PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934

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SANTARUS, INC.

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SANTARUS, INC.
3721 Valley Centre Drive, Suite 400
San Diego, California 92130

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

     The Annual Meeting of the Stockholders of Santarus, Inc. will be held on June 15, 2011 at 1:00 p.m. at the DoubleTree Del Mar hotel, located at 11915 El Camino Real, San Diego, California 92130, for the following purposes:

	•		elect two directors of Santarus;
	•		conduct a non-binding advisory vote on the compensation of our named executive officers;
	•		conduct a non-binding advisory vote on the frequency of a stockholder vote on the compensation for our named executive officers;
	•		ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011; and
	•		transact such other business as may be properly brought before the meeting or any adjournment thereof.

     Stockholders of record at the close of business on April 18, 2011 are entitled to notice of and to vote at our Annual Meeting and at any adjournment or postponement thereof.

     Accompanying this Notice is a proxy card. Whether or not you expect to be at our Annual Meeting, please complete, sign and date the enclosed proxy card and return it promptly. If you plan to attend our Annual Meeting and wish to vote your shares personally, you may do so at any time before the proxy is voted.

     All stockholders are cordially invited to attend the meeting.

		By Order of the Board of Directors,
		Gerald T. Proehl
		President, Chief Executive Officer and Director

San Diego, California
April 28, 2011

SANTARUS, INC.

PROXY STATEMENT

     The board of directors of Santarus, Inc., a Delaware corporation (“Santarus,” the “company,” “we” or “us”), is soliciting the enclosed proxy card for use at our Annual Meeting of Stockholders to be held on June 15, 2011 at 1:00 p.m. at the DoubleTree Del Mar hotel, located at 11915 El Camino Real, San Diego, California 92130, and at any adjournments or postponements thereof. If you need directions to the location of the Annual Meeting, please contact us at (858) 314-5700. This Proxy Statement will be first sent to stockholders on or about April 28, 2011.

     All stockholders who find it convenient to do so are cordially invited to attend the meeting in person. In any event, please complete, sign, date and return the proxy card in the enclosed envelope.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on June 15, 2011

     Electronic copies of this Proxy Statement and Santarus’ annual report are available at www.proxydocs.com/snts.

     A proxy may be revoked by written notice to our corporate secretary at any time prior to the voting of the proxy, or by executing a later proxy or by attending the meeting and voting in person. Shares represented by proxies that reflect abstentions or “broker non-votes” (i.e., shares held by a broker or nominee which are represented at the Annual Meeting, but not empowered to vote on a particular proposal) will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum.

     Absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on certain non-routine items, such as: the election of directors; the vote on the compensation of our Named Executive Officers (as defined below in “Executive Compensation and Other Information — Summary Compensation Table”); and the vote regarding the frequency of the stockholder vote on executive compensation. Thus, if the beneficial owner does not give a broker specific instructions, the beneficially owned shares may not be voted on these proposals and will not be counted in determining the number of shares necessary for approval, although they will count for purposes of determining whether a quorum exists.

     Directors will be elected by a favorable vote of a plurality of the aggregate votes present, in person or by proxy, at the Annual Meeting. Accordingly, abstentions and broker non-votes will not affect the outcome of the election of candidates for director. Stockholders are not permitted to cumulate their shares for the purpose of electing directors or otherwise.

     The non-binding advisory vote on the compensation of our Named Executive Officers requires the affirmative vote of a majority of the aggregate votes present, in person or by proxy, and entitled to vote at the Annual Meeting. Abstentions will have the same effect as votes against this proposal and broker non-votes will have no effect on the outcome.

     With regard to the non-binding advisory vote on the frequency with which the compensation of our Named Executive Officers will be subject to an advisory stockholder vote, the frequency (every one, two or three years) receiving the largest number of votes, even if not a majority, will be considered the preference of our stockholders. However, because this vote is advisory and not binding on us in any way, we may decide that it is in our and our stockholders’ best interests to hold an advisory vote on executive compensation more or less frequently than the preference expressed by our stockholders. Abstentions and broker non-votes will have no effect on the outcome.

     The proposal to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011 requires the affirmative vote of a majority of the aggregate votes present, in person or by proxy, and entitled to vote at the Annual Meeting. Abstentions will have the same effect as votes against this proposal. However, ratification of the selection of Ernst & Young LLP is considered a routine matter on which a broker or other nominee is empowered to vote. Accordingly, no broker non-votes will result from this proposal.

     Stockholders of record at the close of business on April 18, 2011 (the “Record Date”) will be entitled to vote at the meeting or vote by proxy using the proxy card. As of that date, 60,280,231 shares of our common stock, par value $0.0001 per share, were outstanding. Each share of our common stock is entitled to one vote. A majority of the outstanding shares of our common stock entitled to vote, represented in person or by proxy at our Annual Meeting, constitutes a quorum.

     The cost of preparing, assembling and mailing the Notice of Annual Meeting, Proxy Statement and proxy card will be borne by us. In addition to soliciting proxies by mail, our officers, directors and other regular employees, without additional compensation, may solicit proxies personally or by other appropriate means. It is anticipated that banks, brokers, fiduciaries, other custodians and nominees will forward proxy soliciting materials to their principals, and that we will reimburse such persons’ out-of-pocket expenses.

PROPOSAL 1

ELECTION OF DIRECTORS

     Our board of directors currently consists of seven members. Our Amended and Restated Certificate of Incorporation provides for the classification of our board of directors into three classes, as nearly equal in number as possible, with staggered terms of office and provides that upon the expiration of the term of office for a class of directors, nominees for such class shall be elected for a term of three years or until their successors are duly elected and qualified. At this meeting, two nominees for director are to be elected as Class II directors for a three-year term expiring at our 2014 annual meeting of stockholders. The nominees are Michael E. Herman and Kent Snyder. The Class III and Class I directors have one year and two years, respectively, remaining on their terms of office.

     A plurality of the votes of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the election of directors is required to elect directors. If no contrary indication is made, proxies in the accompanying form are to be voted for our board of directors’ nominees or, in the event any of such nominees is not a candidate or is unable to serve as a director at the time of the election (which is not currently expected), for any nominee who shall be designated by our board of directors to fill such vacancy.

Information Regarding Directors

     The information set forth below as to the directors and nominees for director has been furnished to us by the directors and nominees for director. The process undertaken by the Nominating/Corporate Governance Committee in recommending qualified director candidates is described below under “Director Nomination Process.” Certain individual qualifications and skills of our directors that contribute to the board’s effectiveness as a whole are described in the following paragraphs.

Nominees for Election for a Three-Year Term Expiring at the
2014 Annual Meeting of Stockholders

Name		Age				Present Position with the Company
Michael E. Herman			69			Director
Kent Snyder			57			Director

     Michael E. Herman has served as a member of our board of directors since September 2003. From January 1992 to December 2000, Mr. Herman was President of the Kansas City Royals Baseball Club. From January 1990 to December 1999, he was Chairman of the Finance and Investment Committee of the Kauffman Foundation and was its President from January 1985 to December 1990. From October 1974 to December 1990, Mr. Herman was the Executive Vice President and Chief Financial Officer of Marion Laboratories. Mr. Herman is a director of Senomyx, Inc., a biotechnology company, Cerner Corporation, a health care information technology company, and also is a Trustee of Rensselaer Polytechnic Institute and the University of Chicago Graduate School of Business. He also serves as a member of the board of directors of Vail Valley Foundation and New Enterprise Associates. Mr. Herman also previously served as a director of Janus Capital, Eloquent, Inc. and Agouron Pharmaceuticals, Inc. Mr. Herman holds a B.S. in metallurgical engineering from Rensselaer Polytechnic Institute and an M.B.A. from the University of Chicago. In selecting Mr. Herman to serve as a director, the board considered, among other things, his valuable business and financial expertise, both within and outside the life sciences industry, including prior service with Marion Laboratories. Santarus also benefits from Mr. Herman’s current involvement in the healthcare and biotechnology industries through his director positions with Cerner Corporation and Senomyx, Inc.

     Kent Snyder has served as a member of our board of directors since September 2004. Since September 2009, Mr. Snyder has been the Chief Executive Officer and Chairman of Senomyx, Inc., a San Diego-based biotechnology company. From June 2003 to August 2009, Mr. Snyder was President and Chief Executive Officer and a director of Senomyx. In May 2008, Mr. Snyder assumed the role of Chairman of the board of directors of Senomyx. Prior to joining Senomyx, from October 2001 to June 2003, Mr. Snyder was retired. From July 1991 to October 2001, Mr. Snyder held various management positions with Agouron Pharmaceuticals, Inc., a Pfizer company, including President of Global Commercial Operations. Prior to holding the position of President of Global Commercial Operations, Mr. Snyder served as Senior Vice President of Commercial Affairs and Vice President of Business Development. Mr.

Snyder holds a B.S. in pharmacy from the University of Kansas and an M.B.A. from Rockhurst College. In selecting Mr. Snyder to serve as a director, the board considered, among other things, his valuable business and commercial expertise in the pharmaceutical and biotechnology industries, including his current position with Senomyx, Inc. and prior service with Agouron Pharmaceuticals, Inc. Santarus also benefits from Mr. Snyder’s status as an “audit committee financial expert.”

     Our board of directors unanimously recommends a vote “FOR” each nominee listed above. Proxies solicited by our board of directors will be so voted unless stockholders specify otherwise on the accompanying proxy card.

Members of the Board of Directors Continuing in Office

Term Expiring at the
2012 Annual Meeting of Stockholders

Name		Age				Present Position with the Company
Gerald T. Proehl			52			President, Chief Executive Officer and Director
David F. Hale			62			Chairman of the Board
Ted W. Love, M.D.			52			Director

     Gerald T. Proehl serves as our President and Chief Executive Officer and as a director. Mr. Proehl has served in these capacities since January 2002. From March 2000 through December 2001, Mr. Proehl was our President and Chief Operating Officer. From April 1999 to March 2000, Mr. Proehl was our Vice President, Marketing and Business Development. Prior to joining Santarus, Mr. Proehl was with Hoechst Marion Roussel, Inc., a global pharmaceutical company, for 14 years, where he served in various capacities in multiple therapeutic areas including gastrointestinal, cardiovascular, wound care and central nervous system, and from March 1997 to April 1999 served as Vice President of Global Marketing. While at Hoechst Marion Roussel, Mr. Proehl oversaw the co-promotion of the proton pump inhibitor Prilosec^® by Hoechst Marion Roussel and Astra Merck Inc. and was responsible for the marketing of gastrointestinal products Carafate^® and Pentasa^®, among products in several other therapeutic areas. Mr. Proehl holds a B.S. in education from the State University of New York at Cortland, an M.A. in exercise physiology from Wake Forest University and an M.B.A. from Rockhurst College. In selecting Mr. Proehl to serve as a director, the board considered, among other things, his significant knowledge and understanding of Santarus’ business in his role as President and Chief Executive Officer. Santarus also benefits from Mr. Proehl’s general business and commercial experience in the pharmaceutical industry, including his positions with Hoechst Marion Roussel, Inc.

     David F. Hale has been Chairman since February 2004 and has served as a member of our board of directors since June 2000. Since May 2006, Mr. Hale has served as Chairman and Chief Executive Officer of Hale BioPharma Ventures, LLC, which is focused on the formation and development of biotechnology, specialty pharmaceutical, diagnostic and medical device companies. In March 2011, Mr. Hale was appointed Executive Chairman of Biocept, Inc. Mr. Hale is a co-founder of Somaxon Pharmaceuticals, Inc. and currently serves as the Non-Executive Chairman of the board of directors. Prior to this position, he served as Chairman of the board of directors from August 2003 to December 2007, interim Chief Executive Officer from January 2008 to August 2008, and Executive Chairman from December 2007 to June 2009. From October 2000 to May 2006, Mr. Hale served as President and Chief Executive Officer of CancerVax Corporation, a biotechnology company. From December 2000 to May 2006, Mr. Hale was also a director of CancerVax Corporation. In May 2006, CancerVax Corporation merged with Micromet AG to form Micromet, Inc., a biopharmaceutical company, of which Mr. Hale is Chairman. Prior to joining CancerVax Corporation, Mr. Hale served as President and Chief Executive Officer and a director of Women First HealthCare, Inc., a specialty healthcare company, from January 1998 to May 2000. From May 1987 to February 1997, he served as Chairman, President and Chief Executive Officer of Gensia Inc., a specialty pharmaceutical company. In February 1997, Gensia Inc. merged with Sicor Inc., to form Gensia Sicor Inc., and Mr. Hale served as Chief Executive Officer until October 1997, and as a director until June 1999. From February 1987 to September 1994, Mr. Hale served as Chairman of Viagene, Inc., a biotechnology company. Mr. Hale joined Hybritech, Incorporated, a publicly traded biotechnology company (acquired by Eli Lilly and Co. in 1986), in 1982 and served as Chief Operating Officer, President, Chief Executive Officer and a director until May 1987. Mr. Hale served as a director of Metabasis Therapeutics, Inc. from April 1997 to August 2006, Chairman of the board of directors from August 2006 to September 2009, Executive Chairman from September 2009 to January 2010 and acting Chief Executive Officer from October 2009 to January 2010 when Metabasis was acquired by Ligand Pharmaceuticals Incorporated. Mr. Hale holds a B.A. in

biology and chemistry from Jacksonville State University. In selecting Mr. Hale to serve as a director, the board considered, among other things, his significant business experience in the pharmaceutical and biotechnology industries, including service as a director or senior executive officer of numerous publicly traded and privately held pharmaceutical and biotechnology companies. Santarus also benefits from Mr. Hale’s status as an “audit committee financial expert.”

