party in accordance with the terms hereof, without obtaining the prior approval of such other Party, and (c) either Party may upon notice to the other make any disclosure in filings with regulatory agencies or exchanges or as required by law or applicable court order; provided that the other Party shall have the opportunity to consult on such disclosures and filings.

SECTION 15

REPRESENTATIONS AND WARRANTIES

          15.1 Seller Warranties. Seller represents and warrants to Purchaser as follows:

          15.1.1 all Product supplied in connection with this Agreement shall be manufactured and provided in accordance and conformity with the Specifications and at time of delivery will be free from material defects in materials and workmanship;

          15.1.2 all Labeling shall be performed so that the Product shall not be misbranded under any applicable laws, rules and regulations.

          15.1.3 it shall comply with all present and future statutes, laws, ordinances and regulations relating to the manufacture and supply of the Products being provided hereunder, including, without limitation, those enforced by the United States Food and Drug Administration (including compliance with good manufacturing practices);

          15.1.4 to the best of Seller’s knowledge, the manufacture of the Products by Seller does not infringe any patent of any third party or constitute a misappropriation of the trade secrets or other intellectual property rights of any third party; and

          15.1.5 to the best of Seller’s knowledge, neither Seller nor its Affiliates or their employees have ever been (i) convicted of a crime for which a person can be debarred under Section 306(a) or 306(b) of the Generic Drug Enforcement Act of 1992 or under 42 U.S.C. Section 1320-7 or (ii) sanctioned by, suspended, excluded or otherwise ineligible to participate in any federal health care program, including Medicare and Medicaid or in federal procurement or non-procurement programs.

     15.2 Purchaser Warranties. Purchaser represents and warrants to Seller as follows:

          15.2.1 Purchaser shall discharge its obligations pursuant to this Agreement in accordance with all applicable laws, rules and regulations;

          15.2.2 Purchaser is the owner of all Purchaser Trademarks and has the right to license to Seller the Purchaser Trademarks for use in accordance with the terms of this Agreement;

          15.2.3 Purchaser shall avoid misleading or deceptive marketing practices in its distribution, marketing, promotion or sale of the Products hereunder;

          15.2.4 Purchaser shall use Commercially Reasonable Efforts to actively promote the distribution and sale of the Product within the Territory so as to maximize Net Sales therein; and

          15.2.5 Purchase shall maintain the Product, pending sale to its customers, in a facility that is properly equipped (including temperature and humidity control) to store such Product.

     15.3 Execution and Performance of Agreement. Seller and Purchaser each represents to the other that it has full right, power and authority to enter into and perform its obligations under this Agreement. Seller and Purchaser each further represents and warrants to the other that the performance of its obligations under this Agreement will not result in a violation or breach of, and will not conflict with or constitute a default under any agreement, contract, commitment or obligation to which such Party or any of its Affiliates is a Party or by which it is bound.

     15.4 EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, MADE OR GIVEN BY EITHER PARTY HEREUNDER, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO MERCHANTABILITY, NONINFRINGEMENT OR FITNESS FOR ANY PARTICULAR PURPOSE.

SECTION 16

INDEMNIFICATION

     16.1 Indemnification by Seller. Seller shall indemnify and hold harmless Purchaser (and its Affiliates) from and against any and all damages, liabilities, claims, costs, charges, judgments and expenses (including reasonable attorneys’ fees) (collectively “Damages”) that may be sustained, suffered or incurred by Purchaser (or its Affiliates), that result or arise in connection with (i) any actual or alleged death or bodily injury to any individual arising out of the use of the Product sold by Purchaser, including any claim based on failure to warn, design defect, product defect, strict liability in tort, or otherwise, (ii) the breach by Seller of any warranty, representation, covenant or agreement made by Seller in this Agreement, (iii) the design, manufacture, Labeling, Packaging or supply of the Products by Seller or its Affiliates hereunder, or (iv) the (negligent or intentional misconduct of Seller or, to the extent related to any action of an Affiliate in connection with this Agreement, its Affiliates; but excluding in each case above those matters for which Purchaser is obligated to indemnify Seller pursuant to Section 16.2 and except to the extent that any such Damages are a result of the negligent or intentional actions or omissions on the part of Purchaser.

