SALIX PHARMACEUTICALS LTD, S-3/A, 2000-12-15

SALIX PHARMACEUTICALS LTD
S-3/A, 2000-12-15
PHARMACEUTICAL PREPARATIONS

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<PAGE>

As filed with the Securities and Exchange Commission on December 15, 2000

Registration Statement No. 333-51270

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PRE-EFFECTIVE

AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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SALIX PHARMACEUTICALS, LTD.
(Exact name of registrant as specified in its charter)

--------------
<TABLE>
<S> <C>
British Virgin Islands 94-3267443
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
3801 Wake Forest Road
Suite 205
Raleigh, North Carolina 27609
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

--------------

ROBERT P. RUSCHER
President
Salix Pharmaceuticals, Ltd.
3801 Wake Forest Road, Suite 205
Raleigh, North Carolina 27609
(919) 788-8550
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:
DONALD R. REYNOLDS
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607
(919) 781-4000
Fax (919) 781-4865

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Approximate date of proposed sale to the public: From time to time after
this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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CALCULATION OF REGISTRATION FEE

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<TABLE>
<CAPTION>
Proposed Maximum
Title of Each Class of Proposed Maximum Aggregate Amount of
Securities Amount to be Offering Price Offering Registration
to be Registered Registered (1) Per Share(2) Price(1) Fee(3)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par
value per share....... 2,644,200 shares $6.34375 $16,774,143.75 $4,428.37
</TABLE>

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(1) This registration statement also shall cover any additional shares of
common stock which become issuable in connection with the shares registered
for resale hereby by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration which results in an increase in the outstanding shares of
our common stock

(2) Estimated solely for the purpose of calculating the registration fee, based
upon the average of the high and low prices of the common stock on the
Nasdaq SmallCap Market on November 30, 2000 in accordance with Rule 457.

(3) Previously paid. --------------

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete. It might change. We +
+cannot sell these securities until the registration statement that we have +
+filed with the SEC is effective. This prospectus is not an offer to sell, nor +
+does it solicit offer to buy, these securities in any state where the offer +
+or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED DECEMBER 15, 2000

PROSPECTUS
----------

2,644,200 Shares

SALIX PHARMACEUTICALS, LTD.

Common Stock

------------

This is a resale prospectus for the resale of up to 2,644,200 shares of
common stock of Salix Pharmaceuticals, Ltd. by the selling shareholders listed
herein.

Our common stock is traded on the Nasdaq SmallCap Market under the symbol
"SLXP". On December 1, 2000, the last sale price of our common stock on the
Nasdaq SmallCap Market was $7.375 per share.

The selling shareholders may offer the shares through public or private
transactions, on or off the Nasdaq SmallCap Market, at prevailing market prices
or at privately negotiated prices. See "Plan of Distribution".

Our principal executive offices are located at 3801 Wake Forest Road, Suite
205, Raleigh, North Carolina 27609, Attention: Investor Relations. Our
telephone number at that location is (919) 788-8550.

Investing in our common stock involves risks. See "Risk Factors" beginning on
page 8.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved our securities or determined that this
prospectus is truthful or complete. It is illegal for anyone to tell you
otherwise.

The date of this prospectus is , 2000.
<PAGE>

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with SEC. You may read and copy any document we file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. You should call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. Our SEC filings are also available to the public
the SEC's web site at "http:/www.sec.gov."

The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"):

1. Annual Report on Form 10-K405/A for the year ended December 31, 1999;

2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000,
June 30, 2000 and September 30, 2000;

3. definitive proxy solicitation materials dated May 1, 2000; and

4. the description of our stock contained in our registration statements
filed pursuant to Section 12 of the Exchange Act, as amended from time to
time.

You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:

Salix Pharmaceuticals, Ltd.
Investor Relations
3801 Wake Forest Road
Suite 205
Raleigh, North Carolina 27609
(919) 788-8550

This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different
information. We are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.

2
<PAGE>

THE COMPANY

General

Salix Pharmaceuticals, Ltd. is a specialty pharmaceutical company dedicated
to acquiring, developing and commercializing prescription drugs used in the
treatment of a variety of gastrointestinal diseases, which are those affecting
the digestive tract. We do not do any basic research--instead we engage in
product "search and development" efforts. Our strategy is to identify and
acquire late-stage proprietary drugs having an existing base of safety and
efficacy data in humans for the treatment of gastrointestinal disease, and to
apply our regulatory, product development, and sales and marketing expertise to
commercialize these products. We select products that we believe have potential
for rapid regulatory approval, and are marketable through our specialized sales
force to U.S. gastroenterologists, who are doctors who specialize in
gastrointestinal diseases. Once we receive regulatory approval to market a drug
for an initial indication, we might perform clinical studies for other broader
indications to expand the approved use of the drug. This strategy is designed
to reduce the expense, time and risk typically associated with pharmaceutical
research and development, and to expedite the commercialization of higher
potential products.

COLAZAL(TM) (balsalazide disodium) and rifaximin, our first two products,
demonstrate management's ability to execute this strategy successfully. We
licensed COLAZAL from Biorex and completed the development work, which resulted
in U.S. Food and Drug Administration, or FDA, approval in July 2000. We
licensed rifaximin from Alfa Wassermann and have completed Phase III clinical
trials on the product. We currently intend to strategically market these and
future products to U.S. gastroenterologists through our own direct sales force,
and enter into distribution relationships outside the United States and in
markets where a larger sales organization is necessary.

COLAZAL(TM)

Our lead product, COLAZAL, is the first new drug approved in ten years and
the first new therapy in seven years approved by the FDA for the treatment of
mildly to moderately active ulcerative colitis, a chronic disease that causes
inflammation of the inner lining of the colon and rectum. We currently expect
to launch COLAZAL in the United States in early 2001 using our own sales force.
Based on clinical trials, COLAZAL has shown an efficacy and safety profile that
has significant advantages over currently available treatments. COLAZAL's
formulation allows 99% of the drug to reach the colon, resulting in
significantly less side effects than sulfasalazine, one current treatment, and
a faster onset of action than Asacol(R), the market-leading drug in this
therapeutic category with sales of $200 million in 1999. Current therapies
either have (1) significant side effects causing up to 30-40% of patients to
discontinue treatment or (2) do not efficiently deliver maximal doses of the
active therapeutic agent to the colon, resulting in a variable and sometimes
inadequate response.