     Ted W. Love, M.D. has served as a member of our board of directors since March 2005. Since February 2010 he has served as Executive Vice President and Head of Research and Development at Onyx Pharmaceuticals, Inc. He previously served as President and Chief Executive Officer of Nuvelo, Inc., a biopharmaceutical company, from March 2001 to January 2009, having been appointed President and Chief Operating Officer of Nuvelo in January 2001. He served as a director of Nuvelo starting in February 2001 and became Chairman of the board of directors in September 2005. He joined Nuvelo from Theravance, Inc. (formerly Advanced Medicine), a biopharmaceutical company, where he served as Senior Vice President of Development from February 1998 to January 2001. Prior to that, he spent six years at Genentech, Inc., a biotechnology company, holding a number of senior management positions in medical affairs and product development. Dr. Love currently serves on the board of directors of Affymax, Inc., ARCA biopharma, Inc., and the 29-member California Independent Citizen’s Oversight Commission. Dr. Love holds a B.A. in molecular biology from Haverford College and an M.D. from Yale Medical School. In selecting Dr. Love to serve as a director, the board considered, among other things, his valuable medical and business expertise, including his prior service with Nuvelo, Inc., Theravance, Inc. and Genentech, Inc. Santarus also benefits from Dr. Love’s experience in his current position with Onyx Pharmaceuticals, Inc. and as a director of two biopharmaceutical companies.

Term Expiring at the
2013 Annual Meeting of Stockholders

Name		Age				Present Position with the Company
Daniel D. Burgess			49			Director
Michael G. Carter, M.B., Ch.B., F.R.C.P. (U.K.)			73			Director

     Daniel D. Burgess has served as a member of our board of directors since July 2004. Since May 2007, Mr. Burgess has been President and Chief Executive Officer of Mpex Pharmaceuticals, Inc., a private biopharmaceutical company. From August 1999 to May 2007, Mr. Burgess was Chief Operating Officer and Chief Financial Officer of Harbor BioSciences, Inc., formerly Hollis-Eden Pharmaceuticals, Inc., a pharmaceutical company. Mr. Burgess joined Harbor BioSciences from Nanogen Inc., a supplier of molecular diagnostic tests, where he served as Vice President and Chief Financial Officer. Prior to joining Nanogen in 1998, Mr. Burgess spent ten years with Gensia Sicor, Inc. (acquired by Teva Pharmaceutical Industries Limited), formerly Gensia Inc., a specialty pharmaceutical company, and Gensia Automedics, Inc., a partially owned subsidiary of Gensia Sicor. He served as President and a director of Gensia Automedics, where he was responsible for all functional areas of this medical products company. In addition, he was Vice President and Chief Financial Officer of Gensia Sicor, where he was responsible for finance, investor relations, business development and other administrative functions. Prior to joining Gensia, Mr. Burgess held positions at Castle & Cooke, Inc. and Smith Barney, Harris Upham and Company. Mr. Burgess served as a director of Metabasis Therapeutics, Inc. from March 2004 until its acquisition by Ligand Pharmaceuticals Incorporated in January 2010. He holds a B.A. in economics from Stanford University and an M.B.A. from Harvard Business School. In selecting Mr. Burgess to serve as a director, the board considered, among other things, his valuable financial expertise, including prior service as chief financial officer for publicly traded companies and his status as an “audit committee financial expert.” Santarus also benefits from Mr. Burgess’ general business experience in the pharmaceutical and biotechnology industries.

     Michael G. Carter, M.B., Ch.B., F.R.C.P. (U.K.) has served as a member of our board of directors since February 2005. Dr. Carter has been a venture partner at S.V. Life Sciences Advisers LLP since 1998. He retired from Zeneca, PLC, a publicly traded global pharmaceutical company, in 1998. Dr. Carter served Zeneca as International Medical Director from 1986 to 1989 and International Marketing Director from 1990 to 1995. From 1976 to 1984, Dr. Carter held several positions with Roche Products, Ltd., including head of Medical Development and Medical Affairs, and Director of the Pharmaceutical Division. Dr. Carter currently serves as a director of Micromet, Inc., a biopharmaceutical company, and GTx, Inc., a men’s health biotechnology company, in the U.S. Since September 2009, he has been a member of the Strategic Advisory Board of Cowen Healthcare Royalty Fund. He is an elected fellow of the Royal Pharmaceutical Society, Faculty of Pharmaceutical Medicine, and of the Royal College of Physicians of Edinburgh. Dr. Carter holds a bachelor’s degree in pharmacy from London University (U.K.) and a medical degree from Sheffield

University Medical School (U.K.). In selecting Dr. Carter to serve as a director, the board considered, among other things, his valuable medical and commercial expertise, including prior service with Zeneca, PLC and Roche Products, Ltd. Santarus also benefits from Dr. Carter’s international experience in the pharmaceutical and biotechnology industries.

Director Independence

     Messrs. Burgess, Hale, Herman, Snyder and Drs. Carter and Love are independent directors, as defined in the Nasdaq Stock Market qualification standards.

Board Meetings

     Our board of directors held 14 meetings, including telephonic meetings, during 2010. No director who served as a director during the past year attended fewer than 75% of the aggregate of the total number of meetings of our board of directors and the total number of meetings of committees of our board of directors on which he served.

Board Leadership Structure

     Our board of directors is currently comprised of seven directors, six of whom are independent. We separate the roles of chief executive officer and chairman of our board of directors in recognition of the differences between the two roles. The chief executive officer is responsible for setting the strategic direction for the company and the day to day leadership and performance of the company, while the chairman of our board of directors provides guidance to the chief executive officer and presides over meetings of the full board of directors. We believe that this separation of responsibilities provides a balanced approach to managing the board of directors and overseeing the company.

Board’s Role in Risk Oversight

     Our board of directors is actively involved in oversight of risks that could affect the company. The board’s role in our risk oversight process includes receiving regular reports from members of senior management on areas of material risk to the company, including risks associated with our operational, financial, legal and regulatory functions. The full board (or the appropriate board committee in the case of risks that are under the purview of a particular committee) receives these reports from the appropriate “risk owner” within the organization to enable it to understand our risk identification, risk management and risk mitigation strategies. When a board committee engages in a discussion related to areas of material risk to the company, the chairman of the relevant committee reports on the discussion to the full board during the committee reports portion of the next board meeting. This enables the board and its committees to coordinate the risk oversight role.

Committees of the Board

     Audit Committee. Our audit committee currently consists of Messrs. Burgess, Hale and Snyder. The audit committee held five meetings, including telephonic meetings, during 2010. All members of the audit committee are independent directors, as defined in the Nasdaq Stock Market qualification standards. Our board of directors has determined that each of Messrs. Burgess, Hale and Snyder qualifies as an “audit committee financial expert” as that term is defined in the rules and regulations established by the Securities and Exchange Commission. The audit committee is governed by a written charter approved by our board of directors, a copy of which is available on our web site at www.santarus.com. The functions of this committee include:

	•		meeting with our management periodically to consider the adequacy of our internal controls and the objectivity of our financial reporting;
	•		meeting with our independent registered public accounting firm and with internal financial personnel regarding these matters;
	•		engaging our independent registered public accounting firm; and
	•		reviewing our audited financial statements and reports and discussing the statements and reports with our

management and our independent registered public accounting firm, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management, if any.

Both our independent registered public accounting firm and internal financial personnel regularly meet privately with our audit committee and have unrestricted access to this committee.

     Nominating/Corporate Governance Committee. Our nominating/corporate governance committee currently consists of Drs. Love and Carter and Mr. Herman. The nominating/corporate governance committee held three meetings, including telephonic meetings, during 2010. All members of the nominating/corporate governance committee are independent directors, as defined in the Nasdaq Stock Market qualification standards. The nominating/corporate governance committee is governed by a written charter approved by our board of directors, a copy of which is available on our web site at www.santarus.com. The functions of this committee include:

	•		reviewing and recommending nominees for election as directors;
	•		assessing the performance of our board of directors; and
	•		reviewing our corporate governance guidelines and considering other issues relating to corporate governance.

     Compensation Committee. Our compensation committee currently consists of Messrs. Herman, Hale and Snyder. The compensation committee held seven meetings, including telephonic meetings, during 2010. All members of the compensation committee are independent directors, as defined in the Nasdaq Stock Market qualification standards. The compensation committee is governed by a written charter approved by our board of directors, a copy of which is available on our web site at www.santarus.com. The functions of this committee include:

	•		carrying out our board of directors’ responsibilities relating to compensation of our executive officers, including by designing (in consultation with management and the board of directors), approving and/or recommending to our board of directors for approval and evaluating our compensation plans, policies and programs;
	•		exercising authority under our employee benefit plans; and
	•		advising and consulting with our executive officers regarding other matters related to compensation of our employees.

     With regard to executive compensation, the compensation committee of our board of directors has the primary authority to determine compensation for our executive officers. In addition, the compensation committee, together with the remaining independent members of our board of directors, has authority to review our President and Chief Executive Officer’s individual performance and compensation, as well as to establish and determine achievement of our annual corporate goals. For more information about the compensation committee’s involvement with executive compensation matters, please see the discussion below under the heading “Compensation Discussion and Analysis.”

     The compensation committee also has the primary authority to review, at least annually, and recommend to the board of directors all compensation for our non-employee directors in connection with their service on our board of directors. To aid its review of non-employee director compensation, the compensation committee reviews third party survey data for peer group companies and utilizes the services of one or more independent compensation consulting and survey firms.

Compensation Committee Interlocks and Insider Participation

     Messrs. Herman, Hale and Snyder serve on the compensation committee of our board of directors. No member of the compensation committee was at any time during the 2010 fiscal year or at any other time an officer or employee of our company. None of our executive officers serve, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our compensation committee. None of our executive officers serve, or in the past year has served, as a member of the compensation committee of any entity that has one or more executives serving on our board of directors.

Director Nomination Process

     Director Qualifications

     In evaluating director nominees, the nominating/corporate governance committee considers, among other things, the following factors:

	•		personal and professional integrity, ethics and values;
	•		experience in corporate management, such as serving as an officer or former officer of a publicly held company;
	•		experience in our industry and/or with relevant social policy concerns;
	•		experience as a board member of another publicly held company; and
	•		practical and mature business judgment.

In connection with its evaluation of director nominees, the nominating/corporate governance committee also considers diversity of expertise and experience in substantive matters pertaining to our business relative to other board members. The nominating/corporate governance committee’s goal is to assemble a board of directors that brings to our company a variety of perspectives and skills derived from high quality business and professional experience.

     Other than the foregoing, there are no stated minimum criteria for director nominees, although the nominating/corporate governance committee may also consider such other facts as it may deem are in the best interests of our company and our stockholders. The nominating/corporate governance committee also believes it is appropriate for at least one, and, preferably, several, members of our board of directors to meet the criteria for an “audit committee financial expert” as defined by Securities and Exchange Commission rules, and that a majority of the members of our board of directors be independent as required under the Nasdaq Stock Market qualification standards. The nominating/corporate governance committee also believes it is appropriate for our chief executive officer to serve as a member of our board of directors. Our directors’ performance and qualification criteria are reviewed annually by the nominating/corporate governance committee.

     Identification and Evaluation of Nominees for Directors

     The nominating/corporate governance committee identifies nominees for director by first evaluating the current members of our board of directors willing to continue in service. Current members with qualifications and skills that are consistent with the nominating/corporate governance committee’s criteria for board of directors service and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of our board of directors with that of obtaining a new perspective.

     If any member of our board of directors does not wish to continue in service or if our board of directors decides not to re-nominate a member for re-election, the nominating/corporate governance committee identifies the desired skills and experience of a new nominee in light of the criteria above. The nominating/corporate governance committee generally polls our board of directors and members of management for their recommendations. The nominating/corporate governance committee may also review the composition and qualification of the boards of directors of our competitors, and may seek input from industry experts. The nominating/corporate governance committee reviews the qualifications, experience and background of the candidates. Final candidates are interviewed by the members of the nominating/corporate governance committee and by certain of our other independent directors and executive management. In making its determinations, the nominating/corporate governance committee evaluates each individual in the context of our board of directors as a whole, with the objective of assembling a group that can best perpetuate the success of our company and represent stockholder interests through the exercise of sound judgment. After review and deliberation of all feedback and data, the nominating/corporate governance committee makes its recommendation to our board of directors.

     To date, we have not received director candidate recommendations from our stockholders. Any recommendations received from stockholders will be evaluated in the same manner that potential nominees suggested by board members, management or other parties are evaluated. We do not intend to treat stockholder recommendations in any manner different from other recommendations.