     16.2 Indemnification by Purchaser. Purchaser shall indemnify and hold harmless Seller (and its Affiliates) from and against any and all Damages, that may be sustained, suffered or incurred by Seller (or its Affiliates) that result or arise in connection with (i) the breach by Purchaser of any warranty, representation, covenant or agreement made by Purchaser in this Agreement or (ii) the distribution, marketing, or sale of the Products by Purchaser following the Seller’s delivery of the Products to Purchaser, or (iii) the negligent or intentional misconduct of Purchaser, or to the extent related to any action of an Affiliate in connection with this Agreement, its Affiliates, but excluding in each case above those matters for which Seller is obligated to indemnify Purchaser pursuant to Section 16.1 and except to the extent that any such Damages are a result of the negligent or intentional actions or omissions on the part of Seller.

     16.3 Claims. Each indemnified Party agrees to give the indemnifying Party prompt written notice of any matter upon which such indemnified Party intends to base a claim for indemnification (an “Indemnity Claim”) under this Section 16. The indemnifying Party shall have the right to participate jointly with the indemnified Party in the indemnified Party’s defense, settlement or other disposition of any Indemnity Claim. With respect to any Indemnity Claim relating solely to the payment of money damages and which could not result in the indemnified Party’s becoming subject to injunctive or other equitable relief or otherwise adversely affect the business of the indemnified Party in any manner, and as to which the indemnifying Party shall have acknowledged in writing the obligation to indemnify the indemnified Party hereunder, the indemnifying Party shall have the sole right to defend, settle or otherwise dispose of such Indemnity Claim, on such terms as the indemnifying Party, in its sole discretion, shall deem appropriate; provided that the indemnifying Party shall provide reasonable evidence of its ability to pay any damages claimed and with respect to any such settlement shall obtain the written release of the indemnified Party from the Indemnity Claim. The indemnifying Party shall obtain the written consent of the indemnified Party, such consent not to be unreasonably withheld, prior to ceasing to defend, settling or otherwise disposing of any Indemnity Claim if as a result thereof the indemnified

Party would become subject to injunctive or other equitable relief or the business of the indemnified Party would be adversely affected in any manner.

SECTION 17

DISPUTE RESOLUTION

     17.1 Executive Resolution. If any dispute arises between the parties relating to the interpretation, breach or performance of this Agreement or the grounds for the termination thereof, the parties agree that before submitting such dispute to arbitration as set forth in Section 17.2 below, the Presidents (or a designee of senior management level) of each Party shall, for a period of thirty (30) days after such dispute is formally submitted to either of such Presidents in writing, attempt in good faith to negotiate a resolution of the dispute. The foregoing shall not be interpreted to preclude either Party from seeking and obtaining from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc. to avoid irreparable harm, maintain the status quo, or preserve the subject matter of the dispute.

     17.2 Arbitration. All disputes relating in any way to this Agreement shall be resolved exclusively through arbitration conducted in accordance with the Commercial Arbitration Rule of the American Arbitration Association as then in effect. The arbitration hearing shall be held in the English language in New York, NY (U.S.) in accordance with the substantive law of the State of New York (without reference to New York’s choice of law rules) and shall be before a single arbitrator selected by the parties in accordance with the Commercial Arbitration Rule of the American Arbitration Association pursuant to its rules on selection of arbitrators. Any arbitrator selected shall have reasonable experience as an arbitrator of disputes between entities in the pharmaceutical industry. The arbitrator shall render a formal, binding non-appealable resolution and award on each issue as expeditiously as possible but not more than ten (10) business days after the hearing. The prevailing Party in the arbitration shall be entitled to reimbursement of its reasonable attorneys’ fees, and the parties shall use all reasonable efforts to keep arbitration costs to a minimum. The relevant cure periods for breach under this Agreement shall toll while either Party pursues in good faith a resolution to a dispute under this Section 17.2.