COLAZAL consists of two molecular structures. The first molecule, 5-ASA, is
the active agent and is responsible for the actual therapeutic effect in the
treatment of ulcerative colitis. The second molecule, 4-ABA, is a non-toxic
carrier molecule that enables the 5-ASA molecule to travel to the colon without
being absorbed in the bloodstream. The molecules are joined by a bond that is
cleaved by bacteria that exist only in the colon, allowing for the release of
the 5-ASA active ingredient targeted at the disease site. This unique delivery
mechanism provides COLAZAL with more reliable and consistent delivery of 5-ASA
to the colon than pH delivery products such as Asacol. Asacol consists of 5-ASA
with a pH-sensitive coating designed to release 5-ASA at a range of pH levels.
The problem with such a delivery mechanism is that the pH levels within
gastrointestinal tracts can vary substantially from patient to patient, and
even within a given patient depending on such factors as diet and disease
state. Thus, Asacol frequently releases the 5-ASA too early (before reaching
the colon), or too late (after passing through the colon), thus reducing the
amount of 5-ASA available in the colon to treat the disease. The improved 5-ASA
delivery of COLAZAL over Asacol has been established in Phase III studies where
COLAZAL provided a significant improvement over Asacol in time to relief of
symptoms in ulcerative colitis patients with active disease.

3
<PAGE>

Ulcerative colitis is a form of inflammatory bowel disease, or IBD,
characterized by inflammation of the lining of the colon. Symptoms of active
ulcerative colitis include rectal bleeding, abdominal pain, increased stool
frequency, loss of appetite, fever and weight loss. The cause of ulcerative
colitis is unknown, and there is no known cure except for removal of the colon.
This chronic disease affects roughly 500,000 people in the United States,
typically under the age of 40. In 1999, U.S. sales of prescription products
indicated to treat ulcerative colitis totaled approximately $350 million. This
market in terms of prescription dollar sales has been growing at an annual
compound rate exceeding 25% for the last 10 years.

Rifaximin

Our second drug, rifaximin, is a broad-spectrum, gastrointestinal specific
antibiotic that we intend to establish as the drug of choice for the treatment
of gastrointestinal infections. We have recently completed a Phase III clinical
study comparing rifaximin to placebo for the treatment of bacterial infectious
diarrhea. We have begun analyzing the results and expect to submit a New Drug
Application, or NDA, to the FDA in the second half of 2001.

Patients visit physicians over eight million times annually in the United
States due to diarrhea caused by a wide variety of organisms that could
potentially be treated with rifaximin. Each year between 20% and 50% of
international travelers, an estimated 10 million persons, develop diarrhea,
with approximately 80% of the cases caused by bacteria.

We believe the advantages of rifaximin are two-fold: (1) site-targeted
antibiotic delivery; and (2) superior tolerability. Less than 0.1% of the drug
is absorbed into the bloodstream when it is taken orally. Therefore, high
concentrations of this broad-spectrum antibiotic treat bacterial infections
throughout the gastrointestinal tract. The drug causes fewer side effects or
discomforts such as nausea, headache or dizziness observed with currently
available, highly-absorbed antibiotics. It is also less likely to induce
systemic resistance or drug-to-drug interaction. To date, data from Phase III
studies have not been published, but they are expected to show that rifaximin
has comparable efficacy to the market leader, ciprofloxacin. Additional
unpublished Phase III study results comparing rifaximin to placebo for
bacterial infectious diarrhea are expected to show statistically significant
improvement in the use of rifaximin in resolving bacterial infectious diarrhea
in travelers.

The FDA granted rifaximin Orphan Drug status, allowing for priority review
and seven years' market exclusivity, for a second indication, the treatment of
hepatic encephalopathy. Hepatic encephalopathy is a rare syndrome caused by a
build-up of toxic products (such as ammonia) due to advanced liver disease.
Symptoms include intellectual deterioration, an altered state of consciousness,
personality and behavior changes, and nervous system abnormalities. There are
approximately 140,000 cases of hepatic encephalopathy per year in the United
States. We believe that current antibiotic treatments are inadequate due to
their limited antibacterial spectrum and broad side effects, including
gastrointestinal and kidney toxicity. Lactulose, the only FDA-approved therapy
for hepatic encephalopathy, reduces the amount of toxic products accumulated in
the intestine by increasing the number of bowel movements per day to an amount
considered intolerable by patients. We expect to commence Phase III clinical
trials for rifaximin for this indication early next year, followed by an NDA
submission with the FDA in 2002. Additionally, we intend to investigate the use
of rifaximin in other indications such as antibiotic-associated and other forms
of colitis, preventative treatment against infection prior to bowel surgery,
diverticulitis and bacterial overgrowth of the small intestine.

Sales and Marketing

We are establishing a direct sales force to promote our products to the
fastest adopting, highest prescribing physicians in the United States
responsible for treating gastrointestinal disease. In 1999, patients visited
U.S.

4
<PAGE>

gastroenterologists approximately 26 million times, and these physicians wrote
approximately 35 million prescriptions valued at $2.4 billion. Because there
are only approximately 9,000 active prescribing gastroenterologists in the
United States (compared to over 300,000 U.S. general practitioners), we believe
we can effectively and efficiently market our products directly to
gastroenterologists through a relatively small sales force. This strategy
allows us to attain the higher profit margins and benefits of direct control
over distribution obtained in selling products directly, while also avoiding
the significant costs, risks and infrastructure inherent in assembling a large
sales force. We intend to have the sales force ready to begin marketing COLAZAL
in January 2001.

Pipeline Strategy

We currently intend to leverage our expertise in developing and marketing
drugs by:

. continuing to expand indications for approved products;

. in-licensing or acquiring new pharmaceutical products for the treatment
of gastrointestinal disease; and

. seeking co-promotion relationships for other companies' pharmaceutical
products that are not adequately promoted to gastroenterologists.

Large pharmaceutical companies dominate the U.S. pharmaceutical marketplace,
but these companies are increasingly divesting products that, due to mergers or
change in strategic fit, do not meet the threshold level of sales required by
such companies. Accordingly, we believe there will be a significant pool of
potential gastroenterology products that we can acquire, develop and market
through our sales force.

5
<PAGE>

THE OFFERING

<TABLE>
<C> <S>
Shares of common stock offered by us.. None

Shares of common stock which may be 2,644,200(1)
sold by the selling shareholders.....

Use of proceeds....................... We will not receive any proceeds from
the resale of shares offered hereby,
all of which proceeds will be paid to
the selling shareholders

Risk factors.......................... The purchase of our common stock
involves a high degree of risk. You
should carefully review and consider
"Risk Factors" beginning on page 8.

Nasdaq SmallCap Market Trading SLXP
Symbol...............................
</TABLE>
--------
(1) Includes 384,200 shares of common stock issuable upon exercise of warrants.