     Pursuant to our Amended and Restated Bylaws, stockholders wishing to suggest a candidate for director should write to our corporate secretary. In order to be considered, the recommendation for a candidate must include the following written information: (i) with respect to each of the proposing stockholder and the candidate, the class and number of shares of our capital stock which are owned beneficially and of record, (ii) with respect to each of the proposing stockholder and the candidate, any derivative, swap or other transaction, the purpose or effect of which is to give such party economic risk similar to ownership of shares of our capital stock; (iii) with respect to each of the proposing stockholder and the candidate, any proxy, agreement or relationship that confers a right to vote any of our shares of capital stock; (iv) with respect to each of the proposing stockholder and the candidate, any agreement or relationship engaged in to reduce the level of risk to, or increase or decrease the voting power of, such party with respect to our shares of capital stock, or which provides the opportunity to profit from any decrease in the value of our shares of capital stock; (v) with respect to each of the proposing stockholder and the candidate, any performance-related fees such party is entitled to based on the increase or decrease in the value of any of our shares of capital stock; (vi) any other information relating to the proposing stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies or consents by such proposing stockholder pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act; (vii) all information relating to the candidate that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act (including such candidate’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (viii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among the proposing stockholder, on the one hand, and the candidate, his or her respective affiliates and associates, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K promulgated under the Exchange Act if such proposing stockholder were the “registrant” for purposes of such rule and the candidate were a director or executive officer of such registrant. In addition, we may require any candidate to furnish such other information as may reasonably be required by us to determine the eligibility of such candidate to serve as an independent director in accordance with our corporate governance guidelines or that could be material to a reasonable stockholder’s understanding of the independence or lack of independence of such candidate.

     In order to give the nominating/corporate governance committee sufficient time to evaluate a recommended candidate and/or include the candidate in our proxy statement for the 2011 annual meeting, the recommendation should be received by our corporate secretary at our principal executive offices pursuant to our procedures detailed in the section below entitled “Stockholder Proposals.”

Communications with our Board of Directors

     Our stockholders may contact our board of directors or a specified individual director by writing to our corporate secretary at Santarus, Inc., 3721 Valley Centre Drive, Suite 400, San Diego, California 92130. Our corporate secretary will relay all such communications to our board of directors, or individual members, as appropriate.

Code of Ethics

     Our company has established a Code of Business Conduct and Ethics that applies to our officers, directors and employees. The Code of Business Conduct and Ethics contains general guidelines for conducting the business of our company consistent with the highest standards of business ethics, and is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and Item 406 of Regulation S-K. Our company has established an Ethics Helpline at 1-800-869-9522 that is designed to receive anonymous reports of any known or suspected violations of our Code of Business Conduct and Ethics, Comprehensive Compliance Program for Sales and Marketing Activities or other applicable laws, rules and regulations.

Corporate Governance Documents

     Our company’s Code of Business Conduct and Ethics, Corporate Governance Guidelines, Audit Committee Charter, Compensation Committee Charter and Nominating/Corporate Governance Committee Charter are available, free of charge, on our web site at www.santarus.com. Please note, however, that the information contained on the web site is not incorporated by reference in, or considered part of, this Proxy Statement. We will also provide copies of these documents, free of charge, to any stockholder upon written request to Investor Relations, Santarus, Inc., 3721 Valley Centre Drive, Suite 400, San Diego, California 92130.

Report of the Audit Committee

     The audit committee oversees the company’s financial reporting process on behalf of the board of directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the audit committee reviewed and discussed the audited consolidated financial statements in the company’s annual report with management, including a discussion of any significant changes in the selection or application of accounting principles, the reasonableness of significant judgments, the clarity of disclosures in the financial statements and the effect of any new accounting initiatives.

     The audit committee reviewed and discussed with Ernst & Young LLP, which is responsible for expressing an opinion on the conformity of the company’s audited consolidated financial statements with generally accepted accounting principles, its judgments as to the quality and acceptability of the company’s accounting principles and such other matters as are required to be discussed with the audit committee under generally accepted auditing standards, including the Statement on Auditing Standards No. 61 (Communication with Audit Committees), as currently in effect. In addition, the audit committee has discussed with Ernst & Young LLP its independence from management, and the company has received from Ernst & Young LLP the written disclosures and the letter required by Rule 3526 of the Public Company Accounting Oversight Board (Communication with Audit Committees Concerning Independence) and has considered the compatibility of non-audit services with Ernst & Young LLP’s independence.

     The audit committee met with Ernst & Young LLP to discuss the overall scope of its services, the results of its audit and reviews, its evaluation of the company’s internal controls, including internal control over financial reporting, and the overall quality of the company’s financial reporting. Ernst & Young LLP, as the company’s independent registered public accounting firm, also periodically updates the audit committee about new accounting developments and their potential impact on the company’s reporting. The audit committee’s meetings with Ernst & Young LLP were held with and without management present. The audit committee is not employed by the company, nor does it provide any expert assurance or professional certification regarding the company’s consolidated financial statements. The audit committee relies, without independent verification, on the accuracy and integrity of the information provided, and representations made, by management and the company’s independent registered public accounting firm.

     In reliance on the reviews and discussions referred to above, the audit committee recommended to the company’s board of directors that the audited consolidated financial statements and related schedule and management’s assessment of the effectiveness of the company’s internal control over financial reporting be included in the company’s annual report for the year ended December 31, 2010. The audit committee and the company’s board of directors also have recommended, subject to stockholder approval, the ratification of the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm for 2011.

     This report of the audit committee shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such acts.

     The foregoing report has been furnished by the audit committee.

Daniel D. Burgess, Chairman
David F. Hale
Kent Snyder

Compensation of Directors

     Non-employee members of our board of directors receive a combination of cash compensation, in the form of annual retainers and meeting stipends, and equity incentive compensation, in the form of stock option awards, for their service on our board of directors. Any board member who is also an employee of our company does not receive separate compensation for service on our board of directors.

     Cash Compensation

          2010 Fiscal Year

     For the 2010 fiscal year, each non-employee director received an annual cash retainer of $45,000. The chairman of our board received an additional annual retainer of $40,000 and the chairs of the following board committees received the following additional annual retainers: (i) audit committee, $20,000; (ii) compensation committee, $15,000; and (iii) nominating/corporate governance committee, $10,000. In addition, the non-chair members of the following board committees received the following additional annual retainers: (i) audit committee, $10,000; (ii) compensation committee, $7,500; and (iii) nominating/corporate governance committee, $5,000.

     For each meeting of the board attended during 2010 in excess of ten board meetings, each non-employee director received an additional cash meeting stipend of $2,000 for each such meeting attended in-person or $1,000 for each such meeting attended by telephone.

     In addition, non-employee directors also received reimbursement of their reasonable out-of-pocket expenses in connection with attendance at board and committee meetings.

     Additional information about the cash compensation paid to our non-employee directors during the 2010 fiscal year is reflected in the table captioned “Director Compensation Table,” set forth below.

          2011 Fiscal Year

     For the 2011 fiscal year, each non-employee director is entitled to receive the same amounts of cash compensation as described above for the 2010 fiscal year.

Equity Incentive Compensation

     Our non-employee directors also receive equity incentive compensation in connection with their service on our board of directors.

          2010 Fiscal Year

     For the 2010 fiscal year, on June 10, 2010, the date of the annual meeting of our stockholders, (i) each continuing non-employee director received an option to purchase 32,000 shares of common stock, (ii) the chairman of our board of directors received an additional annual option to purchase 10,000 shares of common stock, (iii) the chairman of our audit committee received an additional annual option to purchase 5,000 shares of common stock, (iv) the chairman of our compensation committee received an additional annual option to purchase 5,000 shares of common stock and (v) the chairman of our nominating/corporate governance committee received an additional annual option to purchase 2,500 shares of common stock. In addition, our policy provides that each non-employee director who is initially elected to our board of directors will be granted an option to purchase 35,000 shares of our common stock in connection with his or her initial election to our board of directors.

     These options will have an exercise price per share equal to 100% of the fair market value of the underlying stock at the time of grant. The options granted to non-employee directors in connection with their initial election to our board of directors will vest in three equal annual installments on each yearly anniversary of the date of grant, subject to the director’s continuing service on our board of directors on such dates. The other options granted to non-employee directors described above will vest in twelve equal monthly installments on each monthly anniversary of the date of grant, subject to the director’s continuing service on our board of directors on such dates. To the extent vested as of a

non-employee director’s termination of membership on our board of directors, each such option will be exercisable for 12 months following such director’s termination of membership on our board of directors. The term of each option granted to a non-employee director is ten years. Upon a change of control (as defined in our amended and restated 2004 equity incentive award plan and our 1998 stock option plan), each option granted to a non-employee director will become 100% vested in accordance with the terms of such plans.

     Additional information about stock option awards granted during the 2010 fiscal year to our non-employee directors is reflected in the table captioned “Director Compensation Table,” set forth below.

          2011 Fiscal Year

     In light of the fact that a large number of outstanding stock options held by our non-employee directors are “underwater ” as a result of their per share exercise prices exceeding the trading price of our stock, and the reduced incentive value provided by such “underwater” options, as well as in recognition of the continuing desire to provide meaningful retention and incentive awards to our non-employee directors, on March 10, 2011, each non-employee director received an option to purchase 32,000 shares of common stock. In addition, on June 15, 2011, the date of the 2011 annual meeting of our stockholders, each continuing non-employee director will receive annual option grants in the same amount and on the same terms as described above in respect of the annual option grants made on the date of our 2010 annual shareholders meeting.

DIRECTOR COMPENSATION TABLE

     The table below summarizes the compensation paid by our company to non-employee directors for the fiscal year ended December 31, 2010.

		Fees Earned or				Option				All Other
		Paid in Cash				Awards				Compensation				Total
Name(1)		($)				($)(2)				($)				($)
David F. Hale		$	108,500			$	62,034			$	—			$	170,534
Daniel D. Burgess			71,000				54,649				—				125,649
Michael G. Carter, M.B., Ch.B., F.R.C.P. (U.K.)			54,000				47,264				—				101,264
Michael E. Herman			70,000				54,649				—				124,649
Ted W. Love, M.D.			57,000				50,957				—				107,957
Kent Snyder			66,500				47,264				—				113,764

Director Attendance at Annual Meetings

     Our company does not have a formal policy regarding attendance by members of our board of directors at our Annual Meeting. Six of our seven then-current directors attended our 2010 annual meeting of stockholders.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information regarding the beneficial ownership of our common stock as of March 31, 2011 for:

	•		each of our Named Executive Officers;
	•		each of our directors;
	•		each person known by us to beneficially own more than 5% of our common stock; and
	•		all of our executive officers and directors as a group.

     Information with respect to beneficial ownership has been furnished by each executive officer, director, or beneficial owner of more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (the “SEC”), and includes voting and investment power with respect to the securities. Except as indicated by footnote, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The number of shares of common stock used to calculate the percentage ownership of each listed person includes the shares of common stock underlying options or warrants held by such persons that are exercisable as of May 30, 2011, which is 60 days after March 31, 2011.

     Percentage of beneficial ownership is based on 60,280,231 shares of common stock outstanding as of March 31, 2011.

     Unless otherwise indicated, the address for the following stockholders is c/o Santarus, Inc., 3721 Valley Centre Drive, Suite 400, San Diego, CA 92130.

		Shares				Percent
		Beneficially				Beneficially
Name and Address of Beneficial Owner		Owned				Owned
Named Executive Officers and Directors:
Gerald T. Proehl(1)			1,854,326				3.0	%
Debra P. Crawford(2)			684,006				1.1
E. David Ballard II, M.D.(3)			409,955				*
William C. Denby, III(4)			538,151				*
Carey J. Fox, J.D.(5)			486,091				*
David F. Hale(6)			503,452				*
Daniel D. Burgess(7)			307,000				*
Michael G. Carter, M.B., Ch.B., F.R.C.P. (U.K.)(8)			272,000				*
Michael E. Herman(9)			410,970				*
Ted W. Love, M.D.(10)			284,500				*
Kent Snyder(11)			273,000				*
5% Stockholders:
Cosmo Technologies Limited(12)			6,972,132				11.6
Westfield Capital Management Co., L.P.(13)			4,884,120				8.1
Funds affiliated with BlackRock, Inc.(14)			3,540,481				5.9
All directors and executive officers as a group (16 persons)(15)			7,721,861				11.5

     The following table sets forth information as to persons who serve as our executive officers and senior management as of March 31, 2011.