SECTION 18

MISCELLANEOUS

     18.1 Relationship of the Parties. The relationship of Purchaser and Seller established by this Agreement is that of independent contractors, and nothing contained herein shall be construed to (i) give either Party any right or authority to create or assume any obligation of any kind on behalf of the other or (ii) constitute the parties as partners, joint venturers, co-owners or otherwise as participants in a joint or common undertaking.

     18.2 Third Party Rights. Nothing in this Agreement shall be deemed to create any third party beneficiary rights in or on behalf of any other person.

     18.3 Entire Agreement. It is the mutual desire and intent of the parties to provide certainty as to their respective future rights and remedies against each other by defining the extent of their mutual undertakings as provided herein. The parties have, in this Agreement (including the Exhibits hereto), incorporated all representations, warranties, covenants, commitments and understandings on which they have relied in entering into this Agreement, and, except as provided for herein, neither Party makes any covenant or other commitment to the other concerning its future

action. Accordingly, this Agreement and the Exhibits hereto (i) constitute the entire agreement and understanding between the parties with respect to the subject matter hereof and there are no promises, representations, conditions, provisions or terms related thereto other than those set forth in this Agreement and (ii) supersede all previous understandings, agreements and representations between the parties, written or oral. No modification, change or amendment to this Agreement shall be effective unless in writing signed by each of the parties hereto.

     18.4 Headings. The Article and Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning and interpretation of this Agreement.

     18.5 Notices. All notices and other communications hereunder shall be in writing. All notices hereunder of an Indemnity Claim, a Force Majeure Event, default or breach hereunder, or, if applicable, termination or renewal of the term hereof, or any other notice of any event or development material to this Agreement taken as a whole, shall be delivered personally, or sent by national overnight delivery service or postage pre-paid registered or certified U.S. mail, and shall be deemed given: when delivered, if by personal delivery or overnight delivery service; or if so sent by U.S. mail, five business days after deposit in the mail, and shall be addressed:

If to Seller:	Watson Pharma, Inc.
	360 Mount Kemble Avenue
	Morristown, NJ, 07962
	Attention: President and Chief Operating Officer
	Telephone: (973) 355-8550
	Fax: (973) 355-8580
With a copy to:	Watson Pharmaceuticals, Inc.
	311 Bonnie Circle
	Corona, CA 92880-2882
	Attention: General Counsel
	Telephone: (951) 493-5925
	Fax: (951) 493-5821
If to Seller:	Savient Pharmaceuticals, Inc.
	One Tower Center
	Fourteenth Floor
	East Brunswick, New Jersey 08816
	Attention: President
	Telephone: (732) 418-4705
	Fax: (732) 418-3687
With a copy to:	Savient Pharmaceuticals, Inc.
	Attn: General Counsel
	One Tower Center, 14th Floor
	East Brunswick, NJ 08816

or to such other place as either Party may designate by written notice to the other in accordance with the terms hereof.

     18.6 Failure to Exercise. The failure of either Party to enforce at any time for any period any provision hereof shall not be construed to be a waiver of such provision or of the right of such

Party thereafter to enforce each such provision, nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. Remedies provided herein are cumulative and not exclusive of any remedies provided at law.

     18.7 Assignment. This Agreement may not be assigned by either Party without the prior written consent of the other, such consent not to be unreasonably withheld, except that either Party may assign its rights and/or obligations hereunder to (i) any of its Affiliates, or (ii) any party or entity which acquires substantially all of the business or assets of such Party to which this Agreement relates if such Party guarantees the performance of the acquiring party and the acquiring party expressly assumes the assigning Party’s obligations hereunder.

     18.8 Severability. In the event that any one or more of the provisions (or any part thereof) contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect pursuant to a final, non-appealable decision in accordance with the dispute resolution provisions set forth in Section 17, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. Any term or provision of this Agreement which is so held to be invalid, illegal or unenforceable in any jurisdiction shall, to the extent the economic benefits conferred by this Agreement to both parties remain substantially unimpaired, not affect the validity, legality or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.