6
<PAGE>

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this prospectus discuss our plans and
strategies for our business and are "forward-looking statements" as that term
is defined in the Private Securities Litigation Reform Act. The words
"anticipates," "believes," "estimates," "expects," "plans," "intends" and
similar expressions are meant to identify these statements as forward-looking
statements, but they are not the exclusive means of identifying them. The
forward-looking statements in this prospectus reflect the current views of our
management; however, various risks, uncertainties and contingencies could cause
our actual results, performance or achievements to differ materially from those
expressed or implied by these statements, including:

. The success or failure of our efforts to implement our business strategy;

. Our limited sales and marketing experience;

. The high cost and uncertainties relating to clinical trials;

. The need for additional funds;

. The unpredictability of the duration and results of regulatory review;

. Our dependence on balsalazide and rifaximin, and the uncertainty of
market acceptance of those products; and

. The other factors discussed in the "Risk Factors" section and elsewhere
in this prospectus.

In evaluating these statements, you should specifically consider the risks
described above and in other parts of this prospectus, including the "Risk
Factors" section. These factors may cause our actual results to differ
materially from any forward-looking statement.

7
<PAGE>

RISK FACTORS

You should be aware that there are various risks to an investment in our
common stock, including those described below. You should carefully consider
these risk factors, together with all of the other information included in this
prospectus, before you decide to invest in shares of our common stock.

If any of the following risks or other risks not known to us now or that we
currently believe to not be significant develop into actual events then our
business, financial condition, results of operations or prospects could be
negatively affected. If that happens, the market price of our common stock
could decline and you may lose all or part of your investment.

Our lack of sales and marketing experience could limit our revenue.

We have no experience in marketing and selling our products either directly
or through our relationships with licensees, which could materially and
adversely impact our ability to generate significant revenue. We are in the
process of establishing our own direct sales force for the purpose of achieving
direct sales of balsalazide, rifaximin and other future products in the United
States. Our marketing and direct sales efforts might not be successful. Our
sales and marketing strategy for balsalazide outside of the United States
relies on our third-party licensees, to whom we have granted, or foresee
granting, exclusive marketing rights. Our licensees, Menarini International and
Shire Pharmaceuticals, or new licensees, might not market balsalazide
successfully in any country in which they have exclusive rights.

Our success depends on current products.

We currently license two pharmaceutical products, balsalazide and rifaximin,
and our prospects over the next three to five years are substantially dependent
on regulatory approval and successful commercialization of these products. We
expect that a significant portion of our potential revenues for the next few
years will depend on regulatory approval and sales of these products.

Regulatory approval of our products.

Development, manufacture and marketing of both balsalazide and rifaximin are
subject to extensive regulation by governmental authorities in the United
States and other countries. Failure to obtain regulatory approvals, delays in
obtaining regulatory approvals, obtaining regulatory approvals for balsalazide
or rifaximin in only limited markets or for limited uses, or lack of market
acceptance for either product, to the extent regulatory approvals are obtained,
would have a material adverse effect on our business, financial condition, and
results of operations. The FDA only recently approved balsalazide and has not
approved rifaximin for use in the United States. If regulatory approval of
rifaximin or any other product is granted, it will be limited to those disease
states and conditions for which the product has been shown to be safe and
effective, as demonstrated to the FDA's satisfaction through clinical studies.
Approval might entail ongoing requirements for post-marketing studies. Even if
regulatory approval is obtained, a marketed product, promotional activities for
the product, its manufacturer and its manufacturing facilities are subject to
continual review and periodic inspections. In addition, identification of side
effects after a drug is on the market or the occurrence of manufacturing
problems could cause subsequent withdrawal of approval, reformulation of the
drug, additional testing or changes in labeling of the product.

In May 1998, we received notification of approval of balsalazide as a
treatment for acute ulcerative colitis in Austria, Belgium, Denmark, Italy,
Luxembourg, and Sweden through the mutual recognition process of the European
Union. Our then partners withdrew marketing applications from certain other EU
countries that had questions that could not be addressed within the time
constraints of the review period required by the mutual recognition process.
These countries are Finland, France, Germany, Greece, Ireland, Netherlands,
Portugal and Spain. Resubmission in these countries will primarily be the
responsibility of our licensees, Shire Pharmaceuticals and Menarini, and they
might not pursue these applications. Balsalazide might not receive

8
<PAGE>

approval from regulatory agencies in any member country of the European Union
where the marketing application was withdrawn.

We recently completed a Phase III clinical study comparing rifaximin to
placebo for the treatment of bacterial infectious diarrhea. We are analyzing
the results of the study, and if the results are promising, expect to file a
new drug application. However, this study might not demonstrate that the drug
is safe and effective for the indication tested, or support the filing of an
NDA for rifaximin as a therapy for infectious diarrhea. Even if we file an NDA
with the FDA, we might not be successful in obtaining regulatory approval in
the United States or Canada.

We have a history of operating losses and expect future losses

We have had net losses in all but one quarter and have not realized any
material operating revenues from product sales, either directly by us or
indirectly through our development and distribution partners. We currently
expect operating losses to continue until product revenues reach a sufficient
level to support ongoing operations. We might not ever be profitable on a
consistent or predictable basis. As of September 30, 2000, we had incurred
cumulative losses since inception of approximately $23.8 million. Our future
operating performance will depend on the timing of regulatory approvals of
balsalazide in European countries and rifaximin in the United States and
Canada, particularly the timing of FDA approval, and, if such approvals can be
obtained, will also depend on market acceptance and our ability to have those
products manufactured at an acceptable cost.

We depend on distribution relationships for sales outside the United States.

Our strategy is to enter into distribution relationships for our products
outside the United States. As a result, we depend on others to sell our
products outside the United States, which is where all our product sales
revenue has come from to date. For example, the commercialization of
balsalazide outside of the United States is entirely dependent on Menarini and
Shire in their respective territories. Although we currently intend to seek new
distribution relationships for other countries, we might not be able to
successfully do so. Although Menarini has agreed to use its best endeavors to
promote, market and sell balsalazide disodium in its exclusive markets, there
are no specified financial thresholds that Menarini must achieve to maintain
its exclusivity. Our agreement with Menarini provides for a term of not less
than 10 years from first launch. Likewise, there are no specific financial
thresholds that Shire must achieve to maintain its exclusivity. Our agreement
with Shire has no term and neither we nor Shire can terminate the agreement
unless by mutual agreement or because of a breach of the agreement.

We might not be able to negotiate acceptable distribution arrangements in
the future, or that our current or future distribution arrangements, including
the agreements with Menarini and Shire, will be successful or will not be
terminated by the other party. The amount and timing of resources to be devoted
to distribution of our products in most instances will not be within our
control. Failure by our distribution partners to commercialize or market our
products, including balsalazide, would have a material adverse effect on our
business, financial condition and results of operations.