Name		Age				Position
Gerald T. Proehl			52			President, Chief Executive Officer and Director
E. David Ballard II, M.D.			55			Senior Vice President, Medical Affairs and Pharmacovigilance
Maria Bedoya-Toro, PhD.			59			Senior Vice President, Regulatory Affairs and Quality Assurance
Debra P. Crawford			53			Senior Vice President, Chief Financial Officer, Treasurer and Secretary
Julie A. DeMeules			58			Senior Vice President, Human Resources
William C. Denby, III			55			Senior Vice President, Commercial Operations
Carey J. Fox, J.D.			42			Senior Vice President, General Counsel
Warren E. Hall			58			Senior Vice President, Manufacturing and Product Development
Michael D. Step			51			Senior Vice President, Corporate Development
Mark Totoritis, M.D.			56			Senior Vice President, Clinical Research
Blake A. Boland			50			Vice President, Sales
Jonathan M. Hee			52			Vice President, Commercial Affairs
Martha L. Hough			57			Vice President, Finance and Investor Relations
Thomas J. Joyce			51			Vice President, Marketing and National Accounts

     Gerald T. Proehl serves as our President and Chief Executive Officer and as a director. Mr. Proehl has served in these capacities since January 2002. From March 2000 through December 2001, Mr. Proehl was our President and Chief Operating Officer. From April 1999 to March 2000, Mr. Proehl was our Vice President, Marketing and Business Development. Prior to joining Santarus, Mr. Proehl was with Hoechst Marion Roussel, Inc., a global pharmaceutical company, for 14 years, where he served in various capacities in multiple therapeutic areas including gastrointestinal, cardiovascular, wound care and central nervous system, and from March 1997 to April 1999 served as Vice President of Global Marketing. While at Hoechst Marion Roussel, Mr. Proehl oversaw the co-promotion of the proton pump inhibitor Prilosec^® by Hoechst Marion Roussel and Astra Merck Inc. and was responsible for the marketing of gastrointestinal products Carafate^® and Pentasa^®, among products in several other therapeutic areas. Mr. Proehl holds a B.S. in education from the State University of New York at Cortland, an M.A. in exercise physiology from Wake Forest University and an M.B.A. from Rockhurst College.

     E. David Ballard II, M.D. serves as our Senior Vice President, Medical Affairs and Pharmacovigilance. Dr. Ballard joined Santarus in March 2004 as Vice President, Clinical Research, was appointed Vice President, Medical Affairs in September 2005, was promoted to Vice President, Clinical Research and Medical Affairs in March 2006, was promoted to Senior Vice President, Clinical Research and Medical Affairs in September 2008 and appointed to his current position in February 2011. From March 2000 to February 2004, Dr. Ballard served in various positions at TAP Pharmaceutical Products Inc., a pharmaceutical company, most recently serving as Therapeutic Area Head, Gastroenterology and Internal Medicine. From July 1997 to March 2000, Dr. Ballard was a Medical Director at Abbott Laboratories, a pharmaceutical company. Dr. Ballard holds a B.S. in biology from Morehouse College and an M.D. from the Medical College of Ohio. Dr. Ballard is also certified as a gastroenterologist by the American Board of Internal Medicine.

     Maria Bedoya-Toro, PhD serves as our Senior Vice President, Regulatory Affairs and Quality Assurance. Dr. Bedoya-Toro joined Santarus in May 2007 as Vice President, Regulatory Affairs and Quality Assurance, and was promoted to her current position in February 2011. She previously served as Senior Director Regulatory Affairs at Eisai Medical Research Inc. from November 2006 to May 2007, moving to Eisai from Ligand Pharmaceuticals, Inc. when Ligand divested their oncology products to Eisai in November 2006. Dr. Bedoya-Toro worked as Senior Director Global Regulatory Affairs and Compliance at Ligand from 2003 to 2006. From 2000 to 2003 she served as Director Global Regulatory Affairs at Baxter Hyland Immuno. From 1998 to 2000 Dr. Bedoya-Toro worked at BASF Bioresearch Corporation as Director Regulatory Affairs/Quality, and from 1996 to 1998 she worked as Director Quality Assurance and Regulatory Compliance at Amylin Pharmaceuticals. From 1988 to 1996 Dr. Bedoya-Toro worked at Rhone-Poulenc Rorer in a number of increasingly responsible positions in regulatory compliance, quality assurance, quality control and compliance. Dr. Bedoya-Toro holds an M.B.A from the University of Chicago and a Ph.D. in bio-analytical chemistry from Ohio University. In addition she has a M.A. in bio-analytical chemistry and a B.S. in chemistry from Western Michigan University.

     Debra P. Crawford serves as our Senior Vice President, Chief Financial Officer, Treasurer and Secretary. Ms. Crawford joined Santarus in November 2000 as Vice President, Chief Financial Officer, Treasurer and Secretary and was promoted to her current position in December 2003. Prior to joining Santarus, Ms. Crawford served as Vice President, Chief Financial Officer and Treasurer from July 1998 to May 2000 for Women First HealthCare, Inc., a specialty healthcare company. Ms. Crawford was also Assistant Secretary of Women First from July 1998 to February 1999 and Secretary from March 1999 to May 2000. From May 2000 to October 2000 and from March 1997 to August 1998, Ms. Crawford was self-employed and provided financial consulting services in the area of corporate development and in the capacity of acting chief financial officer. Ms. Crawford also served as Chief Financial Officer, Vice President of Finance and Administration and Treasurer of IVAC Holdings, Inc. from January 1996 to December 1996 and of IVAC Medical Systems, Inc., a medical device company, from January 1995 to December 1996. From September 1981 to December 1994, Ms. Crawford served in various financial positions within companies of the medical device division of Eli Lilly & Company. Ms. Crawford holds a B.S. in business administration from San Diego State University.

     Julie A. DeMeules serves as our Senior Vice President, Human Resources. Ms. DeMeules joined Santarus in January 2004 as Vice President, Human Resources and was promoted to her current position in February 2006. From January 2000 to November 2003, Ms. DeMeules served as Vice President, Human Resources at Quidel Corporation, a manufacturer and distributor of medical diagnostic products. From February 1991 to January 2000, Ms. DeMeules was employed with Advanced Tissue Sciences, a biotechnology company, most recently serving as Vice President, Human Resources. Prior to joining Advanced Tissue Sciences, Ms. DeMeules served as Director of Human Resources at Square D Corporation, a provider of electrical products, from June 1990 to February 1991. Prior to joining Square D Corporation, Ms. DeMeules served for several years as Vice President of Human Resources of Signet Armorlite, Inc., a manufacturer and distributor of ophthalmic lenses and supplies. Ms. DeMeules holds a B.A. in business administration from the University of San Diego and an M.B.A. from San Diego State University.

     William C. Denby, III serves as our Senior Vice President, Commercial Operations. Mr. Denby has held this position since he joined Santarus in February 2002. Prior to joining Santarus, from October 2001 to February 2002, Mr. Denby served as Senior Vice President of Commercial Operations of Agouron Pharmaceuticals, Inc., a provider of HIV and other specialty pharmaceutical products that was acquired by Pfizer Inc. From June 1997 to October 2001, Mr. Denby served as Senior Vice President and Vice President of Sales and Marketing for Agouron. From January 1995 to June 1997, Mr. Denby served as Senior Director of Sales and Marketing and Senior Director, Commercial and Marketing Affairs for Agouron. Prior to that, Mr. Denby was at Marion Laboratories for 18 years, holding various positions in corporate finance, strategic planning, and sales and marketing. While at Marion Laboratories, Mr. Denby was responsible for promoting a diverse product line which included brands such as Cardizem^®, Nicorette^® and the duodenal ulcer drug Carafate, and he helped secure managed care formulary acceptance for these products. Mr. Denby holds a B.A. in English from the State University of New York at Fredonia and an M.B.A. from Rockhurst College.

     Carey J. Fox, J.D. serves as our Senior Vice President, General Counsel. Ms. Fox joined Santarus as Senior Director, Legal Affairs in March 2002, was promoted to Vice President, Legal Affairs in May 2004, was promoted to Vice President, General Counsel in March 2006 and was promoted to her current position in September 2008. Prior to joining Santarus, Ms. Fox served as Director, Legal Affairs for Elan Pharmaceuticals, Inc., a pharmaceutical company, from January 2002 to March 2002. Prior to joining Elan, Ms. Fox was associated with the law firm of Brobeck, Phleger & Harrison LLP from May 1998 to December 2001 and with the law firm of Fennemore Craig from January 1996 to

May 1998, where she represented a variety of clients in general corporate and securities law matters. Ms. Fox is a member of the State Bar of California and holds a B.A. in social ecology from the University of California, Irvine and a J.D. from Arizona State University.

     Warren E. Hall serves as our Senior Vice President, Manufacturing and Product Development. Mr. Hall joined Santarus in July 2001 as Vice President, Manufacturing and Product Development and was promoted to his current position in December 2003. Prior to joining Santarus, Mr. Hall served as Senior Director of Development from July 2000 to July 2001 at Dura Pharmaceuticals, a specialty pharmaceutical company that was acquired by Elan Corporation, plc, a pharmaceutical company. Mr. Hall served as Senior Director of Program Management for the pulmonary group at Dura from February 1999 to July 2000, and as Senior Director of Manufacturing from July 1998 to February 1999. From November 1995 to June 1998, Mr. Hall served as Director of Manufacturing Operations at Cell Therapeutics, Inc., a cancer treatment company. Prior to Cell Therapeutics, Mr. Hall was with Mallinckrodt, Inc., a pharmaceutical and specialty chemical company, for 17 years, serving in various capacities, most recently as Director of Worldwide Manufacturing. Mr. Hall holds a B.A. in chemistry and biology from Greenville College and an M.S. in organic chemistry from Southern Illinois University.

     Michael D. Step serves as our Senior Vice President, Corporate Development. Mr. Step has held this position since he joined Santarus in February 2005. Prior to joining Santarus, he served from August 2000 to February 2005 with Amylin Pharmaceuticals, Inc., a biopharmaceutical company, most recently as Vice President, Corporate Development. In this capacity, he was responsible for leading corporate development activities, including product licensing, strategic planning, and mergers and acquisitions evaluations. Prior to Amylin, he was Senior Director, Business Development at Dura Pharmaceuticals, Inc., a pharmaceutical company, from May 1998 to July 2000. In this position, his duties included licensing of marketed pharmaceutical products. Prior to that, he served in corporate development and strategic planning at Hoffmann-La Roche and sales and management roles at Roche Labs and Syntex Labs. Mr. Step holds a B.A. in political science from Vanderbilt University and an M.B.A. from the University of Southern California.

     Mark C. Totoritis, M.D. serves as our Senior Vice President, Clinical Research. Dr. Totoritis joined Santarus in September 2010 as Senior Vice President, Biologics and was appointed to his current position in February 2011. From 2007 to September 2010, Dr. Totoritis was associated with Covella Pharmaceuticals, Inc., a start-up biotechnology company that he co-founded and for which he served as Chief Medical Officer until its acquisition by Santarus in September 2010. From 2003 to 2006 he was Vice President of Medical Research and Head of the Immunology/Rheumatology Therapeutics Group at Biogen Idec. Dr. Totoritis also worked as Head of the Autoimmune and Inflammatory Diseases Group at IDEC Pharmaceuticals from 1997 through its merger with Biogen in 2003, rising to the position of vice president. He played a key role in the development and approval for rheumatoid arthritis of Rituxan^®, a biologic drug sold by Genentech and Biogen Idec and also approved for non-Hodgkin’s lymphoma. Dr. Totoritis worked at Advanced Tissue Sciences, Inc. from 1995 to 1997, where his efforts contributed to the approval of the company’s first bioengineered human tissue product for the treatment of burn wounds. Earlier in his career, while at Syntex Research/Roche Bioscience, Dr. Totoritis was a major contributor to the development of CellCept^® for use in patients undergoing solid organ transplantation. He holds an A.B. in human biology from Stanford University and an M.D. from Eastern Virginia Medical School. Dr. Totoritis is board certified in internal medicine and rheumatology by the American Board of Internal Medicine.

     Blake A. Boland serves as our Vice President, Sales. Mr. Boland joined Santarus in January 2004 as Director, National Sales and was promoted to his current position in July 2004. Prior to joining Santarus, Mr. Boland was with Aventis Pharmaceuticals, a global pharmaceutical company, for 16 years. From November 1998 to December 2003, Mr. Boland served as a Regional Sales Director, where he was responsible initially for building a new primary care sales organization in the western U.S. During his career with Aventis and predecessor companies, Mr. Boland held various positions in sales, marketing and sales management in such therapeutic areas as gastroenterology, cardiovascular, respiratory, diabetes and anti-infectives. Mr. Boland holds a B.A. in business administration from Graceland College and an M.B.A. from Rockhurst College.

     Jonathan M. Hee serves as our Vice President, Commercial Affairs. Mr. Hee has held this position since he joined Santarus in January 2004. From October 2000 to December 2003, Mr. Hee served as Vice President, Sales and Marketing Services at Agouron Pharmaceuticals, Inc., a provider of HIV and other specialty pharmaceutical products that was acquired by Pfizer Inc. From October 1996 to October 2000, Mr. Hee served as Director and Senior Director, Sales and Marketing Services for Agouron. Mr. Hee was a Senior Manager of Segment Marketing for Agouron from

November 1995 to October 1996. Prior to joining Agouron, Mr. Hee was with Gensia Inc., a cardiovascular and multi-source injectable drug company, where he held various management roles including Associate Director positions in marketing and market planning. Mr. Hee holds a B.S. in chemical engineering from Stanford University and an M.B.A. from Harvard University.

     Martha L. Hough serves as our Vice President, Finance and Investor Relations. Ms. Hough has held this position since she joined Santarus in January 2005. From August 2002 to December 2004, and September 1998 to October 1999, Ms. Hough was a self-employed consultant to medical technology and pharmaceutical companies. From November 1999 to July 2002, Ms. Hough was Vice President, Business Development, and Chief Financial Officer of LMA North America, Inc., a profitable private medical device company. From 1987 to 1998, Ms. Hough worked in various finance, investor relations, and marketing positions at Gensia Sicor, Inc., serving as Vice President, Finance and Corporate Communications there from January 1995 to June 1998. Ms. Hough holds a B.S. in psychology from Colorado State University and an M.B.A. from the Tuck School of Business at Dartmouth College.