     18.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

     18.10 Expenses. Each Party shall pay all of its own fees and expenses (including all legal, accounting and other advisory fees) incurred in connection with the negotiation and execution of this Agreement and the arrangements contemplated hereby.

     18.11 Governing Law. This Agreement shall be governed by the laws of the State of Delaware without giving effect to any conflict of law provisions or principles.

     18.12 Limitation of Liability. EXCEPT FOR THE PARTIES’ INDEMNIFICATION OBLIGATIONS UNDER SECTION 16.1 AND 16.2, UNDER NO CIRCUMSTANCES WILL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES, COSTS OR EXPENSES (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOST REVENUES AND/OR LOST SAVINGS), ARISING UNDER THIS AGREEMENT OR CONCERNING ANY PRODUCTS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, COSTS OR EXPENSES.

[Signature page follows]

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized respective representatives as of the day and year first above written.

WATSON PHARMA, INC.
By:	/s/ Andrew S. Boyer
	Name:	Andrew S. Boyer
	Title:	VP Sales and Marketing

SAVIENT PHARMACEUTICALS, INC.
By:	/s/ Christopher Clement
	Name:	Christopher Clement
	Title:	President & CEO

LIST OF EXHIBITS

A. Product, Specifications and Packaging

B. Initial Finished Product Prices

C. Adverse Event Reporting Procedures

D. Initial Purchase Order Forecast

E. Quality Requirements

F. Form of Press Release

EXHIBIT A

Product, Specifications and Packaging

Oxandrolone Tablets USP, 2.5mg and 10.0 mg tablets (the “Product”)

[**]

A-1

EXHIBIT B

Finished Product Prices

     The initial Finished Product Price with respect to the launch quantities of each Product shall be as provided below:

NDC	Description	Finished Product Price
[**]	2.5 mg (100) ct	$[**]/bottle
[**]	10.0 mg (60) ct	$[**]/bottle

B-1

EXHIBIT C

Adverse Event Reporting Procedures

ADVERSE EVENT PROCEDURES

These procedures are intended to satisfy regulatory requirements for standard written procedures for Adverse Event (AE) reporting and for the establishment of explicit procedures and detailed agreements with commercial partners with respect to compliance with AE Reporting Requirements for the Product. These procedures may be amended by the parties at any time, by mutual written agreement, to ensure that they comply with applicable laws and regulations in the countries in which the Product is marketed. These procedures shall not be construed to restrict Purchaser’s ability to take action that it deems to be appropriate or required of it under applicable law or regulations.

The parties’ drug safety groups will discuss and agree to any necessary changes or additions to the arrangements below.

Definitions:

Definitions are in accordance with FDA guidelines.

Source Document — For reports taken by phone, the documentation made at the time the information is collected; for written reports, the documentation completed by the reporter or designee. For both, it includes any additional material pertaining to the report obtained subsequently.

Procedures/Regulatory Responsibilities:

Seller has obligations for processing and reporting adverse events to the relevant regulatory authorities, including reporting of expedited adverse event reports. In addition, Seller has obligations for the preparation and submission of periodic reports to FDA. Responsibility for evaluation of adverse events and signal detection are to be with Seller.

Seller will provide a copy of the periodic report for the Product to Purchaser.

Individual Adverse Events:

     Purchaser shall notify Seller by facsimile or overnight mail within such time of first learning of an adverse event so as to allow Seller to comply with all reporting requirements pursuant to law. Where the notification is made via facsimile, Seller shall confirm receipt by return fax to Purchaser. If an acknowledgment of the adverse event report is not received from Seller, the report will be re-sent within 48 hours, and marked as re-sent.

     Purchaser will forward all original source documents relating to such adverse events to Seller via overnight mail.

     Seller retains responsibility for assessing seriousness and expectedness of the adverse event.