We depend on third parties for manufacturing.

We do not manufacture our products, including balsalazide and rifaximin,
and, therefore, are dependent on contract manufacturers to do so. Any
disruption in the manufacturing of our products would have a material adverse
effect on our business, financial condition and results of operations. We have
experienced supply problems due to our dependence upon a limited number of
contract manufacturers. If we are unsuccessful in obtaining or retaining third-
party manufacturing or if our manufacturers experience production difficulties,
delays or disruptions or fail to comply with regulatory requirements, we might
not be able to obtain adequate supplies of products in a timely fashion or at
acceptable quality, and price, or to commercialize our products as planned.

9
<PAGE>

Menarini's obligations to purchase balsalazide from us will terminate if we
are unable or unwilling to adequately supply them with product. In such
circumstances Menarini will receive a license to manufacture balsalazide. If
this license becomes permanent, our revenues from sales by Menarini could be
severely reduced or eliminated. Under our agreement with Shire, if the price at
which Shire manufactures balsalazide, by itself or through third parties,
exceeds a price ceiling for specified periods and quantities, we must pay Shire
the excess cost, which would reduce our revenues. We anticipate that future
agreements with new distribution partners will contain clauses similar to those
in the Menarini and Shire agreements.

Contract manufacturers that we use must adhere to current Good Manufacturing
Practices, which are regulations strictly enforced by the FDA through its
facilities inspection program. If these facilities cannot pass a pre-approval
plant inspection, the likelihood of the FDA's pre-market approval of rifaximin
will be adversely affected. Material manufacturing changes that occur after
approval are also subject to FDA review and approval. The FDA or other
regulatory agencies might not approve the manufacturing processes or facilities
for our products. In addition, if the facilities cannot pass regular post-
approval inspections, manufacturing and distribution might be disrupted,
recalls of products might be necessary and other sanctions could be applied.

We will depend on in-licensing and acquisition of new products for future
growth.

Our ability to grow in the future will depend on our success in in-licensing
or acquiring additional pharmaceutical products. We must also complete
development of any new products, obtain regulatory approvals, have the products
manufactured, and commercialize them. We currently intend to seek to in-license
or acquire pharmaceutical products that have been developed beyond the initial
discovery phase and for which late-stage human clinical data is already
available. These kinds of pharmaceutical products might not be available on
attractive terms for in-licensing or acquisition by us.

Market acceptance of our products is uncertain.

Our future success and revenues will depend upon their acceptance by the
medical community and third-party payers as useful and cost-effective. Failure
of any of our products to achieve market acceptance would have a material
adverse effect on our business, financial condition and results of operations.
Market acceptance will depend upon several factors, including the effectiveness
of sales and marketing efforts, and the establishment of the safety,
effectiveness, patient tolerance and cost of our products relative to those of
our competitors. We might be required to engage in extensive advertising,
educational programs or other means to market our products.

We depend on licenses to obtain rights to our products.

We got our rights to balsalazide and rifaximin under license agreements with
Biorex and Alfa Wassermann, respectively. If Biorex or Alfa Wassermann
terminates their license agreement, we would have no further rights to use
their patents or trade secrets to manufacture and market balsalazide or
rifaximin, as the case may be, which would have a material adverse affect on
our revenue. Our rights under these licenses are subject to early termination
upon material breach by us, our bankruptcy or insolvency or our failure to
satisfy our manufacturing obligations under our distribution agreements. Our
licenses for balsalazide and rifaximin provide that our royalty obligations
extend beyond the expiration date of the underlying patents, which could have a
material adverse effect on our business, financial condition and results of
operations if a generic version of balsalazide or rifaximin, as the case may
be, were introduced. Our license agreement with Alfa Wassermann also provides
that we may not promote, distribute or sell any antibiotic product that
competes with rifaximin in the United States and Canada for a period of five
years after the first commercial sale of rifaximin under the agreement, thereby
limiting our ability to in-license, develop or market products.

10
<PAGE>

Failure to maintain patents and proprietary rights, including beyond the
expiration of patents, would allow others to develop and sell products similar
to ours, which could impair our business.

Our success will depend in part on our ability to obtain patent protection
for our products and processes. There can be no assurance that patents will
issue with respect to, or that the claims allowed or our other intellectual
property rights will provide sufficient protection to, our present or future
technology. Because our strategy is to in-license or acquire pharmaceutical
products which typically have been discovered and initially researched by
others, our products might have limited or no remaining patent protection due
to the time elapsed since their discovery. For example, the patents for the
balsalazide composition of matter and method of treating ulcerative colitis
with balsalazide expire in July 2001 in the United States, and the patents for
the rifaximin composition of matter (also covering a process of making
rifaximin and using rifaximin to treat gastrointestinal infectious diseases)
expire in May 2001 in the United States and Canada. We have obtained patent
extensions of five years in both Italy and the United Kingdom, and we believe
we might be granted additional extensions of up to five years in certain
circumstances, based on patent term restoration procedures established in
Europe and in the United States under the Waxman-Hatch Act for products that
have received regulatory approval. However, there can be no assurance that any
extensions will be granted.

We have filed applications for use patents for additional indications using
balsalazide and related chemical substances. There can be no assurance that any
patents will be issued. There can be no assurance that competitors will not
develop products based on the same active ingredients for marketing as soon as
the applicable patents expire or at any time thereafter or that competitors
will not design around existing patents. Sales of generic versions could have
an adverse effect on our business, financial condition, and results of
operations.

In addition to patent protection, we also rely on trade secrets, proprietary
know-how and technological advances which we seek to protect, in part, through
confidentiality agreements with our collaborative partners, employees and
consultants. These agreements might be breached and we might not have adequate
remedies for any breach. In addition, our trade secrets and proprietary know-
how might otherwise become known or be independently developed by others.
Litigation, which could result in substantial cost to us, might be necessary to
enforce or defend our patents or proprietary rights.

Claims by others that we infringe their intellectual property could be costly
and could impair our business.

Our patent or other proprietary rights related to our products might
conflict with current or future rights of others. Litigation or patent
interference proceedings, either of which could result in substantial cost to
us, may be necessary to enforce any patents issued to us and our other
proprietary rights or to determine the scope and validity of other parties'
proprietary rights. The defense and prosecution of patent and intellectual
property claims are both costly and time-consuming, even if the outcome is
favorable to us. Any adverse outcome could subject us to significant
liabilities to third parties, require disputed rights to be licensed from third
parties, or require us to cease selling our products. We might not be able to
obtain a license to any third-party technology that we require to conduct our
business, or, if obtainable, that technology might not be available at a
reasonable cost. Failure by us to obtain a license to any technology that we
might require to commercialize our technologies or products will have a
material adverse effect on our operations.