     Thomas J. Joyce serves as our Vice President, Marketing and National Accounts. Mr. Joyce has held this position since he joined Santarus in January 2004. From April 2002 to January 2004, Mr. Joyce served as Senior Director, Marketing at Neurocrine Biosciences, Inc., a drug discovery and development company. From July 1999 to March 2002, Mr. Joyce served as Senior Director, Global Marketing Planning of Agouron Pharmaceuticals, Inc., a provider of HIV and other specialty pharmaceutical products that was acquired by Pfizer Inc. From September 1997 to June 1999 and from May 1996 to August 1997, Mr. Joyce served as Associate Director of Corporate Development and Senior Market Manager, respectively, of Agouron. Prior to joining Agouron, Mr. Joyce held various sales and sales management positions at Hoechst Marion Roussel. Mr. Joyce holds a B.A. in psychology from the University of Dayton.

Compensation Discussion and Analysis

     This section discusses the material elements of the compensation awarded to, earned by or paid to our Named Executive Officers consisting of our principal executive and principal financial officers and our three most highly compensated individuals who were serving as executive officers on the last day of the fiscal year ending December 31, 2010.

     Executive Compensation Program Overview

     Our compensation programs for our executive officers and other employees are designed to:

	•		attract and retain highly skilled individuals by establishing salaries, benefits, and incentive compensation which are competitive with similar positions in other companies with whom we compete for employees and which are internally equitable within our company;
	•		closely align compensation for our employees with the company’s performance on both a short-term and long-term basis;
	•		reward and provide differentiated compensation based on individual performance; and
	•		further enhance our employees’ long-term incentive to increase stockholder value and the company’s stock price by providing a portion of our total compensation in the form of company equity, through stock options and stock ownership.

     To accomplish those goals, compensation for our employees, including our executive officers, generally consists of the following elements: (1) base salary, (2) annual cash bonuses, (3) long-term incentives through stock option awards and stock ownership and (4) other welfare and retirement savings benefits. In addition, our executive officers are entitled to potential payments upon specified termination or change in control events.

     The compensation committee of our board of directors has the primary authority to determine compensation for our executive officers. In addition, the compensation committee, together with the remaining independent members of our board of directors, has authority to review the individual performance and compensation of Gerald T. Proehl, our

President and Chief Executive Officer, as well as to establish and determine achievement of our annual corporate goals. Each year, our compensation committee and the remaining independent members of our board of directors review the compensation of Mr. Proehl, as well as his individual performance for the calendar year under review and our company’s overall performance. The compensation committee also reviews compensation for our other executive officers on an annual basis and his or her individual performance for the calendar year under review. To aid the compensation committee’s review, Mr. Proehl provides a recommendation concerning compensation and performance for each executive officer, excluding himself. Management does not participate in the final deliberations of the compensation committee (or of the independent members of our board of directors in the case of Mr. Proehl) with regard to their own compensation. The annual determination of salary and equity awards for our executive officers and Mr. Proehl for the 2010 fiscal year took place in February 2010, and the determination of bonuses earned for performance during the 2010 fiscal year took place in February 2011.

     The compensation committee’s overall objective, or compensation philosophy, when establishing levels of compensation for a particular executive officer for the 2010 fiscal year was to target total cash compensation at the 50^th percentile level and equity compensation at the 75^th percentile, when compared to comparable positions within other comparable specialty pharmaceutical companies, or peer companies. The compensation committee has established this philosophy to emphasize variable and performance-based compensation over fixed compensation, to better manage cash burn and to align the long-term goals of executives and stockholders towards growth in stock price. To ensure that the compensation committee’s executive compensation decisions for the 2010 fiscal year were consistent with this philosophy, the committee established the following list of peer companies, which companies the committee determined were comparable at the time the list was established in 2009 to our company in various regards, including the nature of operations, stage of development, market capitalization, total revenues and/or number of employees:

•   Acorda Therapeutics, Inc.		•   Cypress Bioscience Inc.		•   MiddleBrook Pharmaceuticals, Inc.
•   Alkermes Inc.		•   Enzon Pharmaceuticals, Inc.		•   Noven Pharmaceuticals, Inc.
•   AMAG Pharmaceuticals Inc.		•   Inspire Pharmaceuticals, Inc.		•   Questcor Pharmaceuticals, Inc.
•   Amylin Pharmaceuticals Inc.		•   InterMune, Inc.		•   Salix Pharmaceuticals, Ltd.
•   Arena Pharmaceuticals Inc.		•   Isis Pharmaceuticals Inc.		•   Sucampo Pharmaceuticals, Inc.
•   Auxilium Pharmaceuticals, Inc.		•   ISTA Pharmaceuticals, Inc.		•   The Medicines Company
•   BioMarin Pharmaceutical Inc.		•   Jazz Pharmaceuticals, Inc.		•   ViroPharma Incorporated
•   Cadence Pharmaceuticals Inc.		•   Ligand Pharmaceuticals Inc.		•   ZymoGenetics Inc.

     To assist with the analysis of executive compensation for the 2010 fiscal year, the compensation committee engaged Radford, an AON consulting company, or Radford, to provide compensation consulting services. Radford reports directly to the compensation committee, and the committee has the sole authority to hire, fire and direct the work of Radford as its advisor. For the 2010 fiscal year, the compensation committee requested Radford to advise it on a variety of compensation-related issues, including:

	•		providing general information concerning executive compensation trends and developments;
	•		compiling, analyzing and presenting third party survey data; and
	•		assessing various forms of equity compensation.

In addition, Radford also provides the company with non-customized salary survey data that is utilized by management in connection with reviewing salaries. The compensation committee believes that Radford is able to provide independent, objective compensation advice to the compensation committee. Other than providing the advice and services described above, Radford provided no other services to either the company or the compensation committee during the 2010 fiscal year.

     The third party survey data presented by Radford was designed to ensure that the executive compensation decisions were consistent with the overall compensation philosophy and included survey data relating to levels of base salaries, incentive cash bonuses and equity awards from the Radford Global Life Sciences Survey and proxy data for executive positions within the 24 peer companies described above. When reviewing the third party survey data, the compensation committee considered whether the total cash and equity compensation for our executive officers targeted the 50^th and 75^th percentiles, respectively, when compared to compensation paid to executives holding comparable positions within

our peer companies. The compensation committee compared the executive compensation programs as a whole and also compared the pay of individual executives if the jobs were sufficiently similar to make the comparisons meaningful.

     The compensation committee also utilized “tally sheets,” prepared with the assistance of management, when making its executive compensation decisions for the 2010 fiscal year. The “tally sheets” described the nature and/or value of each element of compensation payable to each executive officer, and enabled the compensation committee to evaluate each compensation element in the context of the executive’s overall total compensation. The specific information set forth in the “tally sheets” was similar to the information set forth in the tables following this “Compensation Discussion and Analysis” section and included the following information: a summary description of total compensation, a description of options granted and outstanding and a description of potential payments upon termination or change in control.

     Elements of the Executive Compensation Program

          Base Salary

     As a general matter, the base salary for each executive officer is initially established and approved by the compensation committee at the time the officer is hired, taking into account the officer’s qualifications, experience, role and responsibilities, prior salary and competitive salary information. Under the terms of our executive officer employment agreements, each officer is entitled to an annual review of his or her base salary, in the sole discretion of the compensation committee. Any year-to-year adjustments to each executive officer’s base salary are determined by an assessment by the compensation committee (with assistance from management as described above and with the involvement of the independent members of our board of directors, with respect to Mr. Proehl) of her or his individual performance (including the executive’s accomplishments and effectiveness), overall company performance, the company’s budget for salary increases, the officer’s qualifications, experience, role and responsibilities, and competitive salary information. In assessing competitive salary information, the compensation committee (and the independent members of our board of directors, with respect to Mr. Proehl) review and consider independent third party data related to salary levels for similar executive positions in our peer companies, as described above.

     In connection with the annual review of his performance at the scheduled compensation committee and board of directors meetings in February 2010, Mr. Proehl received a 3.5% salary increase to his level of base salary, which was effective in March 2010 and resulted in an increase in Mr. Proehl’s base salary from $540,000 to $558,900. At this same time, our other Named Executive Officers each received an increase in his or her level of base salary ranging from 3.0% to 7.0% effective in March 2010. The increase in base salary for each Named Executive Officer was as follows: Debra P. Crawford received a 4.0% increase from $319,982 to $332,781; E. David Ballard II, M.D. received a 4.25% increase from $311,765 to $325,000; William C. Denby, III received a 3.0% increase from $304,385 to $313,517; and Carey J. Fox, J.D. received a 7.0% increase from $303,849 to $325,119.

     In determining these adjustments, the compensation committee (and the independent members of our board of directors, with respect to Mr. Proehl) considered each executive officer’s individual performance, the company’s overall performance and competitive salary information, based on the third party survey data compiled by Radford. As described above, when reviewing the third party survey data, the compensation committee (and the independent members of our board of directors, with respect to Mr. Proehl) considered whether total cash compensation for our executive officers targeted the 50^th percentile of the total cash compensation paid to executives holding comparable positions within our peer companies. Consistent with our overall compensation philosophy, the total cash compensation for our executive officers for the 2010 fiscal year, including the base salary levels described above and the target annual cash bonuses (assuming a 100% level of attainment) described below, targeted the 50th percentile of the total target cash compensation for executives holding comparable positions within our peer companies.

          Annual Cash Bonuses

     Our executive officers, as well as all of our other employees (with the exception of our field sales representatives and certain other field-based commercial employees), were eligible to receive annual cash bonuses pursuant to our 2010 bonus plan.

     Payments for executive officers under our 2010 bonus plan were based 100% on achieving established corporate goals (rather than on achievement of individual goals) and were determined as a percentage of each executive officer’s base salary. We believe that by basing the potential bonus payments for executive officers solely on achievement of corporate goals, we ensure that each executive officer’s performance is fully aligned with the overall executive team and company objectives, as well as focused on increasing stockholder value by providing incentives for corporate performance. The performance goals are established each year so that in the board’s and compensation committee’s determination they are not certain to be attained absent strong performance by the executive officers and the company as a whole.

     Under the terms of our 2010 bonus plan, the target bonus for Mr. Proehl, our President and Chief Executive Officer, was 60% of base salary, and the target bonus for each of our other executive officers was 40% of base salary. Under the terms of our 2009 bonus plan, the target bonus for Mr. Proehl was 50% of his base salary and the target bonus for the other executive officers was 35% of their respective base salaries. The target bonus percentage amounts were established through an analysis that included a review of third party survey data for our peer companies. As described above, when reviewing the third party survey data, the compensation committee (and the independent members of our board of directors, with respect to Mr. Proehl) considered whether total cash compensation for our executive officers targeted the 50th percentile of the total cash compensation paid to executives holding comparable positions within our peer companies, in the case of the target bonuses, assuming our executive officers fully achieve the corporate performance goals established by our board. Each executive officer was then eligible to receive a bonus ranging from zero to 150% of his or her target bonus, based on the level of the company’s achievement of its corporate performance goals for the 2010 fiscal year, which goals were established by our board at its scheduled meeting in February 2010.

     At its scheduled meeting in February 2011, the independent members of the board assessed the company’s performance during the 2010 fiscal year against the 2010 corporate performance goals as follows:

2010 Corporate Goals		Performance Against Corporate Goals
Total revenue of at least $170 million (product-related including royalties, but excluding impact of new product(s) added during the year) (weighted 40%)		Total revenues of $125.4 million. Excluding Cycloset, a new product added in 2010, total revenues were $124.7 million.
Income before tax of greater than or equal to $13 million (excluding impact of new product(s) added during the year) (weighted 20%)		Net loss of $18.5 million. Excluding approximately $20.4 million in net loss associated with new products added during the year, the most significant of which was a $15.0 million upfront fee paid for North American rights to Rhucin® (recombinant human C1 inhibitor), income before tax was approximately $1.9 million.
Statistically significant results from both budesonide MMX® Phase III studies (weighted 20%)		Statistically significant results from budesonide MMX Phase III U.S. and EU studies announced in September and November 2010
Add one significant product to product portfolio (weighted 10%)		Acquisition of rights to Cycloset® (bromocriptine mesylate), Rhucin and SAN-300 announced in September 2010
Initiation and completion of enrollment in first rifamycin SV MMX Phase III study in travelers’ diarrhea (N=262) (weighted 10%)		Enrollment approximately 32% complete as of December 31, 2010

     As part of its assessment, the independent board members noted that the company exceeded its goal of adding one significant product to its product portfolio by completing the Cycloset, Rhucin and SAN-300 transactions in September 2010. In addition, the steps the company took during the second half of 2010 and following the loss of patent exclusivity for the company’s Zegerid prescription products, including restructuring the company’s commercial operations, completion of the business development transactions, completing enrollment in both budesonide MMX Phase III studies and reporting positive top-line results, and management of the company’s financial resources, were

viewed positively. Based on these assessments by the independent members of the board, the overall level of achievement under the 2010 bonus plan was established at 74%.