C-1

Seller is responsible for any additional follow-up regarding the adverse event. If, however, Purchaser receives additional information regarding the adverse event, the information will be forwarded to Seller as per the above timeframes.

Seller has responsibility for evaluating adverse events to determine the need for a quality investigation.

Contact Information:

Seller contact information (to be updated as necessary):

Savient Pharmaceuticals, Inc.
ATTN: Medical Director/ Adverse Event Reports
One Tower Center
Fourteen Floor
East Brunswick, New Jersey 08816
Phone: 732-418-4756
Facsimile: 732-418-9417

Purchaser’s contact information (to be updated as necessary):

Watson Laboratories, Inc.
ATTN: Drug Safety — Adverse Events
311 Bonnie Circle
Corona, CA 92880
Facsimile: (951) 493-5825 or (951) 493-5815
Phone: (951) 493-4399

SOPs and Training:
Both companies will have SOPs relating to the handling of adverse events, specifically, with regard to each company’s respective responsibilities as per this agreement. Personnel handling adverse events will be appropriately trained.

C-2

EXHIBIT D

Initial Purchase Order Forecast

Prior to

Str.

Size

Launch

M1

M2

M3

M4

M5

M6

M7

M8

M9

M10

M11

M12

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Forecast

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[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

WATSON (Sales)

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Savient (Supply)

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Inventory Level

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Weeks in DC Inventory

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Forecast

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

WATSON (Sales)

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Savient (Supply)

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Inventory Level

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Weeks in DC Inventory

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

M13

M14

M15

M16

M17

M18

M19

M20

M21

M22

M23

M24

[**]

Forecast

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

WATSON (Sales)

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Savient (Supply)

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Inventory Level

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Weeks in DC Inventory

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Forecast

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

WATSON (Sales)

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Savient (Supply)

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Inventory Level

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

Weeks in DC Inventory

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

D-1

EXHIBIT E

Quality Requirements

1.0 QUALITY REQUIREMENTS & DEFINITION

These Quality Requirements define the operating procedures to be followed when Products are manufactured for Purchaser, either at Seller’s facility or a designated third party manufacturer, to ensure compliance with cGMPs and other regulatory requirements. Seller will use Commercially Reasonable Efforts to assure compliance of the contract manufacturer to these requirements. In the event of conflict between the terms and conditions of this Exhibit and the terms and conditions of the Agreement, the terms and conditions of the Agreement shall prevail.

1.1 Definition

Terms not defined shall have the meanings set forth in the Agreement including Section 1 thereof.

“Critical Defect” shall mean problems in plant, systems or materials which can affect the quality, safety, purity or efficacy of products or can lead to health threatening conditions in finished pharmaceutical products.

2.0 PRODUCT

The Product covered by these Quality Requirements is specified in Exhibit A of the Agreement.

3.0 MANUFACTURE

3.1 Premises

          3.1.1 The premises and equipment used for manufacture must be in compliance with cGMPs, current regulatory requirements, and in accordance with the documentation approved by the FDA.

3.2 GMP Regulations

The GMPs regulations to be applied are the United States GMPs listed in Title 21 Code of Federal Regulations (“CFR”) Parts 210 and 211 and associated Compliance Guidances.

3.3 Materials

          3.3.1 Materials Procured by Seller. Seller is responsible for ensuring that all materials procured for use in the Products are in full compliance with the registered specifications.

3.4 Manufacturing/Packaging/Labeling Documentation

          3.4.1 As referred to in accordance with Section 10 of the Agreement.

E-5

          3.4.2 In addition, Seller will maintain original manufacturing and packaging documentation according to record retention procedure consistent with the FDA requirements.

3.5 Methods

          3.5.1 The Products must be manufactured as specified in the approved NDA. Seller shall advise Purchaser of any material changes to the manufacturing specifications contained in the approved NDA within a reasonable amount of time after becoming aware that any such material changes are required pursuant to any applicable law, rule or regulation.