We face intense competition and if we are unable to compete effectively, our
revenues and operating results could suffer.

Competition in the pharmaceutical industry is intense and characterized by
extensive research efforts and rapid technological progress. Technological
developments by competitors, earlier regulatory approval for marketing
competitive products, or superior marketing capabilities possessed by
competitors could adversely affect the commercial potential of our products,
including balsalazide, and could have a material adverse effect on our revenue
and results of operations. We believe that there are numerous pharmaceutical
and biotechnology

11
<PAGE>

companies, including large well-known pharmaceutical companies, as well as
academic research groups throughout the world, engaged in research and
development efforts with respect to pharmaceutical products targeted at
gastrointestinal diseases and conditions addressed by our current and potential
products. In particular, we are aware of products in research or development by
competitors that address the diseases being targeted by our products.
Developments by others might render our current and potential products obsolete
or non-competitive. Competitors might be able to complete the development and
regulatory approval process sooner and, therefore, market their products
earlier than us. Many of our competitors have substantially greater financial,
marketing and personnel resources and development capabilities than we do. For
example, many large, well capitalized companies already offer products in the
United States and Europe that target the proposed indications for balsalazide,
including mesalamine (SmithKline Beecham plc, Dr. Falk Pharma GmbH, Pharmacia &
Upjohn, Inc., Solvay S.A., The Procter & Gamble Company and Shire
Pharmaceuticals), sulfasalazine (Pharmacia & Upjohn, Inc.), and olsalazine
(Pharmacia & Upjohn, Inc.). In addition, manufacturers of generic drugs may
seek to compete directly with our products in the absence of effective patent
protection or non-patent exclusivity protection.

Currency fluctuations could materially adversely affect our financial condition
and results of operations.

Historically, a significant portion of our business has been conducted in
currencies other than the United States dollar. Although translation into our
reporting currency has not historically had a material impact on our financial
position, due to the substantial volatility of currency exchange rates, among
other factors, we cannot predict the effect of exchange rate fluctuations upon
our financial condition and operating results. We might experience currency
losses in the future. Foreign currency transaction gains and losses arising
from normal business operations are credited to or charged against earnings in
the period incurred. As a result, fluctuations in the value of the currencies
in which we conduct our business relative to the United States dollar have
caused and will continue to cause currency transaction gains and losses.

Failure to manage our growth could disrupt our business.

We expect to experience significant growth in the number of our employees
and the scope of our operations. Our inability to manage growth effectively
could have a material adverse effect on our business, financial condition and
results of operations. We have recently established corporate headquarters in
Raleigh, North Carolina, and have begun to assemble our direct sales force.
This growth and expansion is expected to place a significant strain on our
management and operations. Our ability to manage growth effectively will depend
upon our ability to broaden our management team and our ability to attract,
hire, and retain skilled employees. Our success will also depend on the ability
of our officers and key employees to continue to implement and improve our
operational, management information and financial control systems and to
expand, train and manage our employee base.

We depend on key personnel.

Because we are a small company, we are dependent upon a number of key
management and technical personnel, including:

. Randy Hamilton, Chairman;

. Robert Ruscher, President and Chief Executive Officer;

. Lorin Johnson, Senior Vice President, Research and Development;

. Carolyn Logan, Senior Vice President, Sales and Marketing;

. Adam Derbyshire, Chief Financial Officer;

. Lise Riopel, Vice President, Clinical Affairs; and

. Alvaro Carvajal, Vice President, Information Systems.

12
<PAGE>

The loss of the services of one or more of these key employees could have a
material adverse effect on our operations. Our success will also depend on our
ability to attract and retain additional highly qualified management and
technical personnel. We face intense competition for qualified personnel, many
of whom are often subject to competing employment offers. With the recent
regulatory approval for balsalazide in the United States, we have begun hiring
and training a direct sales force to market balsalazide in the United States.
New employees, particularly new sales and marketing employees, will require
substantial training and education concerning balsalazide and any future
products. We might not be successful in attracting and retaining qualified
personnel as necessary, and the failure to do so could have a material adverse
effect on our business, operating results and financial condition.

Our stock price is volatile.

Our stock price has been extremely volatile and might continue to be, making
an investment in our company risky. Between November 20, 2000, when our common
stock started trading on the Nasdaq Small- Cap Market, and December 14, 2000,
the price of a share of our common stock varied from $5.75 to $11.00. In the
last 12 months that our common stock was traded on the Toronto Stock Exchange,
ending November 24, 2000, the price per share dropped as low as $0.17 Canadian.
Trading volume in our common stock has been low, and there can be no assurances
that an active trading market will develop or be sustained on the Nasdaq
SmallCap Market, or any other exchange or dealer quotation system. The
securities markets have experienced significant price and volume fluctuations
unrelated to the performance of particular companies. In addition, the market
prices of the common stock of many publicly traded pharmaceutical and
biotechnology companies have in the past and can in the future be expected to
be especially volatile. Announcements of technological innovations or new
products by us or our competitors, developments or disputes concerning
proprietary rights, publicity regarding actual or potential medical results
relating to products under development by us or our competitors, regulatory
developments in both the United States and other countries, public concern as
to the safety of pharmaceutical products, and economic and other external
factors, as well as period-to-period fluctuations in our financial results,
might have a significant impact on the market price of our common stock.

13
<PAGE>

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of shares of the
common stock offered by the selling shareholders. We are registering the shares
for sale to provide the selling shareholders with freely tradable securities,
but the registration of the shares does not necessarily mean that any of them
will actually be offered or sold.

14
<PAGE>

SELLING SHAREHOLDERS

The shares offered under this prospectus may be sold from time to time for
the account of the selling shareholders named in the following table. The table
also contains information, to our knowledge, regarding the selling
shareholders' beneficial ownership of shares of our common stock as of November
30, 2000. Except as otherwise disclosed in the footnotes, 10% of the shares
listed with respect to each selling shareholder represents shares of common
stock issuable upon exercise of warrants. Percentages are based on 13,562,771
shares outstanding as of November 30, 2000, plus in each case the shares
issuable upon exercise of the related warrants, all of which are currently
exercisable.