     As a result of the board’s determination, for the 2010 fiscal year, Mr. Proehl received a bonus of $248,152, which was equal to approximately 44.4% of Mr. Proehl’s base salary, and each of our other Named Executive Officers received bonuses equal to approximately 29.6% of their respective base salaries. The specific amounts of the cash bonuses awarded to our Named Executive Officers for the 2010 fiscal year are reflected in the Summary Compensation Table under the heading “Non-Equity Incentive Plan Compensation.”

          Long-Term Incentives

     Stock Option Awards

     Our long-term incentives are primarily in the form of stock option awards, and our executive officers, along with all of the company’s other employees, are eligible to participate in the company’s award of stock options. As discussed above, the objective of these awards is to further enhance our executive officers’ long-term incentive to increase stockholder value and the company’s stock price. We believe that stock option based compensation achieves this objective by directly linking the economic benefit to recipients of such awards with our company’s stock performance. We also believe that stock option based compensation encourages employee retention because the awards are designed to vest and become exercisable over time, generally over four years.

     The compensation committee (and the independent members of our board of directors, with respect to Mr. Proehl) have authority to grant stock option awards to our executive officers. In the case of stock option awards, which are generally made in connection with the compensation committee’s annual review of company performance and executive officer performance (and the independent members of our board of directors annual review of Mr. Proehl’s performance) conducted in the first quarter of each year, the number of stock options granted to each executive officer is determined based upon input from our third party consulting firm and competitive compensation information for our peer companies. As described above, when reviewing the third party survey data, the compensation committee (and the independent members of our board of directors, with respect to Mr. Proehl) considered whether total equity compensation for our executive officers targeted the 75^th percentile of the total equity compensation paid to executives holding comparable positions within our peer companies, taking into account comparisons based on, percentage ownership, size of option grants and the Black-Scholes valuation model. The targeting of equity compensation at the 75^th percentile level, as compared to cash compensation at the 50^th percentile level, reflects the compensation committee’s strong belief in a pay for performance culture and alignment of executive compensation to long-term increases in stockholder value. The compensation committee (and the independent members of our board of directors, with respect to Mr. Proehl) also consider overall corporate performance and each executive officer’s individual performance (including the executive’s accomplishments and effectiveness) when determining the specific number of options to be awarded. In addition, the compensation committee takes into account the number of outstanding option grants held by each executive officer, and their vested status, in determining the specific number of options to be awarded.

     The exercise price of options granted under our stock plans has always been 100% of the fair market value of the underlying stock at the time of grant, and the company does not have a policy of granting equity-based awards at other than the fair market value. For options granted on or after January 1, 2007, the fair market value of our common stock is determined by reference to the closing price of our common stock on the Nasdaq Global Market on the date of grant. The majority of the outstanding options held by our executive officers vest over a four-year period and are exercisable over a ten-year period following the date of grant unless employment terminates prior to such date.

     Our general policy is to grant options on fixed dates during open trading windows and on dates determined in advance in the prior year, although there may be occasions when grants are made on other dates. All required approvals are obtained in advance of or on the actual grant date. We do not time the granting of our options to take advantage of any favorable or unfavorable news released by the company.

     During the 2010 fiscal year, Mr. Proehl was granted an option to purchase 300,000 shares of our common stock in connection with the annual review of corporate performance during 2009 and Mr. Proehl’s individual performance during 2009. Each of our other Named Executive Officers were granted an option to purchase a number of shares of

our common stock, ranging from 120,656 to 144,788 shares in connection with the annual review of corporate performance during 2009 and the Named Executive Officer’s individual performance during 2009. The specific amounts of the options awarded to our Named Executive Officers for the 2010 fiscal year are reflected in the table captioned “Grants of Plan-Based Awards.”

     During the 2008 fiscal year Mr. Proehl was granted an option to purchase 80,000 shares of our common stock in March 2008, subject to performance-based vesting, and each of our other Named Executive Officers was granted an option to purchase 40,000 shares of our common stock in March 2008, subject to performance-based vesting. These options are structured to vest only upon attainment of two performance targets relating to the company’s achievement of specified financial results prior to May 31, 2011. During the 2009 fiscal year, 50% of the options became vested and exercisable upon attainment of a performance target that required the company to achieve net income in two consecutive quarters totaling at least $2 million. The remaining 50% portion of the options will become vested and exercisable if a performance target requiring attainment of total revenue of $200 million is achieved in a rolling four quarter period prior to May 31, 2011. The compensation committee believes that performance-based equity awards linked to attainment of performance targets, and which have value only if the company’s stock price appreciates following the date of grant of the awards, strongly align executive compensation with company performance.

     Options granted to any of our employees under our amended and restated 2004 equity incentive award plan become fully vested and exercisable in the event of a change in control where the acquirer does not assume the options. In the event of a change in control where the acquirer does assume the options, such options will be subject to accelerated vesting prior to the change in control such that 50% of the unvested shares subject to the options will become vested and exercisable. In addition, assumed options will automatically become fully vested and exercisable if the holder of such options is terminated by the acquirer without cause or the holder terminates employment for good reason within 12 months after the change in control. Moreover, our executive officers are entitled to further acceleration of vesting in certain termination events under the terms of their employment agreements, as described below under the heading “Employment Agreements.”

     Stock option awards granted during the 2010 fiscal year to Mr. Proehl and our other Named Executive Officers are reflected in the table captioned “Grants of Plan-Based Awards,” and outstanding stock option awards as of December 31, 2010 are reflected in the table captioned “Outstanding Equity Awards at Fiscal Year-End.” Consistent with our overall compensation philosophy, the total equity compensation granted to our executive officers for the 2010 fiscal year was targeted at the 75th percentile of the total equity compensation for executives holding comparable positions within our peer companies.

          Perquisites

     We do not provide any perquisites for our executive officers.

          Other Benefits

     We provide benefits such as medical, dental and life insurance and disability coverage for all of our employees, including our executive officers. In addition, we have established an amended and restated employee stock purchase plan and a 401(k) savings/retirement plan, which are available to all eligible employees, including our executive officers. We also provide personal paid time off and other paid holidays to all employees, including our executive officers, which are similar to those provided at comparable companies.

          Tax Considerations

     As part of its compensation program, the company aims to compensate our executive officers in a manner that is tax effective for the company. In practice, the stock options granted by the compensation committee are not subject to the deduction limitation imposed under Section 162(m) of the Internal Revenue Code, or the Code, as amended. Section 162(m) of the Code generally limits the tax deductions a public corporation may take for compensation paid to its chief executive officer and three other most highly compensated executive officers, other than its chief financial officer, to $1.0 million per executive per year, unless the compensation paid qualifies as “performance based compensation” within the meaning of Section 162(m) of the Code. Our stockholders have previously approved our stock award plans, comprised of the 1998 stock option plan and the amended and restated 2004 equity incentive award plan, qualifying

options and stock appreciation rights under these plans as performance-based compensation intended to be exempt from the Section 162(m) limits. Other awards under these plans also may be granted with the intention of being performance- based compensation in the discretion of the compensation committee.

     Risk Considerations

     Our compensation committee has considered whether our executive compensation programs, which consist of base salaries, annual cash bonuses and long-term equity incentives, encourage unnecessary or excessive risk taking and has concluded they do not. Base salaries are fixed in amount and thus do not encourage risk taking. While the performance-based cash bonus awards focus on achievement of annual goals, the goals are reviewed by the board of directors to ensure overall appropriateness and are a balanced mix of financial performance metrics and operational and strategic performance metrics that are designed to translate into longer-term financial performance. Cash bonus awards are also not guaranteed and are subject to reasonable maximum caps. The compensation committee believes that the bonus program appropriately balances risk and the desire to focus executives on specific annual goals important to the company’s success. Our long-term equity incentives help further align executives’ interests with those of the company’s stockholders. The compensation committee believes that these equity incentives do not encourage unnecessary or excessive risk taking because the ultimate value of the awards is tied to the company’s long-term operating performance as reflected in the company’s long-term stock price performance. Moreover, the awards are subject to long-term vesting schedules to help ensure that executives have significant value tied to long-term stock price performance.

     Employment Agreements

     In order to specify our expectations with regard to our executive officers’ duties and responsibilities and to provide greater certainty with regard to the amounts payable to our executive officers in connection with certain terminations or change in control events, our compensation committee has approved and we have entered into employment agreements with each of our executive officers. Except as provided below, all of the employment agreements with our executive officers contain substantially similar terms. The payment and severance terms in the employment agreements were established based on market factors when the agreements were originally entered into, and they are reviewed periodically by our compensation committee for continued appropriateness. In September 2010, Radford engaged in a complete review of the employment agreements and confirmed to the compensation committee that in Radford’s opinion the agreements contained provisions consistent with prevailing market practices. The potential availability of severance benefits under these agreements did not impact the analysis of the other elements of compensation for the 2010 fiscal year because such benefits serve different purposes than the other elements of compensation. The compensation committee believes these agreements are appropriate to attract and retain individuals at the executive officer level and to properly balance the interests of executives and stockholders, as executives may be asked to consider actions which create stockholder value, but may also result in loss of an executive’s position. The level of payments under the agreements are designed to be fair and reasonable considering the time it would take an executive to find a position of comparable scope.

     Pursuant to the employment agreements, each executive is required to devote substantially all of his or her time and attention to our business and affairs. The initial base salaries of the executives are set forth in their employment agreements. The employment agreements do not provide for automatic annual increases in salary, but each employment agreement provides for annual salary reviews by the compensation committee. Each of the executives is eligible to participate in any management incentive compensation plan adopted by us or such other bonus plan as our board of directors or compensation committee may approve. The award of any bonus compensation is to be determined by the compensation committee or pursuant to a plan approved by the board of directors or compensation committee. Each of the executives is an at-will employee.

          Severance Benefits and Change in Control Arrangements

     The employment agreements provide each executive with certain severance benefits in the event his or her employment is terminated as a result of his or her death or permanent disability. Specifically, in the event of such a termination, the executive or his or her estate, as applicable, shall receive a lump sum payment of 12 months of salary and an amount equal to the average of the executive’s bonuses for the three years prior to the date of termination (for all executives other than Mr. Proehl, prorated for the period of time served by the executive during the year of termination),

plus 12 months healthcare and life insurance benefits continuation at our expense. In addition, that portion of the executive’s stock awards, and any unvested shares issued upon the exercise of such stock awards, which would have vested if the executive had remained employed for an additional 12 months will immediately vest on the date of termination.

     The employment agreements also provide each executive with certain severance benefits in the event his or her employment is terminated by us other than for cause or if the executive resigns with good reason. Specifically, in the event of such a termination or resignation, all executives other than Mr. Proehl will receive a lump sum payment of 12 months of salary and an amount equal to the average of the executive’s bonuses for the three years prior to the date of termination (prorated for the period of time served by the executive during the year of termination), 12 months healthcare and life insurance benefits continuation at our expense, plus $15,000 towards outplacement services. If such termination or resignation occurs more than three months prior to or more than 12 months following a change of control, that portion of the executive’s stock awards, and any unvested shares issued upon the exercise of such stock awards, which would have vested if the executive had remained employed for an additional 12 months, will immediately vest on the date of termination.

     With respect to Mr. Proehl, in the event his employment is terminated by us other than for cause or if he resigns with good reason, Mr. Proehl will be entitled to receive a lump sum payment of 12 months of salary and an amount equal to the average of his bonuses for the three years prior to the date of termination, 12 months of healthcare and life insurance benefits continuation at our expense, plus $15,000 towards outplacement services; provided, however, that if such termination or resignation occurs within three months prior to or within 12 months following a change of control, Mr. Proehl will be entitled to receive 18 months of salary and an amount equal to the average of his bonuses for the three years prior to the date of termination, 18 months of healthcare and life insurance benefits continuation at our expense, plus $15,000 towards outplacement services. If such termination or resignation occurs more than three months prior to or more than 12 months following a change of control, that portion of Mr. Proehl’s stock awards, and any unvested shares issued upon the exercise of such stock awards, which would have vested if Mr. Proehl had remained employed for an additional 12 months, will immediately vest on the date of termination.

     In addition, with respect to all executives (including Mr. Proehl), if such termination occurs within three months prior to or within 12 months following a change in control, all of the executive’s remaining unvested stock awards, and any unvested shares issued upon the exercise of such stock awards, will immediately vest on the date of termination.

     Apart from termination, the employment agreements also provide that, in connection with a change in control of the company, 50% of the executive’s unvested stock awards, and any unvested shares issued upon the exercise of such stock awards, will immediately become vested. This accelerated vesting supersedes any less favorable accelerated vesting provided under our amended and restated 2004 equity incentive award plan and our 1998 stock option plan.

     Each of the employment agreements also provides that payments under each employment agreement may be delayed to the extent necessary to avoid adverse tax consequences for the affected executive officer under Section 409A of the Code.

     The employment agreements do not provide for any type of tax “gross up” or similar reimbursement obligation by the company in respect of “golden parachute” or any other taxes to which any of the executive officers may become subject.

     Additional information concerning the potential payments our executive officers may receive in the event of termination of their employment or a change in control of the company is provided in the table captioned “Potential Payments Upon Termination or Change in Control.”