3.6 Batch Numbering. Seller’s batch numbering system will be used for numbering each batch of each of the Products made for sale in the Territory. This identification will appear on all documents relating to the particular batch of the Products. To the extent commercially practicable, the code for batch numbering identification will be supplied to Purchaser.

3.7 Expiration Dating. The expiration date shall be established from stability data for the Products. Seller will allocate the Date of Manufacture in accordance with Seller’s internal procedures.

3.8 Reworking. Any reworking of the Products shall not be permitted without the consent of Purchaser, such consent not to be unreasonably withheld.

3.9 Manufacturing and Equipment Data. Seller is responsible for keeping records of equipment usage, raw materials batch numbers and certification, in process results and parameters, and previous Products used in equipment if non-dedicated equipment is used.

4.0 QUALITY ASSURANCE

4.1 Testing

          4.1.1 Raw materials and packaging components. Seller will ensure that all materials and components used are in compliance according to the approved NDA.

          4.1.2 In-process testing. Seller is responsible for ensuring that all required in-process testing is carried out and documented.

          4.1.3 Finished Product. Seller will test all batches of each of the Products to the Product Specifications and methods according to the approved NDA.

4.2 Release Procedures

          4.2.1 Finished Products. Seller is responsible for ensuring and certifying that the Products has been made in accordance with the applicable NDA by reviewing all manufacturing and control information.

          4.2.2 Certificate of Analysis and Certificate of Compliance. Seller will produce a Certificate of Analysis (C of A) confirming that the Products have been tested, and meet the registered specifications. Test specifications and test results must be included for each

E-6

test in accordance with Exhibit A of the Agreement. Seller will also provide a Certificate of Compliance (C of C) stating the Products has been manufactured in accordance with the approved batch record and list all deviations and investigations related to the lot. The C of A and C of C may be combined into a single document provided all required information is contained therein. This document shall accompany each batch shipped from Seller.

          4.2.3 Products Acceptance. Purchaser will inspect each delivery of Products from Seller prior to Purchaser’s release for distribution. Purchaser will notify Seller in writing of any defects. Purchaser transfer of Products into inventory shall deem Products acceptance by Purchaser.

          4.2.4 Release to the Market. The Quality Assurance Department of Purchaser will release the Products for distribution on the document package provided by Seller and Purchaser’s product release procedures.

4.3 Products Refusal

          4.3.1 As referred to in Section 9 of the Agreement.

4.4 Documentation

          4.4.1 Validation batches. Seller is responsible for generating a validation package that includes: (1) the validation protocol, (2) full batch document packages, (3) all validation data and (4) validation report for all Validation batches of the Products manufactured. In the event of a “For Cause Incident,” following prior written request, Purchaser shall have the right to review the protocols and reports at Seller’s premises during business hours.

          4.4.2 Requests for full documentation. Seller commits to providing a full document package within three (3) business days if requested by Purchaser for any of the Products where such request relates to substantiated and reasonable quality concerns, any regulatory reasons (e.g., batch recall) or audit report which discloses a material defect in the Product.

4.5 Retained Samples

          4.5.1 Raw Materials. Seller will retain sufficient samples of the raw materials, active materials and excipients used in the manufacture of the Product in accordance with cGMP regulations.

          4.5.2 Finished Product. Seller will retain, at minimum, sufficient samples of the Products, to carry out such tests as are required by cGMP regulations.

4.6 Stability

          4.6.1 Seller is responsible for maintaining a stability-testing program for the Products and will provide a stability report to Purchaser annually. Any problem, which arises as a result of this program once confirmed, will be promptly notified to Purchaser’s Quality Assurance. A minimum of one batch per year of the Products shall be included in the Seller

E-7

stability program. The parties specifically agree that Seller may utilize stability data generated from the branded version of the Products and that such data shall be accepted by Purchaser for the purposes contemplated herein.

          4.6.2 In the event the Agreement is terminated, Seller will continue to generate stability data to support the acceptability of the Product until all Product distributed by Purchaser has reached the end of its shelf-life.