<TABLE>
<CAPTION>
Beneficial Ownership
Prior to Offering
-----------------------
Percentage Number of
Number of Shares to
Name of Shares(1) Class(2) be Sold
---- ------------ ---------- ---------
<S> <C> <C> <C>
Leonard J. Adams............................ 13,200 * 13,200
ANO LLC..................................... 4,400 * 4,400
Robert Apple................................ 5,720 * 5,720
Aries Domestic Fund II, L.P................. 14,058.4 * 14,058.4
Aries Domestic Fund, L.P.................... 41,298 * 41,298
Aries Master Fund II........................ 85,443.6 * 85,443.6
Don A. Backlund............................. 4,400 * 4,400
Baker Street Capital Partners, L.P.......... 66,000 * 66,000
Baker Street Technology Partners, L.P....... 66,000 * 66,000
John Bannon................................. 4,400 * 4,400
Kevin & Deborah Barbary..................... 5,500 * 5,500
Bear Stearns Security Corp Trustee for
William S. Ellsworth, Jr................... 4,400 * 4,400
The Blinn Family Trust...................... 4,400 * 4,400
William R. Brown............................ 4,400 * 4,400
Allen Chao and Lee Hua Chao Family Trust.... 35,200 * 35,200
Andrew and Lydia Chesnick................... 4,400 * 4,400
Janet Childs................................ 5,500 * 5,500
John F. Combs............................... 7,040 * 7,040
John J. Connor.............................. 5,280 * 5,280
Mark Cooper................................. 4,400 * 4,400
Alan R. Curtis.............................. 4,400 * 4,400
DCF Life Sciences Fund Limited.............. 88,000 * 88,000
Deerfield International Limited............. 104,544 * 104,544
Deerfield Partners, L.P..................... 282,656 2.1% 282,656
Franklin Strategic Series--Franklin Global
Health Care Fund........................... 176,000 1.3% 176,000
Paul & Laurie Frasier....................... 5,500 * 5,500
William A. Galvin........................... 8,800 * 8,800
William H. Gaudreau Trust................... 4,400 * 4,400
David Goldberg.............................. 4,400 * 4,400
Peter Grabler............................... 13,200 * 13,200
Donald D. Graham............................ 8,800 * 8,800
Peter Greco................................. 8,800 * 8,800
Martin M. Hale.............................. 11,000 * 11,000
Charles J. Hammarstrom, Jr.................. 8,800 * 8,800
William R. Haney, Sr........................ 8,800 * 8,800
Leonard S. Jacob & Sandra Jacob............. 5,500 * 5,500
Judy G. Johnson Living Trust Dated 10/6/99.. 4,400 * 4,400
Darlene L. Jordan........................... 6,600 * 6,600
Gerald R. Jordan Foundation................. 16,500 * 16,500
Gerald R. Jordan, Jr........................ 93,500 * 93,500
Jordan Family 1984 Trust.................... 16,500 * 16,500
Yi H. Kao, M.D. & Marianne Kao.............. 4,400 * 4,400
Jeffrey M. Lavin............................ 4,400 * 4,400
</TABLE>

15
<PAGE>

<TABLE>
<CAPTION>
Beneficial Ownership
Prior to Offering
-------------------------
Percentage Number of
Number of Shares to
Name of Shares(1) Class(2) be Sold
---- ------------ ---------- ---------
<S> <C> <C> <C>
Leerink Swann & Company................ 158,200(1) 1.2% 158,200(1)
Lighthouse Management L.P.............. 49,500 * 49,500
Wayne Lipson........................... 4,400 * 4,400
Steven K. Luminais..................... 4,400 * 4,400
Norman A. Marowitz..................... 4,400 * 4,400
Joe Mayer.............................. 4,400 * 4,400
Timothy W. McGibney.................... 4,400 * 4,400
MLPF&S Custodian FPO Bankruptcy
Affiliates Basic...................... 4,400 * 4,400
Octavio and Diana Morales Living Trust
Dated March 19, 1999.................. 4,400 * 4,400
mRNA Fund L.P.......................... 5,022.6 * 5,022.6
Mark & Lynda E. Mscisz................. 4,400 * 4,400
Steven Mscisz.......................... 4,400 * 4,400
Charles F. Norton, Jr.................. 6,160 * 6,160
Eric & Dierdre K. Okamoto, Joint
Tenants............................... 4,400 * 4,400
Oxford Bioscience Partners (Adjunct)
III, L.P.............................. 39,600 * 39,600
Oxford Bioscience Partners (Bermuda)
III Limited Partnership............... 60,297.6 * 60,297.6
Oxford Bioscience Partners III, L.P.... 423,079.8 3.1% 423,079.8
Pipes Corporate Strategies Ltd.
Investment Manager UBS O'Connor LLC... 246,400 1.8% 246,400
Harry T. Poteat, MD, ScD............... 22,000 * 22,000
ProMed Partners, L.P................... 140,800 1.0% 140,800
Rainbow Trading Corporation............ 17,600 * 17,600
Andrew Randall......................... 4,400 * 4,400
Steven M. Ratner 1999 Irrevocable
Trust................................. 4,400 * 4,400
Michael A. Russell..................... 4,400 * 4,400
Wayne Saker............................ 13,200 * 13,200
Jonathan P. Schwartz................... 4,400 * 4,400
Ira Sherman and Darlene Bryant, As
Joint Tenants......................... 8,800 * 8,800
Shuman & Ross Profit Sharing Trust
F/B/O Howard S. Ross.................. 4,400 * 4,400
Walter G. Steinkrauss & Deborah A.
Slocum................................ 4,400 * 4,400
Samuel & Shirley Straface.............. 4,400 * 4,400
Willoughby Stuart...................... 17,600 * 17,600
Bertram C. Tackeff & Sterra S. Tackeff,
JTWROS................................ 17,600 * 17,600
Todd Taplin............................ 4,400 * 4,400
Jiri Tichy & Dagmar Tichy.............. 8,800 * 8,800
Toledano Capital LLC................... 8,800 * 8,800
Tribophysics Corporation............... 13,200 * 13,200
Tryphon Fund, Inc...................... 17,600 * 17,600
Charles B. Wells....................... 4,400 * 4,400
Scott Wilfong.......................... 6,600 * 6,600
John W. Wilkinson...................... 4,400 * 4,400
--------- ---- ---------
Totals:................................ 2,644,200 19.0% 2,644,200
========= ==== =========
</TABLE>
--------
* Less than 1%

(1) Consists of a warrant to purchase 158,200 shares of our common stock.

We issued an aggregate of 2,260,000 shares of our common stock to the
selling shareholders in connection with our $14.1 million private placement in
November 2000. We also issued to the selling shareholders warrants to purchase
a total of 226,000 shares of common stock in this private placement, as well as
warrants to purchase a total of 158,200 shares of common stock to the placement
agent who assisted in the private placement. We agreed to register all of these
shares, including those issuable upon exercise of the warrants, and to pay
substantially all of the expenses of offering them under this prospectus.