Compensation Committee Report

     The compensation committee of the company’s board of directors has submitted the following report for inclusion in this Proxy Statement:

     The compensation committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on the committee’s review of and the discussions with management with

respect to the Compensation Discussion and Analysis, the committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 for filing with the SEC.

     This report of the compensation committee shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.

     The foregoing report has been furnished by the compensation committee.

Michael E. Herman, Chairman
David F. Hale
Kent Snyder

SUMMARY COMPENSATION TABLE

     The table below summarizes the total compensation paid to or earned by each of our Named Executive Officers consisting of our Chief Executive Officer, Chief Financial Officer and our three other most highly compensated executive officers for the fiscal years ended December 31, 2010, 2009 and 2008.

														Non-Equity
										Option				Incentive Plan				All Other
						Salary				Awards				Compensation				Compensation				Total
Name and Principal Position		Year				($)				($)(1)				($)(2)				($)(3)				($)
Gerald T. Proehl, President and Chief			2010			$	555,750			$	902,580			$	248,152			$	7,350			$	1,713,832
Executive Officer			2009				536,667				189,748				318,600				3,675				1,048,690
			2008				516,667				458,456				293,800				3,450				1,272,373
Debra P. Crawford, Senior			2010				330,648				435,609				98,503				7,350				872,110
Vice President, Chief Financial			2009				317,442				98,523				132,153				3,675				551,793
Officer, Treasurer and Secretary			2008				302,558				215,939				120,527				3,450				642,474
E. David Ballard II, M.D., Senior			2010				322,794				363,006				96,200				3,325				785,325
Vice President, Medical Affairs			2009				310,008				65,682				128,759				313				504,762
and Pharmacovigilance			2008				293,287				232,629				119,133				2,500				647,549
William C. Denby, III, Senior			2010				311,995				363,006				92,801				7,350				775,152
Vice President, Commercial			2009				302,434				82,103				125,711				3,675				513,923
Operations			2008				291,029				197,334				115,754				3,450				607,567
Carey J. Fox, J.D., Senior			2010				321,574				435,609				96,235				7,350				860,768
Vice President, General Counsel			2009				301,438				98,523				125,490				3,675				529,126
			2008				276,503				251,234				114,450				3,335				645,522

GRANTS OF PLAN-BASED AWARDS

     The table below provides information about plan-based awards granted to our Named Executive Officers during the fiscal year ended December 31, 2010.

																		Option Awards:
																		Number of				Exercise or
						Estimated Possible Payouts under												Shares of				Base Price				Grant Date
						Non-Equity Incentive Plan Awards(1)												Stock or				of Option				Fair
		Grant				Threshold				Target				Maximum				Units				Awards				Value
Name		Date				($)				($)				($)				(#)(2)				($/Sh)(3)				($)(4)
Gerald T. Proehl			03/10/10			$	—			$	335,340			$	503,010				300,000			$	4.63			$	902,580
Debra P. Crawford			03/10/10				—				133,112				199,669				144,788				4.63				435,609
E. David Ballard II, M.D.			03/10/10				—				130,000				195,000				120,656				4.63				363,006
William C. Denby, III			03/10/10				—				125,407				188,110				120,656				4.63				363,006
Carey J. Fox, J.D.			03/10/10				—				130,048				195,071				144,788				4.63				435,609

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

     The table below provides information about outstanding equity awards for each of our Named Executive Officers as of December 31, 2010.

		Option Awards
										Equity
										Incentive
										Plan Awards:
		Number of				Number of				Number of
		Securities				Securities				Securities
		Underlying				Underlying				Underlying
		Unexercised				Unexercised				Unexercised				Option
		Options				Options				Unearned				Exercise				Option
		(#)				(#)				Options				Price				Expiration
Name		Exercisable				Unexercisable				(#)				($)				Date(7)
Gerald T. Proehl			56,250	(1)			243,750				—			$	4.630				03/10/20
			113,750	(1)			146,250				—				1.180				03/16/19
			40,000	(2)			40,000				—				2.360				03/13/18
			165,000	(1)			75,000				—				2.360				03/13/18
			210,937	(1)			14,063				—				6.900				03/12/17
			100,000	(1)			—				—				6.790				02/09/16
			40,000	(3)			—				—				6.380				09/21/15
			100,000	(1)			—				—				7.150				02/15/15
			113,287	(4)			—				—				3.500				12/23/13
			460,691	(5)			—				—				0.875				05/22/13
Debra P. Crawford			27,147	(1)			117,641				—				4.630				03/10/20
			59,062	(1)			75,938				—				1.180				03/16/19
			20,000	(2)			20,000				—				2.360				03/13/18
			76,054	(1)			34,571				—				2.360				03/13/18
			75,000	(1)			5,000				—				6.900				03/12/17
			50,000	(1)			—				—				6.790				02/09/16
			25,000	(3)			—				—				6.380				09/21/15
			65,000	(1)			—				—				7.150				02/15/15
			56,643	(4)			—				—				3.500				12/23/13
			132,138	(5)			—				—				0.875				05/22/13
E. David Ballard, M.D.			22,623	(1)			98,033				—				4.630				03/10/20
			39,375	(1)			50,625				—				1.180				03/16/19
			13,020	(1)			11,980				—				2.300				11/14/18
			20,000	(2)			20,000				—				2.360				03/13/18
			67,031	(1)			30,469				—				2.360				03/13/18
			65,625	(1)			4,375				—				6.900				03/12/17
			25,000	(1)			—				—				7.490				03/01/16
			24,300	(1)			—				—				6.790				02/09/16
			13,500	(3)			—				—				6.380				09/21/15
			20,412	(1)			—				—				7.150				02/15/15
			55,000	(6)			—				—				10.990				03/19/14
William C. Denby, III			22,623	(1)			98,033				—				4.630				03/10/20
			49,218	(1)			63,282				—				1.180				03/16/19
			20,000	(2)			20,000				—				2.360				03/13/18
			67,031	(1)			30,469				—				2.360				03/13/18
			65,625	(1)			4,375				—				6.900				03/12/17
			45,000	(1)			—				—				6.790				02/09/16
			25,000	(3)			—				—				6.380				09/21/15
			65,000	(1)			—				—				7.150				02/15/15
			56,643	(4)			—				—				3.500				12/23/13
			51,946	(5)			—				—				0.875				05/22/13
Carey J. Fox, J.D.			27,147	(1)			117,641				—				4.630				03/10/20
			59,062	(1)			75,938				—				1.180				03/16/19
			13,020	(1)			11,980				—				2.300				11/14/18
			20,000	(2)			20,000				—				2.360				03/13/18
			76,054	(1)			34,571				—				2.360				03/13/18
			75,000	(1)			5,000				—				6.900				03/12/17
			25,000	(1)			—				—				7.490				03/01/16
			30,000	(1)			—				—				6.790				02/09/16
			13,500	(3)			—				—				6.380				09/21/15
			35,100	(1)			—				—				7.150				02/15/15
			20,000	(1)			—				—				12.050				05/14/14
			12,358	(4)			—				—				3.500				12/23/13
			6,742	(5)			—				—				0.875				05/22/13
			8,028	(6)			—				—				2.100				04/26/12

OPTION EXERCISES

     The table below provides information about stock option awards exercised by our Named Executive Officers during the fiscal year ended December 31, 2010.

		Option Awards
		Number of Shares				Value Realized
		Acquired on Exercise				on Exercise
Name		(#)				($)(1)
Gerald T. Proehl			85,714			$	168,857
Debra P. Crawford			12,857				24,043
E. David Ballard, M.D.			—				—
William C. Denby, III			—				—
Carey J. Fox, J.D.			—				—

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

     The table below reflects the amount of compensation that each of our Named Executive Officers would be entitled to receive under his or her existing employment agreement with our company upon termination of such executive’s employment in certain circumstances. The amounts shown assume that such termination was effective as of December 31, 2010 (with the amount of severance based on the executive’s base salary as of such date), and thus include amounts earned through such time and are only estimates of the amounts that would be paid out to such executives upon termination of their employment. The actual amounts to be paid out can only be determined at the time of such executive’s separation from our company. Please see the section above entitled “Compensation Discussion and Analysis — Employment Agreements” for further discussion.

				Termination		Termination
				w/o Cause or		w/o Cause or
				for Good Reason		for Good Reason
				(apart from		(in connection		Death
				change in		with change		or		Change in
Name		Benefit		control)		in control)		Disability		Control(3)
Gerald T. Proehl		Severance		$558,900		$838,350		$558,900		$—
		Cash Bonus		267,467		267,467		267,467		—
		Accelerated Option Vesting(1)		190,450		410,313		190,450		205,157
		Healthcare and Life Insurance Benefits(2)		22,207		33,311		22,207		—
		Outplacement Services		15,000		15,000		—		—
		Total Value:		1,054,024		1,564,441		1,039,024		205,157
Debra P. Crawford		Severance		332,781		332,781		332,781		—
		Cash Bonus		110,084		110,084		110,084		—
		Accelerated Option Vesting(1)		95,705		208,371		95,705		104,186
		Healthcare and Life Insurance Benefits(2)		21,513		21,513		21,513		—
		Outplacement Services		15,000		15,000		—		—
		Total Value:		575,083		687,749		560,083		104,186
E. David Ballard II, M.D.		Severance		325,000		325,000		325,000		—
		Cash Bonus		106,980		106,980		106,980		—
		Accelerated Option Vesting(1)		75,269		163,354		75,269		81,677
		Healthcare and Life Insurance Benefits(2)		22,207		22,207		22,207		—
		Outplacement Services		15,000		15,000		—		—
		Total Value:		544,456		632,541		529,456		81,677
William C. Denby, III		Severance		313,517		313,517		313,517		—
		Cash Bonus		105,562		105,562		105,562		—
		Accelerated Option Vesting(1)		80,962		178,186		80,962		89,093
		Healthcare and Life Insurance Benefits(2)		22,207		22,207		22,207		—
		Outplacement Services		15,000		15,000		—		—
		Total Value:		537,248		634,472		522,248		89,093
Carey J. Fox, J.D.		Severance		325,119		325,119		325,119		—
		Cash Bonus		103,033		103,033		103,033		—
		Accelerated Option Vesting(1)		101,767		219,991		101,767		109,996
		Healthcare and Life Insurance Benefits(2)		14,160		14,160		14,160		—
		Outplacement Services		15,000		15,000		—		—
		Total Value:		559,079		677,303		544,079		109,996

Equity Compensation Plan Information

     The following table sets forth information regarding all of our equity compensation plans as of December 31, 2010.

Number of Securities

Number of Securities

Weighted-Average

Remaining Available for

to

Exercise Price of

Future Issuance Under

be Issued upon

Outstanding

Equity Compensation

Exercise

Options,

Plans (Excluding

of Outstanding Options,

Warrants and

Securities Reflected in

Plan Category

Warrants and Rights

Rights

Column (a))

(a)

(b)

(c)

Equity compensation plans approved by security holders

16,403,329

$

4.20

3,432,867

(1)

Equity compensation plans not approved by security holders

—

—

—

Total

16,403,329

$

4.20

3,432,867

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Review and Approval of Transactions with Related Persons

     Pursuant to our Audit Committee Charter, the audit committee of our board of directors is responsible for reviewing all transactions with related parties and all such transactions must be approved by the audit committee unless such transactions are approved by a comparable body of the board of directors. We have not adopted written procedures for review of, or standards for approval of, these transactions, but instead the audit committee of our board of directors intends to review such transactions on a case by case basis. In addition, the compensation committee of our board of directors and/or our board of directors reviews all compensation-related policies involving our directors and executive officers.

Strategic Collaboration with Cosmo

     On December 15, 2008, we entered into a strategic collaboration with Cosmo Technologies Limited, an affiliate of Cosmo Pharmaceuticals S.p.A., or Cosmo, including a license agreement pursuant to which we were granted certain exclusive rights to develop and commercialize selected proprietary pharmaceutical products of Cosmo in the U.S. In partial consideration of the licenses granted, on December 15, 2008, we issued 6,000,000 shares of our common stock to Cosmo and made an upfront cash payment to Cosmo of $2.5 million. In addition, following the completion of the phase III studies for budesonide MMX, Cosmo elected to receive payment of a clinical milestone through the issuance of 972,132 shares of our common stock at a value of approximately $2.7 million. We may also be required to pay Cosmo up to a total of an additional $6.0 million in clinical and regulatory milestones for the initial indications for the licensed products, up to $6.0 million in clinical and regulatory milestones for a second indication for rifamycin SV MMX and up to $57.5 million in commercial milestones. The milestones may be paid in cash or through issuance of additional shares of our common stock, at Cosmo’s option, subject to certain limitations. We will pay tiered royalties to Cosmo ranging from 12% to 14% on net sales of any licensed products we sell. We are responsible for one-half of the total out-of-pocket costs associated with the budesonide MMX phase III clinical program and for all of the out-of-pocket costs for the ongoing rifamycin SV MMX phase III U.S. registration study. In the event that additional clinical work is required to obtain U.S. regulatory approval for either of the licensed products, we and Cosmo will agree on cost sharing.

     The strategic collaboration with Cosmo is described in more detail in Note 3 to the consolidated financial statements included with our Annual Report on Form 10-K for the year ended December 31, 2010.