4.7 Regulatory Inspections

          4.7.1 In addition to the inspection rights and co-operative efforts contemplated within the Agreement, Seller will inform Purchaser of any Regulatory Inspections which involve the Products in accordance with Section 10 of the Agreement.

4.8 Audit

          4.8.1 To be conducted in accordance with Sections 10.3 and 10.4 of the Agreement

4.9 Corrective Actions from Audits

          4.9.1 Critical defects (Substantial GMPs deficiency). In the event any Critical Defects are observed during audits by Purchaser or regulatory authorities, no further deliveries of Products may be delivered to Purchaser until corrective actions have been completed to Purchaser’s satisfaction, as reasonably determined by Purchaser.

          4.9.2 Other defects. In the case of other defects (minor cGMPs issues) observed during audits by Purchaser or regulatory authorities, a reasonably satisfactory corrective action program must be in place. Purchaser shall reasonably agree with the program before further deliveries of Products to Purchaser may be made; however, approval of any corrective action or corrective action program by a regulatory authority with jurisdiction shall be conclusive evidence as to such corrective action/program’s acceptability.

4.10 Recalls/Product Complaints/Field Alerts

          4.10.1 Recalls. Seller is responsible to notify Purchaser promptly of any issues that could result in a Recall in accordance with Section 10.5 of the Agreement.

          4.10.2 Product Complaints. Purchaser will forward the complaint to Seller within five (5) calendar days from the date received by Purchaser’s Corporate Quality Complaint Operations. Seller will initiate an investigation according to its standard operating procedures. A written report of the investigation shall be sent to Purchaser Corporate Compliant operation within thirty (30) calendar days of the resolution of the forwarded complaint. Purchaser shall respond directly to all complainants. Should either party receive follow-up information from a complainant with respect to an ongoing or previous complaint investigation such information will be promptly reported to the other party.

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          4.10.3 Field Alerts. Product issues arising from stability data or other manufacturing issues that meet Field Alert Report criteria, once confirmation is received that such criteria is met, will be promptly communicated to Purchaser. Purchaser and Seller will jointly evaluate and prepare reports for filing by Seller, as required by law.

4.11 Change Control and Deviations

          4.11.1 Change Control. Seller will comply with cGMPs in its change control procedures. Seller shall notify Purchaser in writing of any material change to source of Active Pharmaceutical Ingredient, equipment used in manufacturing, primary packaging material, Product Specifications, manufacturing process, or any other change that affects the registration status. Seller shall assure Purchaser of supply of the Products during such time as may be required to amend its NDA for such changes.

          4.11.2 Deviations. Seller will record any unplanned deviations from the manufacturing process and/or testing of the Products in the batch/testing records and clearly notify Purchaser in writing of any and all deviations from the Quality Requirements for each batch; the notifications contemplated herein may be provided in the form of the Certificate of Compliance.

4.12 Failures Investigation

          4.12.1 Seller is responsible for investigating any test result or in-process test that fails to meet specification. Where appropriate, each investigation must give rise to a corrective action, which must be reviewed and approved by Seller.

          4.12.2 If the recommendation is to release the batch which is the subject of such investigation as-is, the investigation must document that any failure has not jeopardized the safety, efficacy or quality of the Products. To support this assurance, additional sampling, testing and checks may be required and these must be recorded in the batch file.

4.13 Annual Product Review

          4.13.1 Seller is responsible for preparing the Annual Product Review (APR) for the Products manufactured. Purchaser, as the marketer of the Products, will provide any and all information to Seller that is required of the marketer for the compilation of the APR. A copy of the report shall be provided to Purchaser.

5.0 VALIDATION

5.1 Process

Seller is responsible for ensuring that the manufacturing process for the Products is validated before any routine production can start. The validation should ensure that the process is capable of consistently meeting the Products Specifications. In the event of a “For Cause Incident,” Seller shall make validation protocols and reports available for review by Purchaser upon prior written request at Seller’s premises during business hours.