16
<PAGE>

PLAN OF DISTRIBUTION

The selling shareholders may offer the shares at various times in one or
more of the following transactions:

. on the Nasdaq SmallCap Market;

. in the over-the-counter market;

. in transactions other than market transactions;

. in connection with short sales of shares of our common stock;

. by pledge to secure debts or other obligations;

. in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions in
standardized or over-the-counter options; or

. in a combination of any of the above.

The selling shareholders may sell shares at market prices then prevailing,
at prices related to prevailing market prices, at negotiated prices or at fixed
prices.

In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers.

The selling shareholders may use broker-dealers to sell shares. If this
happens, broker-dealers will either receive discounts or commissions from the
selling shareholders, or they will receive commissions from purchasers of
shares for whom they have acted as agents.

The selling shareholders and any broker-dealers who act in connection with
the sale of the shares hereunder may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commissions they receive and proceeds of
any sale of the shares may be deemed to be underwriting discounts and
commissions under the Securities Act.

Neither we nor the selling shareholders can presently estimate the amount of
such compensation. We know of no existing arrangements between any selling
shareholders, any other shareholder, broker, dealer, underwriter or agent
relating to the sale or distribution of the shares.

We will pay all of the expenses of the registration, offering and sale of
the shares to the public other than commissions or discounts of underwriters,
broker-dealers or agents. We also agreed to indemnify the selling shareholders
and related persons against liabilities, including liabilities under the
Securities Act. We have been advised that in the opinion of the SEC
indemnification for liabilities arising under the Securities Act is against
public policy as expressed in the Securities Act and is therefore,
unenforceable.

We have advised the selling shareholders that while they may be engaged in a
distribution of the shares included in this prospectus they are required to
comply with Regulation M promulgated under the Securities Exchange Act of 1934.
With limited exceptions, Regulation M precludes the selling shareholders, any
affiliated purchasers, and any broker-dealer or other person who participates
in the distribution from bidding for or purchasing, or attempting to induce any
person to bid for or purchase any security which is the subject of the
distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. All of the
foregoing might affect the marketability of the shares offered hereby.

This offering will terminate on the earlier of (1) the date on which all of
the shares are eligible for resale in a three-month period pursuant to Rule 144
under the Securities Act, or (2) the date on which all shares

17
<PAGE>

offered by this prospectus have been sold by the selling shareholders, except
that this offering will terminate as to the 158,2000 shares offered by Leerink
Swann & Company on the earlier of the above or November 8, 2005.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K405/A for the
year ended December 31, 1999 as set forth in their report, which is
incorporated by reference in the registration statement. Our consolidated
financial statements are incorporated by reference in this prospectus in
reliance upon Ernst & Young LLP's report given on their authority as experts in
accounting and auditing.

LEGAL MATTERS

The validity of the issuance of the shares of common stock offered hereby
will be passed upon for us by Wyrick Robbins Yates & Ponton LLP, Raleigh, North
Carolina.

18
<PAGE>

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

No one (including any salesman or broker) is authorized to provide oral or
written information about this offering that is not included in this
prospectus.

----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Find More Information........................................ 2
The Company................................................................ 3
The Offering............................................................... 6
Special Note Regarding Forward-Looking Statements.......................... 7
Risk Factors............................................................... 8
Use of Proceeds............................................................ 14
Selling Shareholders....................................................... 15
Plan of Distribution....................................................... 17
Experts.................................................................... 18
Legal Matters.............................................................. 18
</TABLE>

----------------

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

2,644,200 Shares

SALIX PHARMACEUTICALS, INC.

Common Stock

----------------

PROSPECTUS

----------------

, 2000

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated expenses payable by the
registrant in connection with the filing of this Form S-3 Registration
Statement:

<TABLE>
<S> <C>
SEC registration.................................................... $ 4,428.37
Nasdaq SmallCap Market listing fee.................................. 10,000.00
Printing costs...................................................... 5,000.00
Legal fees.......................................................... 35,000.00
Accounting fees and expenses........................................ 5,000.00
Miscellaneous expenses.............................................. 5,571.63
----------
Total............................................................. $65,000.00
==========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Registrants'Articles of Association provide that the Registrant may
indemnify against all expenses, including legal fees, and against all
judgments, fines and amounts paid in settlement and reasonably incurred in
connection with legal, administrative or investigative proceedings of any
person who is or was a party or is threatened to be made a party to any
threatened, pending or completed proceedings, whether civil, criminal or
administrative or investigative, by reason of the fact that the person is or
was a director, an officer or a liquidator of the Registrant; or is or was, at
the request of the Registrant, serving as a director, officer or liquidator of,
or in any other capacity is or was acting for, another company or a
partnership, joint venture, trust or other enterprise. The Registrant may only
indemnify a person if the person acted honestly and in good faith and with a
view to the best interests of the Registrant and, in the case of criminal
proceedings, the person had no reasonable cause to believe that his or her
conduct was unlawful.

The Registrant maintains liability insurance insuring its officers and
directors against liabilities that they may incur in such capacities.

At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------

<C> <S>
3.1(a) Memorandum of Association of Salix Pharmaceuticals, Ltd., as amended.

3.2(a) Articles of Association of Salix Pharmaceuticals, Ltd., as amended.

4.1(a) Form of Common Share Certificate.

4.2(a) Form of Warrant to purchase Common Shares.

4.3(a) Form of Warrant to purchase Common Shares.

5.1 Opinion of Wyrick Robbins Yates & Ponton LLP (previously filed).

10.1(a) Form of Indemnification Agreement between the Registrant and each of
its officers and directors.

10.2(a) Form of 1994 Stock Plan for Salix Pharmaceuticals, Ltd. and form of
Stock Option and Restricted Stock Purchase Agreements thereunder.
</TABLE>

II-1
<PAGE>

<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------

<C> <S>
10.3(k) Form of 1996 Stock Plan for Salix Pharmaceuticals, Ltd. and form of
Notice of Stock Option Grant and Stock Option Agreement
thereunder, as amended September 14, 2000.

10.4(b) Amendment Agreement effective as of September 17, 1992 by and among
Glycyx Pharmaceuticals, Ltd., Salix Pharmaceuticals, Inc. and
Biorex Laboratories, Ltd.

10.5(b) License Agreement, dated September 17, 1992 between Biorex
Laboratories Limited and Glycyx Pharmaceuticals, Ltd. and letter
agreement amendments thereto.

10.6(b) Research and Development Agreement dated September 21, 1992 between
Glycyx Pharmaceuticals, Ltd. and AB Astra and letter agreement
amendments thereto.

10.7(b) Distribution Agreement dated September 21, 1992 between Glycyx
Pharmaceuticals, Ltd. and AB Astra.

10.8(b) Amended and Restated License Agreement by and between Salix
Pharmaceuticals, Inc. and Biorex Laboratories, Limited, dated
April 16, 1993.