Covella Merger

     In September 2010, we acquired the worldwide rights to SAN-300 through the acquisition of Covella Pharmaceuticals, Inc., or Covella, pursuant to the terms of a merger agreement. Prior to our acquisition of Covella, Covella was a privately held company owned by a small number of stockholders, including Mark Totoritis, our Senior Vice President, Clinical Research, and Westfield Capital Management Company, LP, or Westfield, one of our greater than 10% stockholders at the time of the transaction, among others.

     Under the terms of the merger agreement, we paid a total upfront of $162,000 in cash and 181,342 in unregistered shares of our common stock to the Covella stockholders. We also assumed responsibility for payment of approximately $1.2 million in Covella liabilities and transaction expenses, including $600,000 of debt owed to Westfield and a $100,000 change in control payment owed to Dr. Totoritis. In addition, we may be required to make clinical and regulatory milestone payments to the former Covella stockholders totaling up to an aggregate of $37.7 million (consisting of a combination of cash and our common stock) based on success in developing product candidates (with the first such milestone being payable upon successful completion of the first Phase II(b) clinical study). We may also be required to pay a royalty equal to a low single digit percentage rate of net sales of any commercial products resulting from the anti-VLA-1 mAb technology. Our obligation to pay the royalties continues on a country-by-country basis until the date which is the later of: (i) expiration of the last valid claim of the patents licensed by Covella pursuant to the license agreement in such country; or (ii) 10 years after the first commercial sale of the products in such country.

     Of the total merger consideration, Dr. Totoritis and Westfield received approximately $49,000 and $6,000, respectively, and 55,191 and 6,307 unregistered shares of our common stock, respectively. In addition to their portion of the merger consideration, Westfield also received $600,000 as repayment of debt owed by Covella and Dr. Totoritis

received a $100,000 change in control payment owed by Covella. Dr. Totoritis and Westfield may also be entitled to portions of the additional milestone and royalty payments discussed above.

     The Covella stockholders agreed to indemnify us for certain matters, including breaches of representations and warranties and covenants included in the merger agreement, up to a maximum specified amount and subject to other limitations. We agreed to indemnify the Covella stockholders for certain matters, including breaches of representations, warranties and covenants included in the merger agreement, up to a maximum specified amount and subject to other limitations.

     Based on a review of all relevant factors, including, without limitation, the terms set forth in the merger agreement, our board of directors deemed the merger to be advisable to and consistent with and fair to and in the best interests of the company and its stockholders in order to advance our long-term business interests.

Other Transactions

     During 2010, we believe that there has not been any transaction or series of similar transactions to which we were or are to be a party in which the amount involved exceeds $120,000 and in which any director, executive officer or holder of more than 5% of our common stock, or members of any such person’s immediate family, had or will have a direct or indirect material interest, other than the transactions described above under the headings “-Strategic Collaboration with Cosmo” and “-Covella Merger” and compensation described under the headings “Proposal 1 Election of Directors — Compensation of Directors” and “Executive Compensation and Other Information.” We intend that any such future transactions will be approved by the audit committee unless such transactions are approved by a comparable body of the board of directors, and will be on terms no less favorable to our company than could be obtained from unaffiliated third parties.

PROPOSAL 2

ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

     Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), stockholders are entitled to vote at the annual meeting to provide advisory approval of the compensation of our Named Executive Officers as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission.

     As described in the Compensation Discussion and Analysis section of this Proxy Statement, the goal of the compensation committee of the board of directors in setting executive compensation is to provide a compensation package structured to attract, motivate and retain highly qualified executive officers by paying them competitively, consistent with our success and their contribution to that success. The compensation committee believes compensation should be structured to ensure that a significant portion of an executive’s compensation opportunity will be directly related to our performance and other factors that directly and indirectly influence shareholder value. Consistent with our performance-based philosophy, we provide a base salary to our executive officers and include a significant annual incentive-based component, payable in cash, that is tied to company-wide financial and business objectives, and stock options which have value only through future share price appreciation.

     Stockholders are urged to read the Compensation Discussion and Analysis section of the Proxy Statement, which discusses how our compensation policies and procedures implement our compensation philosophy, as well as the Summary Compensation Table and other related compensation tables and narrative disclosure, which describe the compensation of our Named Executive Officers for the 2010 fiscal year. The compensation committee and the board of directors believe that our policies and procedures are effective in implementing our compensation philosophy and in achieving its goals, and that the compensation of our Named Executive Officers for the 2010 fiscal year reflects and supports these compensation policies and procedures.

     We are asking our stockholders to indicate their support for our Named Executive Officers’ compensation as described in this Proxy Statement. This proposal, commonly known as a “Say-on-Pay” proposal, gives our stockholders the opportunity to express their views on our Named Executive Officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we ask that our stockholders vote “FOR” the following resolution:

     RESOLVED, that the stockholders of Santarus approve, on an advisory basis, the compensation of the company’s Named Executive Officers described in the Compensation Discussion and Analysis section of the Proxy Statement for the 2011 Annual Meeting of Stockholders and disclosed in the 2010 Summary Compensation Table and related compensation tables and narrative disclosure included in the Proxy Statement.

     This advisory vote on executive compensation is not binding on our board of directors. However, the board of directors and the compensation committee will take into account the result of the vote when determining future executive compensation arrangements.

     Our board of directors recommends a vote “FOR” the approval of the compensation of our Named Executive Officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission.

PROPOSAL 3

ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON COMPENSATION
OF OUR NAMED EXECUTIVE OFFICERS

     Under the Dodd-Frank Act, our stockholders are entitled to vote regarding whether the stockholder advisory vote to approve the compensation of the Named Executive Officers as required by Section 14A(a)(2) of the Securities Exchange Act (and as described in proposal 2 of this Proxy Statement), should occur every one, two or three years. Under the rules issued by the Securities and Exchange Commission, stockholders shall also have the option to abstain from voting on the matter.

     Our board of directors has determined that an advisory stockholder vote on executive compensation every three years is the best approach for us and our stockholders for a number of reasons, including the following:

	•		Our executive compensation program is designed to support long-term value creation, and a triennial vote will allow stockholders to better judge our executive compensation program in relation to our long-term performance. As described in the Compensation Discussion and Analysis section above, one of the core principles of our executive compensation program is to ensure management’s interests are aligned with our stockholders’ interests to support long-term value creation. Accordingly, we grant awards with multi-year service periods to encourage our Named Executive Officers to focus on long-term performance, and recommend a triennial vote which would allow our executive compensation program to be evaluated over a similar time-frame and in relation to our long-term performance.
	•		A triennial vote will provide us with the time to thoughtfully evaluate and respond to stockholders’ sentiments and implement any necessary changes. We carefully review changes to our executive compensation program to maintain the consistency and credibility of the program and to ensure its continued motivation and retention of our employees. We therefore believe that a triennial vote is an appropriate frequency to provide our management team and compensation committee sufficient time to thoughtfully consider stockholders’ input and to implement any appropriate changes to our executive compensation program, in light of the timing that would be required to effectively and thoughtfully implement any decisions related to such changes.
	•		A triennial vote will allow us to thoughtfully consider evolving market pay practices and implement those pay practices in our executive compensation program that offer the greatest promise of creating long-term value for our stockholders. We seek to constantly stay abreast of evolving market pay practices as part of our ongoing interest in fostering long-term value creation through the use of proper arrangements and incentives. We believe a triennial vote will allow us to thoughtfully assess the value of evolving market pay practices and implement any changes to our executive compensation program in an appropriate manner.

     Pursuant to the Dodd-Frank Act, the stockholder vote on the frequency of the stockholder vote to approve executive compensation is an advisory vote only. As an advisory vote, the result will not be binding on Santarus or our board of directors, although we will consider the outcome in determining the frequency of such vote. Stockholders are not being asked to approve or disapprove the board of director’s recommendation, but rather to indicate their choice among the frequency options.

     Our board of directors recommends that stockholders vote “FOR EVERY THREE YEARS” regarding the frequency of the stockholder vote to approve the compensation of the Named Executive Officers required by Section 14A(a)(2) of the Exchange Act.

PROPOSAL 4

RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     Our board of directors has appointed Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2011 and has directed that management submit the appointment of our independent registered public accounting firm to the stockholders for ratification at the Annual Meeting. Ernst & Young LLP has audited our financial statements since 1998 and through the year ended December 31, 2010. Representatives of Ernst & Young LLP will be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

     Stockholders are not required to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm. However, we are submitting the appointment of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If you fail to ratify the appointment, our board of directors and the audit committee will reconsider whether or not to retain Ernst & Young LLP. Even if the appointment is ratified, our board of directors and the audit committee in their discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of our company and our stockholders.

     The affirmative vote of the holders of a majority of the shares of our common stock represented and voting at the Annual Meeting will be required to ratify the appointment of Ernst & Young LLP.

Audit and All Other Fees

     The aggregate fees billed to our company by Ernst & Young LLP, our independent registered public accounting firm, for the indicated services were as follows:

		2010				2009
Audit Fees(1)		$	487,950			$	457,811
Audit Related Fees(2)			—				—
Tax Fees(3)			—				—
All Other Fees(4)			1,735				1,995

     The audit committee has considered whether the provision of non-audit services is compatible with maintaining the independence of Ernst & Young LLP, and has concluded that the provision of such services is compatible with maintaining the independence of our auditors.

Audit Committee Policy Regarding Pre-Approval of Audit and Permissible Non-Audit Services of Our Independent Registered Public Accounting Firm

     Our audit committee has established a policy that all audit and permissible non-audit services provided by our independent registered public accounting firm will be pre-approved by the audit committee. These services may include audit services, audit-related services, tax services and other services. The audit committee considers whether the provision of each non-audit service is compatible with maintaining the independence of our auditors. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Our independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date.

     Our board of directors recommends a vote “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     Under Section 16(a) of the Exchange Act, directors, officers and beneficial owners of ten percent or more of our common stock are required to file with the Securities and Exchange Commission on a timely basis initial reports of beneficial ownership and reports of changes regarding their beneficial ownership of our common stock. Officers, directors and 10% beneficial owners are required by Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) forms that they file.

     Based solely on our review of the copies of such forms received and the written representations from certain reporting persons, we have determined that no officer, director or 10% beneficial owner known to us was delinquent with respect to their reporting obligations as set forth in Section 16(a) of the Exchange Act during the fiscal year ended December 31, 2010.

STOCKHOLDER PROPOSALS

     In order to be included in our proxy statement and form of proxy relating to our Annual Meeting of Stockholders to be held in 2012, proposals of stockholders intended to be presented at that meeting must be received by us no later than December 30, 2011, which is 120 days prior to the first anniversary of the mailing date of this Proxy Statement. These proposals must comply with the requirements as to form and substance established by the Securities and Exchange Commission for such proposals in order to be included in the proxy statement. Under our Amended and Restated Bylaws, a stockholder who wishes to make a proposal at the 2012 Annual Meeting without including the proposal in our proxy statement and form of proxy relating to that meeting must notify us no earlier than February 16, 2012 and no later than March 16, 2012 unless the date of the 2012 annual meeting of stockholders is more than 30 days before or more than 60 days after the one-year anniversary of the 2011 annual meeting. If the stockholder fails to give notice by this date, then the persons named as proxies in the proxies solicited by the board of directors for the 2012 Annual Meeting may exercise discretionary voting power regarding any such proposal.

ANNUAL REPORT

     Our annual report for the fiscal year ended December 31, 2010 will be mailed to stockholders of record on or about April 28, 2011. Our annual report does not constitute, and should not be considered, a part of this proxy solicitation material.

     Any person who was a beneficial owner of our common stock on the Record Date may request a copy of our annual report, and it will be furnished without charge upon receipt of a written request identifying the person so requesting a report as a stockholder of our company at such date. Requests should be directed to Santarus, Inc., 3721 Valley Centre Drive, Suite 400, San Diego, California 92130, Attention: Investor Relations.

OTHER BUSINESS

     Our board of directors does not know of any matter to be presented at our Annual Meeting which is not listed on the Notice of Annual Meeting of Stockholders and discussed above. If other matters should properly come before the meeting, however, the persons named in the accompanying proxy card will vote all proxies in accordance with their best judgment.

     All stockholders are urged to complete, sign, date and return the accompanying proxy card in the enclosed envelope.

		By Order of the Board of Directors,
		Gerald T. Proehl
		President, Chief Executive Officer and Director

Dated: April 28, 2011

The proxy statement and annual report
are available at www.proxydocs.com/snts.

1.		To elect two directors for a three-year term to expire at the 2014 Annual Meeting of Stockholders. The present Board of Directors of the Company has nominated and recommends for election as director the following persons:

INSTRUCTION:	To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: l

     

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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR LISTED IN PROPOSAL 1, FOR PROPOSAL 2, FOR THREE YEARS IN PROPOSAL 3 AND FOR PROPOSAL 4.

In their discretion, the proxy holders are authorized to vote upon such other business as may properly come before the annual meeting or any adjournment or postponement thereof.

All other proxies heretofore given by the undersigned to vote shares of stock of the Company, which the undersigned would be entitled to vote if personally present at the annual meeting or any adjournment or postponement thereof, are hereby expressly revoked.

PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY SHOWN, PLEASE PRINT CHANGES.