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5.2 Cleaning

Seller is responsible for ensuring that a validated equipment cleaning method is used and adequate cleaning is carried out for each batch of manufactured Product. Purchaser shall review the cleaning validation on an audit basis.

5.3 Computer System

Seller is responsible for ensuring that computer systems which are used for the manufacturing process and/or laboratory testing of the batch must be validated. Validation protocols and reports shall be available for Purchaser for review during an audit.

6.0 STORAGE AND SHIPPING

Seller will ensure that during packaging, storage and shipment of the Products that there is no possibility of deterioration, contamination or admixture with any other materials. Seller will only ship goods to Purchaser’s designated locations.

E-10

Appendix I to Exhibit E

Certificate of Analysis

[**]

E-11

EXHIBIT F

Form of Press Release

Savient Pharmaceuticals, Inc. (“Savient” or“the Company”) announced today that Watson Pharmaceuticals, under the terms of its previous supply and distribution agreement with Savient, has launched an authorized generic of oxandrolone tablets, USP (C-III), an Oxandrin^® brand equivalent product manufactured and supplied through Savient. The authorized generic product will be launched immediately and distributed by Watson in both the 2.5 mg and 10 mg dosages. The authorized generic of oxandrolone tablets will continue to meet all quality control standards of the Oxandrin^® brand and will contain the same active and inactive pharmaceutical ingredients. Oxandrin^® is Savient’s oral anabolic agent for the treatment of involuntary weight loss, a frequent and sometimes life-threatening condition associated with numerous disease states. Savient will continue to market and distribute the Oxandrin^® brand product.

E-12

EX-10.25

EX-10.25

EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

Name of Subsidiary

Myelos Corporation
Savient Pharma Holdings, Inc. Jurisdiction of Formation

Delaware
Delaware

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated March 27, 2006 (except with respect to the matters described in the fourth paragraph, as to which the date is March 16, 2007), accompanying the consolidated financial statements and Schedule II included in the Annual Report of Savient Pharmaceuticals, Inc. and Subsidiaries on Form 10-K for the year ended December 31, 2006. We hereby consent to the incorporation by reference in the Registration Statements of Savient Pharmaceuticals, Inc. and Subsidiaries on Form S-8 (File No. 333-36121 effective August 7, 1997, File No. 333-33073 effective August 7, 1997, File No. 333-33075 effective September 22, 1997, File No. 333-64541 effective September 29, 1998, File No. 333-87344 effective May 1, 2002, File No. 333-127068 effective August 1, 2005).

/s/ Grant Thornton LLP
New York, New York
March 16, 2007

EX-23.2 13 y29840exv23w2.htm EX-23.2: CONSENT OF MCGLADREY & PULLEN LLP

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statements (Nos. 333-36121, 333-33073, 333-33075, 333-64541, 333-87344, and 333-127068) on Form S-8 of Savient Pharmaceuticals, Inc. and subsidiaries of our report dated March 16, 2007 relating to our audit of the consolidated financial statements, and the financial statement schedule and internal control over financial reporting, which appear in this Annual Report on Form 10-K of Savient Pharmaceuticals, Inc. and subsidiaries for the year ended December 31, 2006.

/s/  McGladrey & Pullen, LLP
New York New York
March 16, 2007

EX-23.2

EX-23.2

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Christopher G. Clement, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Savient Pharmaceuticals, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 16, 2007
 

/s/ Christopher G. Clement  

Christopher G. Clement 

President and Chief Executive Officer 

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Brian J. Hayden, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Savient Pharmaceuticals, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 16, 2007
 

/s/ Brian J. Hayden  

Brian J. Hayden 

Senior Vice President and Chief Financial Officer 

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of Savient Pharmaceuticals, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher G. Clement, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Christopher G. Clement
	Christopher G. Clement
	President and Chief Executive Officer

March 16, 2007

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of Savient Pharmaceuticals, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian J. Hayden, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Brian J. Hayden
	Brian J. Hayden
	Senior Vice President and Chief Financial Officer

March 16, 2007