10.9(b) Co-Participation Agreement, dated April 30, 1993 between Salix
Pharmaceuticals, Inc. and AB Astra as amended by Amendment No. 1
thereto effective September 30, 1993.

10.9.1(c) Letter Agreement dated October 16, 1998 to Co-Participation
Agreement dated April 30, 1993 by and between Salix
Pharmaceuticals, Inc. and AB Astra.

10.10(b) Manufacturing Agreement, dated September 15, 1993 between
Courtaulds Chemicals Limited and Glycyx Pharmaceuticals, Ltd.

10.11(b) Distribution Agreement, dated September 23, 1994 between Glycyx
Pharmaceuticals, Ltd. and Menarini International Operations
Luxembourg SA and amendments thereto.

10.12(b) License Agreement, dated June 24, 1996, between Alfa Wassermann
S.p.A. and Salix Pharmaceuticals, Ltd.

10.13(b) Supply Agreement, dated June 24, 1996, between Alfa Wassermann
S.p.A. and Salix Pharmaceuticals, Ltd.

10.14(a) Lease dated January 1, 1992 by and between Kontrabecki Mason
Developers and Salix Pharmaceuticals, Inc., as amended.

10.15(d) Consulting Agreement dated July 31, 1998 between Salix
Pharmaceuticals, Ltd. and James Shook.

10.16(e) Severance Agreement and Mutual Release dated January 6, 1999
between Salix Pharmaceuticals, Ltd. and David Boyle.

10.17(e) Letter of Intent dated March 5, 1999 between Glycyx
Pharmaceuticals, Ltd. and Fujirebio.

10.18(f) Employment Agreement effective May 6, 1999 between Salix
Pharmaceuticals, Ltd. and Randy W. Hamilton.

10.19(f) Employment Agreement effective May 6, 1999 between Salix
Pharmaceuticals, Ltd. and Dr. Lorin K. Johnson.

10.20(j) Employment Agreement effective May 15, 2000 between Salix
Pharmaceuticals, Ltd. and Robert P. Ruscher.

10.21(f) Employment Agreement effective May 6, 1999 between Salix
Pharmaceuticals, Ltd. and John Brough.

10.22(g) Termination and Settlement Agreement dated as of December 22, 1999,
by and between Astra AB and Salix Pharmaceuticals Inc. (a wholly
owned subsidiary of Salix Pharmaceuticals, Ltd.).

10.23(g) Agreement dated December 22, 1999, between Glycyx Pharmaceuticals,
Ltd. (a wholly owned subsidiary of Salix Pharmaceuticals, Ltd.)
and Astra AB.

10.24(h) Shareholder Protection Rights Agreement, dated as of January 13,
2000 between Salix Pharmaceuticals, Ltd. and Montreal Trust
Company of Canada.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------

<C> <S>
10.25(j)* Agreement between Glycyx Pharmaceuticals, Ltd. and Shire
Pharmaceuticals Group, PLC

10.26(j)* Agreement between Biorex Laboratories Limited and Glycyx
Pharmaceuticals, Ltd.

10.27 Form of Subscription Agreement and Warrant for November 2000 private
placement (previously filed).

21.1(a) Subsidiaries of the Registrant.

23.1 Consent of Ernst & Young LLP, Independent Auditors (previously
filed).

23.2 Consent of Wyrick Robbins Yates & Ponton LLP (contained in Exhibit
5.1).

24.1 Power of Attorney (see page II-5).

27.1(k) Financial Data Schedule.
</TABLE>
--------
* Confidential treatment granted.

(a) Incorporated by reference to the exhibit bearing the same number filed with
the Registrant's Registration Statement on Form S-1 (Registration No. 333-
33781), which the United States Securities and Exchange Commission declared
effective on October 16, 1997.

(b) Incorporated by reference to the exhibit bearing the same number filed with
the Registrant's Registration Statement on Form S-1 (Registration No. 333-
33781), which the United States Securities and Exchange Commission declared
effective on October 16, 1997. The Registrant has received confidential
treatment with respect to certain portions of this exhibit. Such portions
have been omitted from this exhibit and have been filed separately with the
United States Securities and Exchange Commission.

(c) Incorporated by reference to exhibits filed with the Registrant's Quarterly
Report on Form 10-Q for the three months ended September 30, 1998.

(d) Incorporated by reference to exhibits filed with the Registrant's Quarterly
Report on Form 10-Q for the three months ended June 30, 1998.

(e) Incorporated by reference to exhibits filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1998.

(f) Incorporated by reference to exhibits filed with the Registrant's Quarterly
Report on Form 10-Q for the three months ended June 30, 1999.

(g) Incorporated by reference to exhibits filed with the Registrant's Current
Report on Form 8-K dated December 28, 1999.

(h) Incorporated by reference to exhibits filed with the Registrant's Current
Report on Form 8-K dated January 13, 2000.

(i) Incorporated by reference to the exhibit bearing the same number filed with
the Registrant's Annual Report on Form 10-K for the year ended December 31,
1999.

(j) Incorporated by reference to exhibits filed with the Registrant's Quarterly
Report on Form 10-Q for the six months ended June 30, 2000.

(k) Incorporated by reference to exhibits filed with the Registrant's Quarterly
Report on Form 10-Q for the nine months ended September 30, 2000.

II-3
<PAGE>

ITEM 17. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes as follows:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;

Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this Registration Statement.

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
related to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer of controlling
person or the registrant in the successful defense of any action, suite or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certified that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Raleigh, State of North Carolina, on this 15th
day of December 2000.

SALIX PHARMACEUTICALS, LTD.

/s/ Robert P. Ruscher *
By: _________________________________
Robert P. Ruscher
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----

<S> <C> <C>
/s/ Robert P. Ruscher* Director, President and December 15, 2000
____________________________________ Chief Executive Officer
Robert P. Ruscher (Principal Executive
Officer)

/s/ Adam C. Derbyshire* Chief Financial Officer December 15, 2000
____________________________________ (Principal Financial and
Adam C. Derbyshire Accounting Officer)

/s/ John F. Chappell* Director December 15, 2000
____________________________________
John F. Chappell

/s/ Thomas A. D'Alonzo* Director December 15, 2000
____________________________________
Thomas A. D'Alonzo

/s/ Richard A. Franco* Director December 15, 2000
____________________________________
Richard A. Franco

/s/ Randy W. Hamilton* Director and Chairman December 15, 2000
____________________________________
Randy W. Hamilton

*By: /s/ Robert P. Ruscher Attorney-in-fact December 15, 2000
____________________________________
Robert P. Ruscher
</TABLE>

II-5